Auto sector expects no fireworks this Diwali

With market analysts feeling that theReserve Bank is unlikely to pause on its tight monetary policy, the autoindustry sees no respite even during the forthcoming festive season and expectsfurther slowdown in sales in the months ahead.

"We don't expect any significant sales growth this festive season. Themarket has been dented by high fuel prices and interest rates. Any further ratehike will impact sales during the festive season," Icra Senior Analyst(Automotive Sector) Shamsher Dewan said.

PwC India Head (Automotive Practice) Abdul Majeed concurred, saying, "Thechances of another interest hike next month has dampened the prospects of theauto industry during the upcoming festive season. This comes at a time when themarket is already reeling under pressure from high interest rates and risingfuel costs".

Given the rising interest rate scenario, coupled with higher fuel and commodityprices as well as inflation, the industry expects sales to remain depressed inthe coming festive season too, Majeed said, adding sales will continue to growin single-digit.

The market analysts see the Reserve Bank going in for another rate hike at itsmid-quarterly policy review on September 16 to fight sticky inflation. Themonetary authority has already raised interest rates 11 times since March, 2010in its bid to battle high inflation.

In July, headline inflation slipped a tad to 9.22 per cent from 9.44 per centin the previous month. But food inflation has started moving up again in recentweeks due to supply disruptions, following incessant rains in some parts of thecountry, further escalating the chances of another rate hike by the apex bank. .