Paint Companies See Stock Rally Amid Easing Crude Oil Prices
Paint firms get a breather, but will it suffice?
Mint
Image: Mint
Shares of Asian Paints Ltd, Berger Paints India Ltd, and Kansai Nerolac Paints Ltd rose by 3-5% as Brent crude oil prices fell to approximately $93 per barrel. Despite recent price hikes to counter rising costs, analysts express concerns about ongoing supply chain issues and potential impacts on demand, particularly in rural markets due to predicted below-normal monsoon rainfall.
- 01Asian Paints, Berger Paints, and Kansai Nerolac shares rallied 3-5% as crude oil prices eased.
- 02Recent price hikes of 6-8% by Asian Paints and 3-10% by Berger Paints aim to offset rising input costs.
- 03Analysts predict ongoing supply chain challenges may affect volume growth guidance.
- 04Weather forecasts indicate a potential below-normal monsoon, threatening rural demand.
- 05Despite short-term gains, long-term investor confidence remains uncertain due to valuation concerns.
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Shares of Asian Paints Ltd, Berger Paints India Ltd, and Kansai Nerolac Paints Ltd experienced a 3-5% increase on Wednesday following a decline in Brent crude oil prices to around $93 per barrel, down from $107.9 on March 18. This drop is significant as crude derivatives account for about 40% of the raw materials for paint companies. In response to rising crude oil-linked costs, Asian Paints announced a 6-8% price increase in two phases starting April 10, while Berger Paints implemented a 3-10% hike from March 25 and April 9. Despite these adjustments, analysts from ICICI Securities caution that supply chain issues may persist, impacting volume growth guidance. Additionally, forecasts of below-normal monsoon rainfall raise concerns about rural consumption, which could further affect demand for paint products. Both Asian Paints and Berger have seen their shares drop 17% in 2026, raising questions about their current valuations, trading at 40 and 36 times estimated FY28 earnings, respectively. The overall outlook remains cautious as the industry navigates these challenges.
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The price hikes may lead to increased costs for consumers, affecting demand for paint products, especially in rural areas where consumption is closely tied to agricultural output.
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