Shares of Indian auto companies were hit on Tuesday by worries about lower sales following a string of price hike announcements intended to factor in the higher excise taxes announced in the 2012/13 federal budget out on Friday.
Tata Motors on Monday became the latest auto maker to raise prices for passenger vehicles, offsetting an initially positive reaction for the auto sector after the budget included more positive budget measures such as keeping taxes on diesel cars on hold.
Shares in auto makers had also rallied leading up to the budget on a spike in sales from consumers anticipating higher car prices, leading to expectations the potential rise in earnings in fiscal Q4 will not be sustained.
"For car companies, price hikes on account of the excise hike would hurt volumes," said an analyst tracking the sector at a foreign brokerage.
Tata shares were down 2.4 percent, hit as well by profit-taking after the stock hit a record high on Friday. Bajaj Auto lost 1.9 percent. (Reporting by Abhishek Vishnoi; Editing by Rafael Nam)