Stocks such as Astral Poly, Asian Paints, Navin Fluorine, Aarti Industries, Indian Oil, BPCL, HPCL, Atul, Sudarshan Chemical, Supreme Industries, JK Tires, UltraTech Cement, CEAT and Finolex Industries can be added to the trend. crude drop, they say.
“The drop in crude prices should benefit companies in the specialty chemicals sector such as Aarti Industries, Atul, Sudarshan Chemical and also plastic pipe companies like Astral Poly Technik and Supreme Industries, as it will mitigate pressure on input costs and improve gross margins, ”said Rishab Bothra, senior research analyst at Sharekhan. “However, the same should be observed with a lag effect.”
Brent crude has dropped 21% to $ 52.3 a barrel since the start of the year to a 30-month low. The increase in oil production in the United States, Brazil, Canada and Norway and the drop in demand from China add to the excess supply of oil. The crude oil barometer is expected to remain at $ 50 until the outlook for demand in China and around the world improves, which could take another 6 to 12 months, economists said.
“We love Astral Poly, Asian Paints, Navin Fluorine, Aarti Industries and suggest using these companies as investments to play this trend,” said Sahil Kapoor, chief market strategist, Edelweiss Wealth Management.
Titanium dioxide and crude derivatives account for around 50% of the cost of raw materials for paints. Since rubber represents 70% of the total cost to the tire industry, a significant drop in the price of crude oil will encourage the expansion of margins because there is a correlation between the price of crude oil and that of rubber. Cement companies could also win because most of them have improved their energy mix in favor of petroleum coke, whose prices are also moving in tandem with crude oil.
“The sharp drop in the international price of crude oil should benefit oil marketing companies such as Indian Oil, BPCL and HPCL, as persistent low oil prices would reduce losses for refiners, which should have an impact positive on the core refining margins. and the profits, ”said Abhijeet Bora, senior research analyst, Sharekhan.
“In addition, lower oil prices would reduce stress on working capital given the likely decline in domestic LPG and kerosene under-recoveries.”
Each fall of $ 1 in crude oil saves India nearly half a billion dollars. A 10% reduction in crude prices could reduce inflation based on the consumer price index by about 20 basis points (bp) and lead to a 30bp increase in growth in gross domestic product (GDP) ).
