Share prices of tyre companies rose between 2% and 6% on Monday as falling rubber prices triggered optimism that tyre manufacturers’ earnings will improve in coming quarters. According to data from the Rubber Board, domestic rubber prices have corrected over 17% in the last two months after hitting 52-week high in July. Rubber accounts for over 50% of raw material costs of a tyre manufacturer. Leading the tyre pack on Monday was MRF, whose shares rose by 6.35% and closed at Rs 43,073. Share price of Ceat rose by a little over 6% to close at Rs 1,128.
Apollo Tyres hit a fresh 52-week high at Rs 221.95 on the BSE. A total of 5.71lakh shares of Apollo Tyres changed hands during the day, much higher than the two-week average of 4.72 lakh.
Shares of JK Tyres and Goodyear India also rose on Monday and were trading near their 52-week highs at Rs 149 and Rs 639, respectively.
What helped the investor sentiment further was the fact that prices of crude oil — another major raw material for tyre manufacturers — have stayed range bound in the last few weeks.According to market participants, the upcoming festive season is likely to see increased demand for automobiles, which, they say, will ensure strong top line growth for tyre manufactures.
The Society of Indian Automobile Manufacturers data show that production of vehicles rose 16.13% (year-on-year)) and domestic auto sales grew 23.72% (Y-o-Y) in August.