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Tailwinds fuel Ashok Leyland stock but it’s a painful ride ahead

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Ashok Leyland Ltd’s shares have surged 29% from the low of Rs33.7 hit on 25 March. What is driving the stock in spite of the 21-day national lockdown?

To start with, it must be noted that the stock had reached extremely low valuations, and the recent rise may be akin to a deadcat bounce.

A report by Motilal Oswal Financial Services Ltd points out that the stock trades at a 20% discount to its decadal average (price-to-earnings ratio).

But, this is not the only reason. The company’s decision to reverse the proposed buyout of the promoter stake in group company Hinduja Leyland Finance Ltd helped investor sentiment.

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