Tyre stocks buoyant on expectation of reduction in GST rate

Besides possible lowering of GST rate on tyres, decline in crude price and stable rubber prices to boost earnings in the near term.

Dec 20, 2018 06:12 IST India Infoline News Service

Tyre stocks were trading with gains of up to 6% due to possibility of cut in GST rates on tyres. As reported by The Economic Times, the GST Council could slash tax rates on automobile tyres from prevailing 28% to 18%. This was in-line with PM Modi’s announcement of rationalizing the 28% tax bracket (highest bracket). Mr. Modi had said that 99% of goods and services will fall in the 18% or lower GST rate bracket. In addition to this, crude prices have tumbled from $61 per barrel to $56 per barrel over past five days. Tyre companies use crude derivatives as raw materials and hence benefit due to lower crude prices, albeit with a lag. Natural rubber (RSS-4 variety) prices too have stabilized and are currently trading close to the Rs121 per kg mark, 10% decline from the peak of Rs134 per kg, seen so far this calendar year.

Most tyre stocks were trading with gains due to the tax rate decline expectation. JK Tyre and Industries (JKTIL) gained the most at 6.02%, followed by Goodyear India (Goodyear, 1.87%), Apollo Tyres (ATL, 1.32%) and CEAT (0.92%). Only MRF was trading with a loss of 0.39%.

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