- 23 May 2022
- ICICIdirect Research
GOVERNMENT CUTS PETROL, DIESEL EXCISE DUTY, INITIATES STEP TO CONTROL METAL PRICES
News: The Union government has cut excise duty on petrol and diesel by Rs. 8/litre & Rs. 6/litre, respectively, over the past weekend. Media reports also suggest that it has also imposed higher duties on steel exports and at the same time reduced custom duty on key raw materials for steel manufacturing thereby intending to control metal prices for user industries within a broader aim to control inflation
Views: We view this development as a positive for the entire sector from both demand and cost perspective. On demand perspective, decline in retail fuel prices will help spur automobile sales especially in the 2-W category wherein demand is more elastic to fuel prices. Decline in fuel prices also helps reduce costs of doing business, especially in terms of lower logistics costs. On the other hand, decline in metal prices, especially steel, will help keep raw material costs under check for the sector with beneficiaries being Tractor, CV, 4-W, 2-W space in this sequence. Our top bets in the auto OEM include: M&M, Tata Motors, Ashok Leyland, while on the ancillary side we like Minda Corporation, Automotive Axles, Bharat Forge, Ramkrishna Forgings, among others
Impact: Positive