Paints stocks rally up to 5%. Here’s what fueling the surge

Shares of Asian Paints, Akzo Nobel, Berger Paints, Kansai Nerolac and Indigo Paints rose up to 4.84 per cent in Thursday’s trade after crude oil prices slumped to $85/barrel on Wednesday. Indigo Paints was among the top gainers as the stock rallied 4.84 per cent to Rs 1,549.75.

Crude derivatives are among the major raw materials for paint companies. Therefore, a fall in crude prices benefits such companies, as it increases their margins, lowers input costs and thereby increases the profitability of the companies.

For the first time since February, Brent crude futures finished $4.83 lower at $88 per barrel yesterday, whereas WTI crude dropped to $81.94, its lowest level since January, falling $4.94, or 5.7 per cent.

At 1.36 pm, Asian paints shares were trading 1.21 per cent higher at Rs 3,440.45, while Berger Paints was 0.77 per cent higher at Rs 665.

The highest target for Asian Paints goes up to Rs 3950, according to Trendlyne data. And out of the 36 analysts covering the stock, 9 have a sell and strong sell rating, while 17 have a buy call on the stock.

The highest target for Berger Paints goes up to Rs 867 as per Trendlyne data. The average estimate of Rs 681 shows an upside potential of around 2 per cent from current prices. Out of 22 analysts covering the stock, only 3 have buy and strong buy ratings, while 12 have sell and strong sell ratings.