By Sharad Matade:
Stocks of most tyre companies witnessed a double-digit growth with the general buoyancy on the bourses caused by impressive performance by the auto industry, a buying spree by Foreign Institutional Investors, positive proposals in the Union Budget, GST bill, BJP’s landslide victory in Uttar Pradesh elections etc.
Following positive trends on the bourses and impressive auto sales numbers in consecutive months, stocks of tyre companies reported a handsome growth. During the period of February 15, 2017 to April 18, 2017, the BSE Sensex grew 4.14%, while stocks of tyre companies witnessed a double-digit growth.
The equity markets’ sentiments boosted on presentation of the Union Budget at the start of February. Finance Minister Arun Jaitley’s decision to keep long-term capital gains tax and short-term tax rate unchanged was welcomed by investors. This year’s budget largely favoured the rural sector to strengthen the country’s economy.
However, the markets became a bit guarded as the Reserve Bank of India (RBI) kept the policy rates unchanged and the US Federal Reserve hinted at a rate hike. During the month, Foreign Institutional Investors (FIIs) bought Rs 99.02 billion worth of equities, while domestic mutual fund houses continued their buying spree with net purchases of Rs 20.40 billion in February 2017.
However, February turned out to be a good month for the Indian equity markets with positive returns of 3.93 per cent and settled at 28,743.32.
GST Bill and BJP’s impressive victory in Uttar Pradesh infused new energy in the markets, which touched an all-time high in March. The month started with some positive developments as the Government tabled the GST Bill and emphasised on solving the country’s bad loan problems.
However, the US Fed increased interest rates by 25 basis points, which did not dampen the investors’ enthusiasm. In March, FIIs bought Rs 313.26 billion worth of equities while domestic mutual fund houses bought Rs 23.68 billion equity in March 2017.
Positive growth for tyre majors
During the period, all tyre majors reported a positive growth, except PTL Enterprises. During the period of February 15, 2017 to April 18, 2017, Modi Rubber, Ceat and MRF topped the table, with a growth of 51.42%, 31.60% and 30.26% respectively.
Stocks of Apollo Tyres grew over 30% during the period. Till mid-March, Apollo’s stocks remained flat and after that it picked up and kept growing steadily on the bourses. The opening of Apollo’s first Greenfield project in Europe further boosted the momentum in the period. Throughout the period, MRF’s stocks steadily grew and witnessed a 25.23% growth.
Off-the-road tyre major Balkrishna Industries Ltd (BKT) also had over 20% growth in the period. After having no growth in January, BKT’s stocks started gaining momentum from mid-February and managed to keep the growth momentum till the end of the period. Like Apollo’s stocks, JK Tyre & Industry’s stocks remained flat in the initial period. After mid- March, the company’s stocks rose on the bourses and clocked a 19.63% growth in the period.
TVS Srichakra’s stocks posted an 18.80% increase in the period. TVS Srichakra’s stocks started growing from mid-March and reached the period’s high at the end of March. The Chennai-based company’s stocks fell in the first week of April, gained momentum again and managed to have an 18.80% growth.
Modi Rubber’s stocks were the top gainer in the period, which surged over 51%. Ceat was the second top gainer during the period, having a 31.60% growth. Ceat reappointed Anant Goenka as its Managing Director and is reported to have plans of setting up a tyre manufacturing unit and an IT backend set-up in Punjab. Goodyear India’s stocks increased 23.68% in the period.
Auto sector fares well
In February, Passenger Vehicle segment grew 9% to 255,359 units, according to Society of Indian Automobile Manufacturers (SIAM). Passenger car sales increased by 4.90 per cent to 172,623 units and utility vehicles surged 21.79% to 65,877 units.
The two-wheeler segment sales spiked marginally 0.01 per cent to 1,362,045 units in February 2017. Motorcycle sales were down by 3.13 per cent, while scooters and mopeds reported a growth of 3.70 per cent and 15.99%, respectively.
The Commercial Vehicles segment grew by 7.34 per cent to 66,939 units as compared to 62,359 units during February 2016. Whereas total Medium & Heavy Commercial Vehicles sold 30,521 units with a growth of 5.02 per cent, and total Light Commercial Vehicles had a 9.38 per cent growth to 36,418 units.
Like February, March too turned out to be a good month for automakers with an increase of 1.33 per cent in auto sales. According to SIAM, domestic sales for March 2017 stood at 1,880,352 units. The Passenger Vehicle segment increased 10% to 282,519 units in March 2017 as against 256,920 units in March 2016.
Passenger cars increased by 8.17 per cent to 190,065 units, sales of utility vehicles surged 20.91% to 77,689 units during March 2017. March witnessed a sluggish period for the Two-Wheeler segment. The Two-Wheeler sales remained flat, having a marginal growth of 0.26 per cent to 1,471,576 units. Scooter sales had a 8.13 per cent growth to 486,604 units.
Total three wheeler sales plunged 23.72% to 39,000 units. The Commercial Vehicle segment rose 9.26 per cent to 87,257 units. Medium & Heavy Commercial Vehicles surged by 5.97 per cent to 39,353 units and Light Commercial Vehicles grew 12.11% to 47,904 units.
According to the industry sources, FY 2017-18 is expected to be a good year for the auto industry on lower borrowing costs, growing demand, decent GDP growth and satisfactory monsoon.