Here’s How Rising Crude Oil Affects Paint Industry; Indigo Paints Hits 52-Wk Low

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Here’s How Rising Crude Oil Affects Paint Industry; Indigo Paints Hits 52-Wk Low

By Malvika Gurung -- The crude oil prices flying to 14-year highs, surging over 10% on Monday and nearing the $140/barrel mark has sent the domestic and global markets in a red zone. However, amid all the noise, paint stocks have been affected too.

Paint scrips including Indigo Paints, Asian Paints (NS: ASPN ) and Kansai Nerolac Paints (NS: KANE ) have plunged up to 11% on Monday, with Indigo Paints hitting a fresh 52-week low at Rs 1,486/share in the morning session.

Asian Paints corrected nearly 12% last week and is almost 25% below its all-time high.

This is because crude derivatives are among the key raw materials for paint companies. Hence, a rise in crude oil prices is a major challenge for such companies, as it dents their margins, rising input costs and thereby pulling down the companies’ profitability.

Also, with an increasing number of companies like JSW Steel (NS: JSTL ), JK Cement (NS: JKCE ), Grasim (NS: GRAS ) and more entering into the paint business, competition is rising. 

According to Swastika Investmart (BO: SWAF ), besides the rising crude prices, increasing competition is another headwind for paint companies, however, the outlook for the industry continues to appear promising despite near term jitters. It pegs Asian Paints and Berger Paints (NS: BRGR ) to continue outperforming in the industry.

At the time of writing, Indigo Paints was down 8.92%, Berger Paints by 3.7%, and Kansai Nerolac by 3.3%, among others.

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    will the market drop tomorrow
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