Amid a broader rally in Indian stock markets on Friday, the Eicher Motors Ltd stock jumped as much as 23.7% in intraday trade, its biggest single-day gain 20 years, after finance minister Nirmala Sitharaman announced that the government has decided to slash effective corporate tax to 25.17% inclusive of all cess and surcharges for domestic companies.
At 11:59 am, shares of Eicher Motors, the maker of the Royal Enfield motorcycles, were trading at Rs 17,712.70, up 12.4%, after hitting an intra-day high of Rs 19,488. The BSE Auto Index was also up nearly 8% as the industry expected a cut in goods and services tax (GST) rate for the auto sector from 28% to 18% later in the day when the GST council meeting concludes.
Stocks of other auto companies also jumped like Maruti Suzuki (up 10.5%), TVS Motor (up 10%), Tata Motors (up 8%), Hero Moto Corp (up 7.5%), Bajaj Auto (up 6.5%) and Mahindra and Mahindra (up 6.5%).
The automobile industry, which saw the steepest volume plunge in August in nearly two decades, has long been demanding lowering of GST on automobiles to boost demand.
Vehicle sales slumped 31.57% to 1,96,524 units in August from 2,87,198 units in the year-ago period.
Meanwhile, CLSA released a short report on the auto sector on Friday stating that the two-wheeler OEMs (original equipment manufacturers) are likely to face another phase of margin headwinds in financial year 2021 as they may find it difficult to pass on the full cost impact of the upcoming BS6 emission norms amid weak demand and high competition.