Markets have shown tremendous recovery with majority of stocks participating in the rally. However, tyre stocks have underperformed so far and have not participated as much in the current rally. Shohini Nath finds out the issues faced by the tyre industry in India and explains why it may be a good idea to bet on select tyre stocks.
The year 2019 has been unbelievably strong and has surprised even the most optimistic of the investors. The rally is not only in the equity prices on YTD basis. If we take a broader perspective, the prices are higher on a YTD basis for crude oil, metals, fixed income securities, and precious metals as well. In its note, Deutsche Bank mentioned that 37 out of 38 assets it tracks finished the first three months of 2019 with positive returns.
Investors worldwide are on a roll with so many assets showing recovery in prices. The price rise is even more appreciated after a dismal performance in 2018. What is interesting is this price rise in several assets is happening even as the world economy is expected to face a slowdown in 2019.
Amidst all the positive action in the equity world, the tyre stocks have not impressed investors yet. On an average, the performance of the tyre stocks in the recent rally has been disappointing and that is one of the reasons why we think it may be a good idea to closely look at this set of stocks from a long-term investment perspective.
When compared to their 52-week highs, the tyre stocks are down anywhere between 26 percent to 45 percent. This is when the Sensex is at an all-time high and 29 stocks out of BSE 500 index have made fresh 52-week highs and almost 136 stocks out of BSE 500 index are just about 10 percent short of their 52-week highs.
This story is from the April 18,2019 edition of Dalal Street Investment Journal.
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This story is from the April 18,2019 edition of Dalal Street Investment Journal.
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