The Nifty Auto index fell nearly 3% in intraday trading, hitting 25,094 points, driven down by Mahindra and Mahindra (M&M).
The price cut aims to boost sales and make the feature-rich AX7 trims more accessible to buyers.
Maruti Suzuki has a strong market share in this segment.
Maruti Suzuki is expected to benefit significantly, as the company offers hybrid features in many of its models.
The upcoming June consumer price index (CPI) data, due on Thursday, is expected to show headline prices rose 0.1% month-over-month, while core prices gained 0.2%.
The Nifty Auto index fell nearly 3% in intraday trading, hitting 25,094 points, driven down by Mahindra and Mahindra (M&M). This marked the index's largest intraday drop since June 04. By 1:30 p.m., the index had recovered some losses but was still down 2%, trading at 25,307 points.
Shares of M&M dropped nearly 8% to ₹2,697 apiece, the lowest level since June 07. M&M alone accounted for nearly 80% of the index's drop today.
This sharp decline followed the company's announcement of a temporary price cut of up to ₹2 lakh for its top XUV700 variant, the XUV700 AX7. The new pricing, introduced ahead of the XUV700's third anniversary, will be effective for four months starting July 10. The price cut aims to boost sales and make the feature-rich AX7 trims more accessible to buyers.
In addition to M&M, Tata Motors has also implemented price cuts on its SUVs, the Harrier and Safari, effective until July 31. Analysts interpret these price reductions by major players as signs of weakened demand in the segment, attributing this trend to reduced inquiries and postponed vehicle purchases, exacerbated by extreme heat waves affecting consumer behavior. Shares of Tata Motors also fell 2.85% in today's trade.
Other top losers in the index included Exide Industries, which fell by 5% to ₹549 apiece. After reaching an all-time high of ₹620 on June 25, the stock has faced profit booking, leading to a 12% decline to date.
Meanwhile, shares of Samvardhana Motherson International, Apollo Tyres, Hero MotoCorp, Bosch, Ashok Leyland, MRF, Balkrishna Industries, Bharat Forge, and Bajaj Auto are currently trading with losses ranging from 0.3% to 2%.
On the gainers' side, Maruti Suzuki continued its strong momentum for the second consecutive trading session, reaching a new all-time high of ₹13,299 apiece with a nearly 4% gain.
Also Read: Maruti Suzuki shares surge 5% as UP frees hybrid vehicles from registration fees
The stock finished Tuesday's trade strongly with a gain of 6.60% after the Uttar Pradesh government waived registration fees on hybrid cars. Maruti Suzuki has a strong market share in this segment.
Estimates suggest that the registration waiver could reduce the on-road price of hybrid cars by up to ₹4 lakh. Maruti Suzuki is expected to benefit significantly, as the company offers hybrid features in many of its models.
Additionally, today's slump in the auto pack may be attributed to profit booking, as the index has been in positive territory for eight consecutive months since October 2023, resulting in a gain of 58.33% by June 2024.
Frontline indices slump 1% Looking at the frontline indices, the Nifty 50 and Sensex each slumped 1% in today's trade amid rising uncertainty over interest rate cut by the US Federal Reserve this year.
Federal Reserve Chair Jerome Powell stated on Tuesday that inflation “remains above” the U.S. Federal Reserve’s 2% target but has been improving in recent months. He noted that “more good data would strengthen” the case for central bank interest rate cuts.
Powell made these comments during congressional testimony, indicating increasing confidence that inflation will return to the Fed’s target, which is necessary for easing monetary policy.
Traders currently see a 73% chance of a rate cut in September, according to the CME Group's FedWatch Tool. The upcoming June consumer price index (CPI) data, due on Thursday, is expected to show headline prices rose 0.1% month-over-month, while core prices gained 0.2%. This would result in annual gains of 3.1% and 3.4%, respectively.
