Today, significant paint stocks surged between 2% to 5% in response to a notable drop in crude oil prices. Brent crude futures fell by 4.63% to $77.42 per barrel, while WTI crude futures experienced a marked decline of 4.91% to $72.9 per barrel, in the previous trading session.
Both crucial benchmarks plummeted by 9.12% this month, reaching a four-month low due to a sudden decline in crude oil prices triggered by an unexpected surge in U.S. oil inventories. Analysts at ICICI Securities foresee potential further downturns, accentuated by sluggish economic indicators from the EU and China. Moreover, the International Energy Agency’s assessment projecting a looser global oil market for this quarter, owing to revised demand and supply estimates, has added to the prevailing market uncertainties.
Indigo Paints saw a notable surge of 5%, while Kansai Nerolac Paints experienced a 2% increase in today’s trading session. Similarly, Berger Paints, Akzo Nobel India, and Asian Paints observed rallies ranging between 1-2%. The decrease in crude oil prices is particularly significant for paint manufacturers as it directly influences the expenses of crucial raw materials such as solvents and resins, potentially bolstering their profit margins.
India’s dependency on oil imports, meeting nearly 86% of its oil necessities, positions it to gain significantly from the current decline in crude oil prices. Amidst market fluctuations, paint companies delivered impressive results in Q2FY24. Indigo Paints witnessed an 11.5% revenue surge to ₹271 crore and a PAT growth of 25.9%, reaching ₹26.1 crore. Similarly, Berger Paints India experienced a 3.6% revenue increase to Rs. 2,767 crore, propelled by a 10.9% rise in volume.
Despite Sharekhan and Motilal Oswal maintaining optimistic ‘buy’ ratings on select paint stocks, Geojit Financial Services chose to downgrade Berger Paints’ rating, shifting it from ‘buy’ to ‘hold’. Nevertheless, despite these market variations, companies such as Kansai Nerolac and Akzo Nobel India exhibited strong performances during Q2 FY24.
