2 days ago
Auto stocks gain as RBI cuts repo rate by 50 bps
Equity markets witnessed a rise in stocks after the Reserve Bank of India (
RBI
) cut the repo rate by 50 basis points to 5.5 per cent and reduced the
Cash Reserve Ratio
(CRR) by 100 basis points in a phased manner. This marks the third rate cut in 2025, following 25 basis points each in February and April.
The automotive sector responded positively to the policy shift, driven by expectations of improved financing conditions and easing borrowing costs. The CRR cut, which will release ₹2.5 lakh crore into the banking system, is expected to improve liquidity and
vehicle loan availability
, particularly in the entry and mid-level segments.
The S&P BSE Index rose 1.26 per cent following the news in the intraday trade, while
Nifty Auto index
too climbed 1.23 per cent.
Ashok Leyland
and
Hero MotoCorp
were among the top gainers. Other rate-sensitive stocks posted gains too, as the Nifty Realty and Financial Services indices were up nearly 3 per cent and 1 per cent, respectively.
Lower interest rates and the forecast reduction in consumer price inflation to 3.7 per cent for FY26 are anticipated to support vehicle affordability and boost consumer sentiment. The sector is also positioned to benefit from expected increases in private consumption and demand ahead of the festive season.
Analysts noted that with easing credit conditions and improved liquidity, sectors like auto, housing, and banking are likely to see increased momentum in the coming months.
