Market update: Tyre, paint stocks gain on fall in crude oil prices; Upstream cos' scrips dip

Tyre and paints stocks climbed on May 4, 2023, supported by a fall in the price of crude oil. In the international market, crude oil declined nearly 9 per cent in the last two days. While filing this report, the crude oil stood at $73.16 per barrel. On Wednesday, oil prices extended their fall and dropped another 4 per cent in reaction to the Fed's policy statement.

Last seen, on NSE, Indigo Paints rose the most among paint stocks i.e. over 2 per cent, followed by Asian Paints, Berger Paints and Kansai Nerolac Paints which climbed over 1 per cent each, and Shalimar Paints and Akzo Paint stocks were marginally higher. Crude oil prices affect the decorative paint business more than any other because it is a raw material-intensive industry.

Similarly, among tyre stocks, MRF Tyres rose the most which is over 1 per cent, followed by Ceat Limited which rose over 1 per cent, and JK Tyre which traded marginally higher. On the other hand, upstream oil stocks such as Oil and Natural Gas Corporation (ONGC) traded marginally lower.

Why do crude oil prices affect upstream oil, paint, and tyre stocks?

Crude oil is one of the key components in manufacturing paint and tyre. Thus, when there is a rise in crude oil prices, the manufacturing cost of these companies increases and vice versa. On the flip side, a fall in the price of crude oil affects upstream oil stock negatively as these companies are involved in the exploration, development, and production of oil and gas resources.

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