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High interest hits India’s auto sales recovery
October 02, 2013
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MUMBAI: A surprise increase in interest rates and rising car prices in September have tempered hopes for a turnaround in India’s struggling autos sector, with some analysts pushing back forecasts for a sustained recovery to next financial year.

Car sales in India have fallen nearly 6 per cent so far in the current financial year to August, according to the Society of Indian Automobile Manufacturers, as high ownership costs in a slowing economy have prompted consumers to postpone purchases.

Last month, the central bank surprised the market by increasing interest rates in Asia’s third-largest economy where the majority of car buyers finance their purchases through loans. According to a Reuters poll, expectations for monetary policy have shifted towards further tightening.

“We are going to see recovery being pushed back by three months. Earlier we were hoping that the market would bottom out in the last quarter of calendar year 2013,” said Anil Sharma, an analyst with IHS Automotive.

 “But we are not expecting that now because of the rate hike. So maybe in the first quarter or second quarter of the next calendar year we might see the bottoming out.”

Automakers have pinned their hopes on strong demand during the key festive months between September and December, considered to be auspicious by Indians for making big-ticket purchases. A strong monsoon is also seen helping rural demand.

India’s top carmaker Maruti Suzuki said total September sales rose nearly 12 per cent, while two-wheeled vehicle maker TVS Motor Co’s said sales rose 16 per cent. Maruti’s sales were higher partly due to a disruption in production last year due to labour unrest.

SENSEX, RUPEE GAIN

The benchmark S&P Bombay Stock Exchange Sensex was up 137 points Tuesday after current account deficit numbers came in better than expected and auto sales picked up slightly last month, helping investors to shrug off concerns about the US government shutdown.

The 30-share Sensex resumed higher at 19,452.05 and slipped to 19,264.72 before recovering and ending at 19,517.15, a gain of 137.38 points or 0.71 per cent. In the previous two sessions, the index lost 514 points, ahead of the release of current account deficit data and as investors turned jittery about the US government shutdown.

The broader CNX Nifty on the National Stock Exchange rose 44.7 points, or 0.78 per cent, to 5,780.05. The SX40 index on the MCX Stock Exchange closed at 11,619.91, up 53.26 points.

The Indian rupee recovered by 14 paise to close at 62.46 against the Greenback following smart recovery in local equities amid fresh dollar selling by exporters.

At the Interbank Foreign Exchange (Forex) market, the domestic unit resumed stable at its overnight closing level of 62.60 a dollar and immediately touched a low of 62.61.

Agencies

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