Paint stocks jump up to 5%. Here’s what fueling the surge
Asian Paints, Indigo Paints, Akzo Nobel, Berger Paints, and Kansai Nerolac rose up to 5.1% in Friday’s trade on NSE after Brent crude futures fell to a four-month low of $77.42 per barrel on Thursday.
Meanwhile, on Friday, oil prices were little changed in early Asian trade after slipping about 5% to a four-month low on Thursday on worries over global demand.
Brent futures were up 10 cents, or 0.1%, at $77.52 a barrel at 11.17 am on Friday, while US West Texas Intermediate crude (WTI) was up 13 cents, or 0.18% at $73.05.
The oil prices' decline this week was mainly triggered by a steep rise in US crude inventories and production sustaining at record levels, which analysts say triggered concerns of weak demand in the world's largest oil consumer amid high output.
Crude derivatives are among the major raw materials for paint companies.
Therefore, a fall in crude oil prices benefits such companies, as it increases their margins, lowers input costs and thereby increases the profitability of the companies.
Indigo Paints was among the top gainers as the stock rallied 5.1% to Rs 1,550, while Asian Paints rose as much as 3.1% to Rs 3,228.2.
At 11.26 am, Asian paints was trading 2.2% higher at Rs 3,199.9 on BSE. However, the stock has remained muted in the last one year, as it has just delivered 4% of returns to the investors.
As per Trendlyne data, the average target price of Asian Paints is Rs 3,246, which shows an upside of 2% from the current market prices.
The consensus recommendation from 36 analysts for the stock is a Hold.
While Indigo Paints was trading at 3.6% higher to Rs 1528. Indigo Paints also surged over 16% in the last one year.
