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Systematix Research Report
On May 22, 2002, the Central government announced various measures to curb inflation and to lower inflationary expectations. Key among those are-
imposing export duties - 15% on steel products and 50% on iron ore, which we believe should cool off domestic steel prices;
Central and many state governments have reduced taxes on fuel by 7-10%.
As inflation poses a major risk to economic growth, Reserve Bank of India too has increased interest rates this month.
The auto sector has been reeling under significant commodity cost pressures over the last two years, evident from the 40-100% surge in key commodities prices during the period. Thus, lower metal prices should benefit the entire auto space.
Further, the fuel price cuts too would be incrementally positive for commercial vehicle players, as freight operators would see an improvement in their profitability.
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