Paint stocks surge up to 5% on sharp decline in crude oil prices
Oil prices drop over $3 on China's demand concerns, US crude stock; Brent crashes to $78/bbl Both of these crucial benchmarks marked a 9.12% decline this month so far, reaching their lowest levels in four months. The substantial decrease in crude oil prices on Thursday followed a larger-than-anticipated build-up in U.S. oil inventories.
Moreover, downward pressure is also being exerted by weak economic activity indicators from the EU and China. Analysts at ICICI Securities anticipate further downside potential in the near term. Earlier this week, the International Energy Agency indicated that global oil markets won't be as tight as initially expected this quarter, as upward revisions to demand are overshadowed by upgrades to supplies.
Also Read: Centre cuts windfall tax on domestic crude sales, diesel exports Amid this backdrop, Indigo Paints and Kansai Nerolac Paints have jumped 5% and 2% in today's trade, while Berger Paints, Akzo Nobel India, and Asian Paints rallied between 1-2.%. Crude oil is a key component in the production of certain raw materials used in the manufacturing of paints, such as solvents and resins. When crude oil prices drop, it can lead to lower production costs for these raw materials, positively impacting the profit margins of paint companies.
The drop in crude oil prices was also a big positive factor for a country like India, which meets 86% of its oil requirements through imports. Also Read: Nifty 50 recovers from October blow in just 10 sessions; up 3.59% in November so far Meanwhile, for Q2FY24, paint companies delivered a decent set of numbers. Indigo Paints revenue and PAT grew by 11.5% and 25.9% YoY in Q2 to ₹271 crore and ₹26.1 crore, respectively.
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