Auto stocks, led by two-wheeler major Hero Honda Motors, today dropped by nearly 3 per cent in the early trade on the BSE amid fears of hike in excise duty on automobiles in the forthcoming Budget 2011-12.
Extending its two-day losing streak, Hero Honda Motors, the top loser among the BSE 30-Sensex stocks, slipped by 2.79 per cent touching a 52-week low level of Rs 1,399.10 on the Bombay Stock Exchange (BSE).
Union Budget is scheduled to be presented on February 28.
"Investors are fearing that the government may rollback fiscal stimulus by rising the excise duty on automobiles in Union Budget 2011-12, which in-turn has dampened their sentiments," Karvy Stock Broking VP Ambareesh Baliga said.
The decline in the BSE benchmark index Sensex was led by the frontline auto stocks. Mahindra & Mahindra, Maruti Suzuki and Tata Motors were another big laggards from the auto pack.
Shares of Mahindra & Mahindra fell by 2.91 per cent hitting an early low of Rs 632.25.
Similarly, the country's largest carmaker Maruti Suzuki, too went down by 2.92 per cent to touch a low of Rs 1,177.20.
Other dampeners from the auto sector were Tata Motors and Ashok Leyland, while the former shed by 2.03 per cent the latter was trading lower by 0.89 per cent.
Hit by the losses in stocks of the major auto companies, the BSE Auto index was trading down by 1.79 per cent at 8,460.41.
Meanwhile, the BSE Sensex too was trading under pressure with a loss of 115.31 points at 18,323 at 10:25 hrs.