Shares of paint players soared in trade on April 9, despite a muted market sentiment, as crude oil prices cooled off significantly.
Brent crude prices dipped below $62 per barrel, extending a decline of over 30 percent in the last year. Morgan Stanley has lowered its Brent estimates for the remainder of the year, now expecting the benchmark to trade in the $60s during the second half of 2025.
India, which relies on imports for 85 percent of its crude needs, stands to gain from the price drop, as do industries that use crude derivatives. Lower crude prices translate to softer input costs for paint companies like Asian Paints, boosting gross margins and profitability. If the trend persists, it could also lead to more competitive consumer pricing.
Crude oil prices affect the decorative paint business more than any other because it is a raw material-intensive industry. The manufacture of paint requires more than 300 items, most being petroleum-based. Raw material accounts for 55-60 percent of input costs and directly impacts gross margins.
At close, Asian Paints shares climbed 0.6 percent to Rs 2,409 per share. After trimming some morning gains, Berger Paints' stock was up 0.3 percent to quote Rs 537.3 on the NSE. Kansai Nerolac's shares slipped into the red, lower by 0.1 percent to Rs 244.
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Over the past year, Asian Paints shares have fallen 15 percent in trade. Berger Paints have performed slightly better, falling three percent during the same time. Kansai Nerolac shares have fallen 12 percent during the same time period. In comparison, the frontline index Nifty 50 has traded flat during the same time.
Brent crude is also a major source of synthetic rubber and other petrochemical products used in tyre manufacturing. As crude prices rise, the cost of these raw materials gains, increasing production costs for tyre companies. With lower raw material costs, tyre manufacturers can enjoy improved profit margins, and vice versa.
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