With tyre scrips running head, carbon black can't be left behind: 3 stocks to bet on from this industry

It might surprise many, for a company which intends to supply selected raw materials to a tyre company, it might take anywhere two to three years to get approvals in testing and another process before it is able to sell its product to that particular tyre maker. But then once approved, the relationship between them remains forever, until rocked by something major. Similarly, many companies which supply only to large industries have its own advantages.

Gone are the days, when a single company was considered a bellwether for IT sector stock. Today, whether it is a large or mid sized company, all have different focus areas and hence their quarterly results tend to differ from one another. Stock Reports Plus, powered by Refinitiv, is a comprehensive research report that evaluates five key components of 4,000+ listed stocks - earnings, fundamentals, relative valuation, risk and price momentum to generate standardized scores.

In 2008, the IPO of a power company got subscribed in less than a minute of its opening and the size of that issue was Rs 11,563 crore. This just shows the desire to own power sector stocks at that point of time. From those days of frenzy to the nadir in 2014, when power companies were on the top of the list of NPA of the banks. Power companies have seen both the extreme of valuations. It is a sector where after many failures and to some extent a consolidation, some companies have emerged which know how to deal with all kinds of economic and industry cycles. That is probably the reason why a number of companies from the power sector have seen a sharp re-rating in the last one year. Hoping the survivors have learnt their lessons.

While the recent performance of stocks like REC, PFC and recently listed IRDEA has brought focus back to one segment of power companies. But the fact is that in the last few years, the sector has been going through a consolidation. Some of it was forced by the banks due to many companies going under the IBC and some due to the fact that any industry which has gone through a troubled phase of almost a decade, the players who are able to survive tend to get more attention because they have learnt the art of surviving a tough phase which is one most important feature for long term survival. Power sector stocks are now catching up with what the market has witnessed in the last few years.

Tyres stocks have been doing very well on the street. The demand from OEM and replacement markets have been strong which is keeping their cash registers ringing. So, the companies which are supplying raw material to tyre companies are also witnessing tail winds. These are B2B players which are into manufacturing carbon black and because they are not consumer facing businesses, these companies don't come into the limelight even when they are doing well.

Officials in the know told ET that concerns have been raised by many state governments that mine owners were replacing higher grades of iron ore with lower grade ones in their samples submitted to Indian Bureau of Mines (IBM). This resulted in undervaluing of government proceeds from the mining activities as earnings are linked to the sale price of the minerals.

However if one looks at the history of financial markets, there are phases where multiple challenges have come up for the sector at the sametime. But given the savings matrix which Indian’s have, despite all that may have happened, on an overall basis the financial services industry has grown and some select stocks have given decent returns to their shareholders.