Rising crude oil prices have been hurting sectors like paints, textiles, airlines, tyres, and auto that are mainly dependent on crude oil and derivatives as their raw material.
Oil prices surged with the Brent crude hit $110 per barrel in early deals today, its highest level in nearly eight years after the International Energy Agency (IEA) agreed to release 60 million barrels of oil from emergency stockpiles. However, news of that release only boosted investor fears the growing tensions between Russia and Ukraine will keep the supply inadequate.
Most experts believe that crude oil prices are likely to remain between $100-$110 per barrel for the foreseeable future. This poses a problem for India, as over 80 percent of the country's oil requirement is met through exports. So a continued rise in crude oil price will not only increase inflation and impact budgetary calculations but will also result in affecting corporate earnings ad companies will face margin decline due to the rise in raw material costs.
Just in today's trade, paint stocks have lost up to 5 percent with Asian Paints declining the most. Berger Paints, Kansai Nerolac, Indigo Paints, Akzo Nobel were all down between 1-5 percent. Tyre stocks were also negative for the day with Apollo Tyres down over 2 percent and Balkrishna Industries, JK Tyres, CEAT also in the red.
Textile stocks were also under pressure with Lux Industries tanking 5 percent followed by Grasim Industries down 4 percent. Airline stocks also couldn't support the markets. Interglobe Aviation shed 4 percent while SpiceJet was down around 2 percent.
All auto and auto ancilliary stocks were also negative in today's trade. While Maruti Suzuki lost over 6 percent, Bajaj Auto, Hero Moto were down over 4 percent each. TVS Motor and Eicher Motors also fell around 3 percent each. Auto ancillary stocks Minda Corp, Varrox Engineering, Endurance Tech and Jamna Auto also lost between 2-5 percent.
Russia is the second-largest exporter of crude worldwide. Oil price surged to $100 a barrel for the first time since July 2014 last week when Russian President Vladimir Putin had decided to start “military operations" over the Ukraine border. To stop Putin’s aggression, several Western countries have imposed sanctions against Russian companies. The oil trade is exempt from sanctions but buyers are rejecting Russian oil to avoid volatile situations