Paint shares extend rally as crude prices fall

Asian Paints, Shalimar Paints, Berger Paints, Akzo Nobel and Kansai Nerolac gained 10-20% in past four trading sessions on BSE.

Shares of paint manufacturer are trading higher by up to 9%, extending their past three days rally on the bourses, on expectation of improvement in operating profit margins due to fall in crude prices.

Shalimar Paints (up 9% to Rs 183), Berger Paints (8% at Rs 426), Akzo Nobel India (5.5% at Rs 1,405), Asian Paints (4% at Rs 774), Kansai Nerolac Paints (3.7% at Rs 2,085) are up between 4-9% on the BSE.

Most of these stocks have rallied between 5-20% in past four trading sessions, trading at their record highs on BSE.  The benchmark S&P BSE Sensex gained 1.5% rise during the period.

The fall in crude oil prices will be beneficial as paint companies use crude oil derivatives as inputs. Given that the entire benefit is not going to be passed on to the end consumer, there will be an expansion in margins, the Business Standard report suggests.

Raw materials account for over 50% of a paint company’s total expenses.

Brent crude fell to a four-year low on Friday to $71.12 per barrel, while the US crude fell to a four-and-a-half year low of $67.75 per barrel after the Opec decided to keep the output unchanged.