Tyre companies, including MRF Limited, JK Tyres and Apollo Tyres are seeing share prices trading above their 200 day SMAs, with MRF hitting an all-time high thanks to falling rubber prices. An inventory buildup has resulted in sharp rubber price falls that are expected to sustain for a while, as rubber producing countries Indonesia and Thailand prepare to get rid of built-up inventory. The Association of Natural Rubber Producing Countries (ANRPC) recently forecast that the rubber output will exceed demand by over 3 million tonnes in 2017.

Indian tyre companies - which had to bear raw material cost increases of 2-3% of company sales over the last twelve months - are set to gain from this. MRF for example, had seen its  operating margin fall below 20% in recent quarters as it struggled to rein in costs.

Now the companies are also set to increase prices since competition from imported Chinese tyres has reduced, with tyre imports shrinking sharply since February. The overall industry shift and rising consumer demand are according to analysts, expected to push these companies towards better quarterly performance in the coming months.

Photo source: MRF