IndiGo, Indigo Paints Shares Jump Over 4% as Crude Oil Hits Two-Month Low; HPCL, Asian Paints, Tyre Stocks Gain

Shares of IndiGo, Indigo Paints, Asian Paints, tyre manufacturers and oil marketing companies gained on Wednesday, November 11, after global crude oil prices settled at their lowest level in more than two months. The decline in oil prices brought buying interest to stocks of companies that use crude oil and petroleum-based products as major inputs.

InterGlobe Aviation, which operates IndiGo, gained 4.23% to ₹5,659.70 on the NSE, up ₹229.70 from its previous close. Indigo Paints shares climbed 4.02% to ₹951.85, while Asian Paints rose 1.64% to ₹2,550.40 at 11:05 AM IST. Berger Paints was trading 0.77% higher at ₹474.85.

Among oil marketing companies, Hindustan Petroleum Corporation (HPCL) rose 2.94% to ₹397.10 at 11:07 AM. Bharat Petroleum Corporation (BPCL) gained 1.61% to ₹321.10, while Indian Oil Corporation (IOC) was up 0.85% at ₹148.10 at 11:08 AM.

Tyre stocks also traded higher. CEAT gained 1.28% to ₹3,499.80 at 11:05 AM, while JK Tyre rose 0.81% to ₹360.20 at 11:06 AM.

The gains came after Brent crude futures fell $1.08, or 1.2%, to settle at $91.49 per barrel on Tuesday, November 10. US West Texas Intermediate (WTI) crude declined 81 cents, or 0.9%, to $86.04 per barrel. Both benchmarks recorded their lowest settlements since August 31.

Oil prices have declined in recent sessions as concerns over further military action involving the US and Iran eased. Comments from US officials suggesting that sanctions and the naval blockade were reducing the need for further military operations also weighed on crude prices.

However, crude recovered some ground in early Asian trade on Wednesday amid renewed concerns over shipping through the Strait of Hormuz. Brent rose to $92.20 per barrel, while WTI traded at $86.53.

Why Are IndiGo, Paint and Tyre Stocks Rising Today?

Airline stocks gained as lower crude oil prices could eventually reduce aviation turbine fuel (ATF) costs. Fuel is one of the biggest expenses for airlines, including IndiGo, and a decline in ATF prices can help lower operating costs.

Domestic ATF prices are revised periodically and also depend on the rupee-dollar exchange rate. The impact of lower international crude prices may therefore take time to reflect in airline expenses.

Paint manufacturers also gained as several raw materials used in paint production are derived from crude oil. Companies such as Asian Paints, Berger Paints and Indigo Paints use solvents, resins and other petrochemical products in manufacturing.

A decline in these input prices can help reduce production costs, depending on procurement prices and existing raw material inventories.

Tyre companies, including CEAT and JK Tyre, were also trading higher. Crude oil is linked to the prices of synthetic rubber, carbon black and chemicals used in tyre manufacturing. Lower prices for these materials could reduce costs for manufacturers, although natural rubber prices also play an important role.

HPCL, BPCL and Indian Oil Shares Gain as Crude Prices Ease

Oil marketing companies were among the gainers on Wednesday, with HPCL rising nearly 3%.

HPCL, BPCL and Indian Oil buy crude oil, refine it and sell petroleum products in the domestic market. A decline in crude prices can lower their purchase costs and support marketing margins if retail petrol and diesel prices remain unchanged.

The impact on earnings also depends on refining margins and inventory gains or losses. For upstream oil producers such as ONGC and Oil India, the impact can be different. These companies earn revenue from crude oil production, and lower international prices can reduce the amount they receive for the oil they sell.

The latest movement in crude prices comes amid developments in the US-Iran conflict. While oil prices fell to two-month lows on Tuesday, Wednesday's recovery showed that concerns over shipping disruptions in the Strait of Hormuz continue to influence the market.

Also Read - HDFC Bank Stock Surges 17% In 10 Days From 52-Week Low As Improving Operations Renew Investors’ Interest