The Reserve Bank of India’s Monetary Policy Committee lifted the policy repo rate by 25 basis points on October 7, marking the first increase in over three years. The decision instantly tightened consumer borrowing costs, as banks can lift lending rates in line with the repo adjustment.
Nifty Auto Index fell for the first time in the session, with all constituent stocks trading in the red. The sector’s decline mirrored the broader impact of the rate hike across the auto market.
Bajaj Auto’s shares dropped 2.5%—the steepest decline among the index’s members—following the RBI announcement. The drop reflected investors’ concern over higher financing costs for vehicle buyers.
Dealer sentiment, according to Saharsh Damani of the Federation of Automobile Dealers Association, remains relatively positive; 78% of surveyed dealers anticipate growth over the next three months despite the higher base. Damani noted that current PV inventory levels are elevated, largely in anticipation of the festive season build‑up.
The festive season is a critical sales period for auto companies, but the higher EMIs could delay purchases. Analysts expect a muted sales season unless the central bank moderates its policy stance.
Investors will watch the upcoming earnings releases and any guidance on debt or capital expenditure that could signal how firms plan to navigate the tighter credit environment.