Auto stocks in mild losses, Nifty Auto unchanged after RBI MPC keeps repo rate unchanged with eye on inflation

Nifty Auto index traded with mild cuts, down 0.1%, despite the RBI Monetary Policy Committee maintaining the repo rate at 6.5% instead of hiking it. However constituents Eicher Motors, TVS Motors and M&M traded in the red, with losses up to 1.3%, dragging the index. On the other hand, Sona BLW Precision Forgings, Hero MotoCorp and Ashok Leyland share prices saw gains of up to 1.7%.

Nifty Auto zooms in June

Yesterday, the market saw OMCs and auto stocks clock gains, as the Nifty Auto index closed 0.61% higher, ahead of the RBI monetary policy announcement. From the closing level of 31 May to 7 June, Nifty Auto has surged 4.3% with a five-day gaining streak. However, today’s performance of the index may cause the winning streak to snap.

“The focus on the policy day will be on rate-sensitive sectors such as BFSI, Auto, and Realty. Additionally, we witnessed the outperformance from OMCs and Metals counters, highlighting the ongoing sector churning. It is advisable to stay aligned with the prevailing theme of the day and place trading bets accordingly,” Rajesh Bhosale, Technical Analyst at Angel One said on Wednesday. 

Nifty Auto following RBI MPC verdict on 6 April

Ahead of the RBI policy verdict, on 5 April, Nifty Auto closed 0.55% up as experts were anticipating the repo rate to be hiked. However, following the surprise non-committal pause, auto share prices soared and the index settled 0.9% higher on 6 April.

Experts on RBI MPC’s verdict 

“The stock market’s muted reaction to the policy announcements today reflects investors’ anticipation of the status quo. The positive drift post announcement implies a broader acceptance of the RBI’s assessment and decisions. Looking ahead, we expect the market momentum to remain largely unimpacted by these announcements with a potential for the broader markets to outperform. However, investors should stay cautious of any sudden global policy changes that could cause short term volatility in the market,” said Sonam Srivastava, Founder, Wright Research.

“Even though the MPC’s rate decision and stance have come on expected lines as a pause and withdrawal of accommodation respectively, the Governor’s commentary can be interpreted as positive. This indicates that the MPC has come to the end of this rate hiking cycle. If the monsoon is normal and the global scenario is favourable, the MPC may think about a rate cut by end CY2023 or early 2024. From the stock market perspective, this is positive,” said V K Vijayakukar, Chief Investment Strategist at Geojit Financial Services.