Why are Asian Paints, JK Tyre, IndiGo and other oil sensitive stocks falling today?

Shares of oil-sensitive sectors such as airlines, tyre and paint companies fell sharply on Monday after crude oil prices surged to multi-year highs amid escalating geopolitical tensions in West Asia.

Benchmark Nifty 50 was down about 2.8 per cent in early trade as investors turned cautious over the spike in crude prices, which could raise input costs for several industries.

Crude crosses $100 for the first time since June 2022

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Global benchmark Brent Crude jumped nearly 25 per cent to around $115 per barrel and briefly touched close to $119 levels. This marks the first time crude has crossed the $100 mark since June 2022.

The surge follows rising tensions in West Asia. Some global energy officials have warned that prices could even touch $150 per barrel if the conflict prolongs.

Crude has already rallied sharply from around $70 per barrel to nearly $115 after the conflict began, a rise of about 64 per cent.

Airline, tyre and paint stocks under pressure

Rising crude prices typically increase costs for sectors that depend heavily on petroleum derivatives.

Shares of InterGlobe Aviation and SpiceJet fell as much as 8.3 per cent and 8.2 per cent respectively in early trade. By around 9:50 AM, the stocks were still down 7.5 per cent and 5.4 per cent.

In the paints segment, Asian Paints dropped around 5 per cent, Berger Paints India declined 4.3 per cent, while Indigo Paints slipped 5.6 per cent.

Tyre stocks also saw sharp selling. JK Tyre & Industries fell about 8.2 per cent, Apollo Tyres declined 4.9 per cent, Tolins Tyres dropped 4.5 per cent, and MRF was down nearly 3 per cent.

Why crude hurts these sectors

Paint companies depend heavily on crude derivatives for raw materials. Nearly 55 per cent of their input costs come from petroleum-linked products.

Analysts estimate that every $10 per barrel rise in crude can reduce gross margins of paint companies by around 50–60 basis points, while EBITDA margins could fall by about 20–30 basis points.

For tyre companies, crude-linked inputs such as synthetic rubber, carbon black and chemicals account for nearly 35–40 per cent of raw material costs. A $10 increase in crude prices could lead to about 110 basis points decline in margins.

Brokerage CLSA said margins for tyre companies may have already peaked. The firm expects raw material inflation driven by geopolitical tensions to weigh on profitability and could impact gross margins by nearly 400 basis points by FY27.

Pressure also building on paint companies

Brokerage HSBC noted that raw material costs for paint companies are rising after nearly four years of stability.

While companies may attempt price hikes, analysts say intense competition in the sector could make it difficult to fully pass on higher costs to customers. Any price increase may also reduce the gap between value and premium products, potentially impacting volumes.

Oil producers see gains

While crude-sensitive sectors are under pressure, upstream oil producers are benefiting from higher prices.

Shares of Oil and Natural Gas Corporation and Oil India were supported by the rally in crude.

Analysts estimate that every $5 per barrel increase in crude prices could boost earnings per share of these companies by roughly 7–12 per cent.