Why Forging Companies Have Seen an Uptick of Over 10% in Two Weeks

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Why Forging Companies Have Seen an Uptick of Over 10% in Two Weeks
Credit: © Reuters.

By Aditya Raghunath

Investing..com -- Shares of forging companies like Bharat Forge Ltd (NS: BFRG ) and Ramkrishna Forgings Ltd (NS: RKFO ) have seen a solid rally in the last two weeks. Bharat Forge shares closed at Rs 538.5 on December 23. They are currently trading at Rs 601.1, an increase of over 11%. Ramkrishna Forging was trading at Rs 474 on December 23 and has now increased by almost 14% in two weeks.

There are two reasons for this rally. The first one is that these two companies will benefit from the Indian government's $20 billion (Rs 1.46 lakh crore) incentive program to set up manufacturing in India.

Fitch Solutions has said that this program will benefit the automotive industry as according to  FADA (Federation of Automobile Dealers Association), around $7.6 billion of this incentive scheme is earmarked for the auto sector.

On January 7, the stocks received another boost after news broke out that orders for heavy trucks in the US grew by 165% in December 2020 compared to December 2019. Both Bharat Forge and Ramkrishna Forgings supply chassis components (among other auto components) to US heavy vehicles. Exports account for around 60% of Bharat Forge’s revenues and 40% of Ramkrishna’s revenues.

The fact that both these companies operate in the heavy vehicles space is also good news considering that passenger vehicles are in excess capacity in developed markets right now.

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