Shares of several paint companies were reeling under selling pressure on Monday, with Asian Paints, Berger Paints and Indigo Paints falling up to 11% in early deals amid steep rise in crude prices. The Brent crude oil surged over $10 early today to breach $130 a barrel mark, the highest since 2008, as the United States and its allies mull imposing ban on Russian oil exports.
The rise in crude prices will lead to rise in input costs for paint companies, which will impact their earnings and margins. Asian Paints and Berger Paints have already increased the product prices multiple times to mitigate the impact of rising raw material costs.
Shares of Indigo Paints declined as much as 10.5% to hit 52-week low of ₹1,497.65 on the BSE. Extending losses for the second session, the stock opened with a loss of 2.9% today and dropped 12.15% in two sessions.
In a similar trend, sectoral leader Asian Paints fell 5% to touch a intraday low of ₹2,599.35, while Berger Paints slipped 4.6% to hit a 52-week low of ₹623.5 on the BSE. Among others, Kansai Nerolac Paints and Shalimar Paints slipped 5% and 1%, respectively.
Meanwhile, the 30-share Sensex declined as much as 1,791 points or 3.3% to hit a low of 52,542, while the Nifty 50 shed 503 points or 3.1% to slip below the psychological level of 16,000 at 15,741.
Brent futures, a global benchmark for crude oil prices, surged from $90 a barrel to $130 a barrel in last one week after Russia announced invasion of Ukraine. The oil prices were also pushed after some refiners refused to buy Russian oil, which raised fear that U.S. and the U.K. may target Russian energy sector. The report that the U.S. and its European allies are planning to reduce the import of Russian oil also spooked traders.
At the time of reporting, the U.S. West Texas Intermediate (WTI) crude futures for April contracts were up 8.43% to $125.43 a barrel, while the Brent oil futures for May contracts spiked 9.08% to $128.83 per barrel.
The raw material intensive paints sector, which uses crude derivatives and other petroleum based products, benefits from softening crude prices. The sudden spike in crude prices will impact earnings of paint companies, which are already battling with low demands and supply chain issue. The paint industry has witnessed slow demand conditions due to state-level restrictions at the beginning of January. However, demand is expected to pick going forward with uptake in economic activities and sustained demand for automobiles, which aid paint industry.
