Tata Motors, Ashok Leyland: Commercial vehicle shares fall up to 9%; here is why

Shares of commercial vehicle makers like Tata Motors Commercial Vehicles and Ashok Leyland came under selling pressure on Monday, March 30. Tata Motors shares dropped as much as 9.08% to hit an intraday low of ₹388.75 and Ashok Leyland shares plunged as much as 4.88% to hit an intraday low of ₹155 on the National Stock Exchange.

These shares came under selling pressure after surging crude prices in global markets dented investor sentiment towards commercial vehicle makers as their sales directly reflect upon the macro fundamentals of the economy, analysts noted.

Crude oil price has jumped more than 50% from $73 per barrel in the last one month to $116 per barrel after United States and Israel launched an attack on Iran under operation Epic fury on February 28.

India, which imports large chunk of its crude requirement, is staring at negative impact of rising oil prices on inflation, current account deficit, economic growth and rupee depreciating to new lows against the US dollar, analysts noted.

The Indian rupee dropped to a record low against the US dollar on Friday as the currency was weighed down by the rising oil prices, foreign investor outflow, a stronger dollar rate in the market, and no signal about a potential near-term end of the West Asia conflict.

The domestic unit, however, rebounded from its record low levels against the US dollar during the early market hours on Monday after the Reserve Bank of India (RBI) intervention to support the rupee, a lower greenback rate in the global market amid the ongoing geopolitical tensions.

RBI on Friday directed the banks to impose a cap on their net open rupee positions in the foreign exchange (forex) market at the $100 million level by the end of each business day, according to a Reuters report.

Meanwhile, fears of a rate hike by the RBI in order to control inflation going ahead is also adding to weak sentiment for commercial vehicle makers, analysts added.

As of 12:32 pm, Tata Motors Commercial Vehicle shares traded 8.5% lower at ₹391 and Ashok Leyland stock was down 4.9% at ₹155, underperforming the NIFTY50 index which was down 1.23%.