Tyre companies stocks down on slow down in auto sales and gloomy economic outlook

After enjoying positive ride in the first four months of this year due to falling raw material costs and revival in auto sales growth, stocks of tyre companies fell in April and May thanks to slow down in auto sales and gloomy economic outlook of the country which has dampened sentiments of investors.

Stocks of Indian tyre companies had increased around 30% in the first one and a half month of this year while the Bombay Stock Exchange’s Benchmark 30-share Sensex (Sensex Index) spiked by 15% in the same period. However, despite the Sensex Index fell by around 5% in the period of 15th February to 10th April 2012, tyre companies’ continued to move northwards due to falling raw material costs and continued growth in automobile sales, mainly car sales. Tyre companies had posted robust earning growth in the January-March quarter on the account of an impressive sales growth in automobile and softened prices of natural rubber in domestic and international markets and that had reflected on tyre companies stocks.

After restoring some confidence at the start of this year, investors again started losing confidence on the bourses because of discouraging waves of poor industrial growth, record level low of the rupees against the dollar and falling GDP growth rate, and rising crude oil prices.

India’s economic growth plunged in the fourth quarter (January-March) of 2011-12 to 5.3%, which is a nine year low growth. Taking a clue from gloomy reports, the Sensex Index fell to its four months low in May. Adding fuel to the fire, the rupee has been sliding every day to new low levels. At the end of May, the rupees fell to a record low of 56.52 against a dollar.

In the period of 10th April to 5th June, the BSE Sensex Index came down by 7%, while stocks the most of tyre companies fell in