The Nifty Auto surged over 3 percent on Monday on the back of key measures announced by the government regarding the auto sector. On Friday, Finance Minister Nirmala Sitharaman announced a slew of measures including deferring one-time registration fee, lifting a ban on the purchase of petrol/diesel vehicles by its departments and allowing higher depreciation.

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Intraday, the Nifty Auto index gained 3.07 percent touching its day’s high at 7,202.70 on the NSE. Auto stocks like Bosch rose 2.49 percent while Ashok Leyland surged 10 percent respectively on an intraday basis. Mahindra & Mahindra gained 3.69 percent intraday to touch its day's high of Rs 552.70 per share on the NSE.

In a bid to help clear rising inventory of BS-IV emission compliant vehicles, it said such vehicles purchased till March 31, 2020, will be allowed to ply till the validity of their registration.

"...because inventories are stocking up and piling up in car manufacturing companies. Today you get a 15 percent depreciation on them ... all vehicles to increase it to 30 percent on all vehicles acquired from now till March 2020," said Nirmala Sitharaman.

However, the industry's sentiment is not very optimistic with the Finance Minister's announcement on the auto sector. The auto industry believes that there's no clarity on the vehicle scrappage policy and no stimulus for the two-wheelers.

Most auto experts believe that the government lifting ban on the purchase of new government vehicles will not lead to more demand. However, they believe that reversing the earlier measures like a hike in registration fees is a positive.

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First Published:Aug 26, 2019 12:44 PM IST