Tyre stocks gain as weak rubber, oil prices to boost margins

Lower raw material costs on account of weak natural rubber and crude oil prices to boost margins

Shares of tyre companies were up 1-3% as lower raw material costs on account of weak natural rubber and declining crude oil prices would boost margins going forward.

Natural rubber and crude oil-based derivatives such as sythethic rubber, carbon black constitute major portion of the raw material used in the manufacture of tyres.

"With natural rubber prices on a downward trend for more than a year coupled with the current weakness in global crude oil prices gels well for the operating margins of tyre companies going forward. Further, higher demand from auto companies will aid top-line growth," said Arun Agarwal, analyst at Kotak Securities.

Among the tyre stocks, MRF, TVS Srichakra, JK Tyre & Industries and CEAT were up 1-3% each.

Meanwhile, Apollo Tyre shares were up over 3% at Rs 217, after hitting a record high of Rs 218, on reports that Hungary has secured approval of the European Union to award grant for building a plant there.

According to reports, Hungary has gained regulatory approval from the European Union to grant 95.7 million euros in aid to Apollo Tyres for the construction of a tyre plant.

Hungary is offering a direct grant of 48.2 million euros, an employment grant of 2.8 million euros and tax allowances of about 44.7 million euros for the new facility which will lead to a creation of 975 jobs.