Return
to Story Page
To print: Select File and then Print from your
browser's menu
Deepak Singh Tanwar
Mumbai, June 23: After the re-rating of paper, paints and hotels stocks, the tyre sector has also managed to attract buyers. As a result, most of the tyre stocks have shown good appreciation during the past few days, and Apollo Tyres and Ceat have been the top gainers. While Apollo Tyres' price has risen from Rs 47 to Rs 55, Ceat has been hitting the upper circuit for the past two days. The stock is available at Rs 28.
While the stocks of the tyre companies have been on uptrend, the outlook for the corporate performance is yet to show major signs of improvement. The demand for tyres is yet to improve significantly. The only positive factor for the sector is the low raw material prices. Natural rubber prices have shown marginal improvement from their six-year low. Carbon black, another raw material is also rulling at low levels. Even the imposition of a safegaurd duty on the imports of carbon black failed to have a major impact on the carbon black prices. Both these raw materials account for nearly 70 percent of the raw material cost.
An uptrend in stock prices, however, suggests that these negative factors were fully discounted by the market, and the positive outlook is mainly on an expected revival in demand for the sector.
While the jump in Apollo Tyre stock seem to be on account of investment buying, the uptrend in Ceat stock has less to do with the overall positive sentiment for the tyre stocks.
According to market reports, the company is under a restructuring process, and is expected to replace it expensive debt which should provide cushion to its margins. Technically, the stock is very strong, and the current rally can take the price to its next resistance of Rs 38.
Among the other stocks, MRF and Goodyear India have also shown some improvement. In fact, both these stocks were first to bottom out in the tyre sector. MRF bottomed out last October and showed steady improvement since then. The main feature of this recovery was a sharp jump in volumes on this counter.
Goodyear India too bottomedout during the same time but the improvement was not supported by heavy volumes. As for the other stocks -- JK Industries, Modi Rubber, and Dunlop India suffer from poor market fancy and for that reason the improvement has not been much on these counters.
For the future, while demand for tyre did show a smart improvement, stocks like MRF, Goodyear and Apollo Tyres would have a better chance of overperforming the market. As for stocks like Dunlop, and Modi Rubber, the outlook continues to remain bleak.
Copyright © 1999 Indian Express Newspapers (Bombay) Ltd.
------------------------------------------------------------
This story was printed from Net Express located at http://www.expressindia.com. Net Express provides a portal to India, with news from The Indian Express and The Financial Express along with sites on travel and tourism, the entertainment industry, the power sector, the environment and much more.
------------------------------------------------------------