By D K Aggarwal It is a known fact that the performance of the tire industry is directly related to the performance of the automobile industry.

Recent car sales figures show that the automobile industry is recovering. This will lead to increased order inflow from CEATT, Apollo Tires, MRF and Godyear India tire manufacturers.

Tire manufacturers are benefiting from lower rubber prices, lower raw material prices and increased volumes as automotive demand recovers. Moreover, alternative markets are also showing good business. Hence, the future outlook for the sector is positive.

Rubber is a key raw material for tire companies and its prices have been declining over the last four years. They have come down from the highs of the rupee. As of 2011, as of December 2011, it was Rs. 23,700 per 100 kilograms Rs. 13,320 per 100 kilograms.

When contacted by the management of CEAT, a strong player in the industry, it is expected that raw material prices will remain stable for the next 6 to 8 months. This is good news for the company’s future margins.

Now, looking at the demand scenario in the automobile sector, the monthly sales figures of automakers have been on an upward trend since last year. For the three months. in July, Indian car sales stood at 183, 176 units, up 11.3% from July 2013’s 164, 572 units.

However, for a better picture, six months of data could provide a more stable view of the industry’s recovery. However, the current process of the industry bottoming out cannot be ignored. In addition, the outlook for industry demand is positive due to the upcoming holiday season.

The new government at the Center has acted as a catalyst in restoring investor confidence, which is also reflected in the purchase of Indian stocks by foreign investors on the domestic stock exchanges. The Sensex continues to hit new highs.

In order to meet the OMC According to the expected demand, the tire companies have initiated the process to meet this demand. As can be seen from the recent data from the National Rubber Board, tire manufacturers have increased their purchases of rubber from overseas and rubber imports have also increased due to the sharp fall in international rubber prices.

Between April and July 2014, rubber imports increased by 47% to 133, 789 tons as compared to 90, 580 tons in the same period of FY2014.

The shares of the tire company have significantly increased the value per shareholder, but there is still upside potential given the growth opportunities available.

(The author is CMD, SMC Investments and Advisors Limited. the views and recommendations expressed in this section are his personal views and not those of The Economic Times).