Tata Motors, Ashok Leyland shares rocket up to 12%. Here are 2 reasons fuelling the sharp surge

Shares of commercial vehicle majors Ashok Leyland and Tata Motors rallied as much as 12% on Thursday after a sharp drop in oil prices, which boosted investor sentiment amid hopes of an Iran deal.

In today’s session, Ashok Leyland shares rallied as much as 12% to Rs 172 on the BSE, while commercial vehicle major Tata Motors jumped 9% to Rs 440.

Why are these 2 stocks rising?

1.) Oil tumbles 10% in two days - Crude oil prices crashed over a percent on Thursday, extending losses from a 9% plunge in the previous session as markets assessed the implications of the Democrats' sweeping victory over Republicans in the US midterm elections.


The political setback raised expectations that mounting pressure on the Republican Party could push the Trump administration toward ending the war with Iran through a negotiated settlement.

Brent crude was trading at $93.51 a barrel, down more than 1%, or $1.05 in absolute terms. US West Texas Intermediate (WTI) crude slipped 1.35% to below $87 a barrel. In the previous session, Brent futures settled $8.98, or 8.7%, lower at $94.62 a barrel, while WTI crude futures dropped $7.97, or 8.3%, to $88.12. Both benchmarks ended Wednesday at their lowest levels since August 31.

Falling crude oil prices are positive for commercial vehicle (CV) manufacturers such as Ashok Leyland and Tata Motors as diesel accounts for a significant portion of fleet operators' running costs. Lower fuel prices improve the operating economics of truck and bus owners, potentially encouraging fleet expansion, replacement demand and fresh vehicle purchases. Cheaper crude also reduces input and logistics costs for automakers, supporting margins. Additionally, lower fuel prices can ease inflationary pressures and improve overall economic activity, benefiting freight movement and transportation demand.

2.) Buoyant market mood - The Indian stock market opened Thursday's session on a strong note, with benchmark indices Sensex and Nifty rallying nearly 2% amid a favourable mix of global and domestic cues. Gains by Democrats in the US midterm elections, marking a setback for US President Donald Trump, along with easing crude oil prices, boosted investor sentiment and extended Dalal Street's recovery rally for a second consecutive session.

The Sensex surged over 1,400 points to cross the 78,700 mark, while the Nifty 50 jumped more than 400 points to reclaim 24,350. The sharp rally added nearly Rs 8 lakh crore to the combined market capitalisation of BSE-listed companies, taking it to Rs 501 lakh crore.

Broader markets also participated in the rally, with the Nifty Midcap 100 and Nifty Smallcap 250 indices gaining up to 1.5%. Meanwhile, India VIX, the market's volatility gauge, declined 2.5% to slip below the 15 mark.

Among sectoral indices, Nifty Auto, Nifty Financial Services and Nifty Realty emerged as major outperformers, rising more than 2% each.

With tailwinds for the economy getting stronger, the bullish trend in the market is set to continue, said VK Vijayakumar, Chief Investment Strategist at Geojit Investments. He noted that the strongest positive for the market is the sharp 10% fall in Brent crude to around $94 level.

This decline is in hopes that a resolution to the US-Iran conflict is likely soon since this conflict and the consequent high crude prices contributed significantly to the Republican rout in the midterms.

Disclaimer: This article has been written by Veer Sharma, who is not a SEBI-registered Research Analyst or an Investment Adviser. Veer Sharma and his/her ‘relative(s)’ (as defined under Section 2(77) of the Companies Act, 2013) do not hold any financial interest in the companies mentioned in this article as of the date of publication. The views/recommendations mentioned in this article, wherever applicable, are those of the respective SEBI-registered Research Analyst/brokerage and have been reproduced/reported with due attribution. They should not be construed as the views or recommendations of The Economic Times Digital or the journalist. Readers are advised to consider the original research report and make their investment decisions based on their own assessment. Brokerage disclaimers here