Even as India's auto sector grapples with its worst slowdown in over two decades, the Nifty Auto Index recorded its best gains in 17 months, buoyed by India's surprise corporate tax cuts.
On Sept. 20, Finance Minister Nirmala Sitharaman cut corporate tax rate from 34.93 percent to 25.17 percent for domestic companies, as part of the government's attempts to spur India's GDP growth that fell to a six-year-low in April-June 2019.
Brokerage Edelweiss Securities estimates that the coporate tax cuts will boost earnings per share of automakers by 6 percent.
Nifty Auto Index heavyweights like Maruti Suzuki India Ltd., Eicher Motors Ltd., Bajaj Auto Ltd. surged 8.7 percent, 7.3 percent and 4.4 percent, respectively, in September. The Nifty Auto Index, which jumped Nifty 5.7 percent, is the second best performing sector index in September after Nifty Energy index's 7 percent surge on the back of India's privatisation plan.
“The automobile sector was sluggish for last 12 months. But with the slew of measures to give a fillip to economy since July 6, we are seeing the sluggishness giving way to positivity," Pawan Goenka, managing director at Mahindra & Mahindra Group, told the Press Trust of India. “The six-week festive season starting with Navratri is going to be decisive. If the sales remain encouraging, the automobile sector will gather pace.”
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