Automobile stocks are on the slump today, led by M&M, which is amongst the top losers on the BSE currently. Down almost 2% at Rs.1235, the stock hit an intra day low of Rs.1225. The rest in the pack – Tata Motors, Ashok Leyland, Maruti, Bajaj Auto, all are down.

It was widely expected that the Govt will extend the excise duty cuts beyond today, 31^st Dec for the auto sector but that did not happen. Starting tomorrow, these excise duty sops will go. For small car, two-wheelers and CVs, the excise duty was reduced to 8% and it will now go back to 12%. For SUVs, the duty cut was at 24% and that will go up to 30%, large cars will rise from 24% to 27% and mid-size cars from 24% to 20%. This will make the vehicles costlier but the sops were costing the ex-chequer around Rs.2500 crore per month. Given the target of the Govt to bring in the fiscal deficit to 4.1% of the GDP, this withdrawal of excise duty cut did not come as a surprise.