Why Ceat, MRF, Apollo Tyres Shares are on Fire

Shares in tyre manufacturers have seen sharp gains because of strong buying over the last few days. Ceat, Apollo Tyres and MRF all hit their record highs for the second successive session on Tuesday.

1) Ceat jumped as much as 9 per cent today. The stock has gained over 37 per cent in the last one week.

2) Apollo Tyres jumped 3 per cent today. The stock is up 16 per cent over the last week.

3) MRF traded 1.4 per cent higher, but over the last week the stock is up 17 per cent.

Factors driving tyre stocks,

1) Rubber prices continue to fall and are trading near 5-year lows. This will continue to support margins in the medium term, said an analyst with a local brokerage.

2) Low crude prices have also contributed to lower input costs. Nearly 30 per cent of raw material for tyres is derived from crude products. Crude prices have slipped to a 16-month low.

3) Thailand, which is the biggest rubber exporter, is likely to sell 20,000 tonne of rubber. This is likely to weight on raw material prices.

4) Tyre companies will gain from the turnaround in auto sales. Car sales are looking up after two years of sluggish growth.

5) Foreign investors and HNIs seem to be investing big in the tyre space. This is clearly evident from the jump in MRF shares, which are now trading above Rs 30,000 apiece.

These factors have led to heavy buying in tyre stocks. On Monday, delivery volumes in Apollo Tyres was 27.33 lakh as compared to its 10-day average of 13 lakh shares. Similarly, delivery volumes for Ceat were 5.62 lakh on Monday as compared to its 10-day average of 1.42 lakh shares.

Open interest in these shares have also gone up, indicating investors are bullish about their prospects.

As of 10 a.m., Ceat traded 6.3 per cent higher at 827, Apollo Tyres were up 1.7 per cent at Rs 213.15 and MRF was up 0.4 per cent at Rs 29,711. The broader Sensex traded 0.2 per cent lower at 27,265.