Paint stocks rise 6% on falling crude prices; Asian Paints reaches 8 month high

Indian paint stocks rose today despite major indices trading in negative territory due to weak global cues. The rise in paint stocks came after a sharp fall in crude oil prices during Tuesday’s session, driven by concerns over weak demand.
Shares of Indigo Paints jumped 6 percent, reaching their highest level since late July. Asian Paints also rose 3 percent to an eight-month high. Berger Paints (India) stock rose 2.6 per cent to ₹591.80 per share, while Kansai Nerolac Paints and Akzo Nobel India gained 2.5 per cent and 1.1 per cent, respectively.
Similarly, Shalimar Paints ended two-day losing streak with a gain of 4.4 per cent, taking its share price to ₹139.50.
Industries dependent on crude oil as a raw material, including the paint sector, benefit from the fall in prices. Paints are derived from petrochemicals, which come from crude oil. As crude oil prices decline, the costs of raw materials such as solvents, resins and additives also decline.
The lower cost of raw materials enables paint companies to produce their products more cheaply, increasing their profit margins.
There is a possibility of pressure on crude oil due to falling demand, increasing supply and recession.
Brent and WTI crude oil futures fell more than 5 percent on Tuesday to a nine-month low. The decline was driven by signs of slowing demand from China, the world’s biggest crude importer, and news of a possible deal to resolve a dispute that has disrupted Libyan production and exports.
Additionally, recently released US economic data also reignited recession fears, putting pressure on crude oil prices, which continued to fall today. These factors have pushed crude oil prices into negative territory for calendar year 2024.
The country’s services sector grew less than expected, raising concerns about the overall health of the economy, a private survey showed. The Caixin China Services Purchasing Managers’ Index (PMI) fell to 51.6 in August from 52.1 in July, according to a statement from Caixin and S&P Global released on Wednesday.
Additionally, the ISM Manufacturing PMI reported that U.S. factory activity declined for the fifth consecutive month at a slightly faster rate than expected.
Investors will be closely watching the upcoming US job vacancies and jobless claims reports on Friday. These data could determine whether the anticipated rate cuts this month will be standard or more significant.