Tyre, paint, oil marketing and airline cos soar in relief rally

Chheda said oil prices are likely to remain stable around $90 per barrel, with limited upside risk.

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Shares of companies sensitive to crude price moves surged in a relief rally on Friday as oil prices retreated sharply, easing concerns over elevated input costs hurting profitability

After surging close to 20 per cent since the onset of the US-Iran conflict, Brent crude fell more than 5 per cent to as low as $85.80 a barrel on Friday amid growing optimism around a US-Iran peace deal. The pullback lifted shares of oil marketing companies (OMCs), tyre makers, airlines and paint firms, key beneficiaries of lower crude, while dragging down upstream oil producers.

A decline in crude is typically positive for India, one of the world’s largest importers of oil. Brent futures slipped below $90 a barrel for the first time in three months. “Between $80-90, oil prices are likely to be in a sweet spot for most sectors,” said Sunny Agrawal, head of fundamental research, SBI Securities.

Tyres
Tyre makers, which derive nearly half their input costs from crude-linked products such as synthetic rubber and carbon black, also rallied. “Tyre companies focused on selling the high-priced products, which could mitigate the impact considerably,” said Vyom Chheda, research analyst, StoxBox. “Ceat is the preferred bet in the sector,” he said.

Ceat climbed 5.8 per cent, Apollo Tyres gained 4.2 per cent, and MRF rose 2.1 per cent.

Chheda said oil prices are likely to remain stable around $90 per barrel, with limited upside risk.

Oil Marketing Companies
Falling crude prices helped ease pressure on OMCs, with Hindustan Petroleum Corporation rising 6.3 per cent and Bharat Petroleum Corporation gaining 5.6 per cent. Indian Oil Corporation advanced 5 per cent.

While sentiment has turned favourable, earnings visibility remains clouded after losses in April and May, suggesting a weak June quarter. “If the government sustains the hike in fuel prices, then the prospects for the next couple of months are better for OMCs,” said Agrawal. “Investors should wait and watch how the next quarter pans out.”

Tyre makers, which derive nearly half their input costs from crude-linked products such as synthetic rubber and carbon black, also rallied. “Tyre companies focused on selling the high-priced products, which could mitigate the impact considerably,” said Vyom Chheda, research analyst, StoxBox. “Ceat is the preferred bet in the sector,” he said.

Ceat climbed 5.8 per cent, Apollo Tyres gained 4.2 per cent, and MRF rose 2.1 per cent.

Chheda said oil prices are likely to remain stable around $90 per barrel, with limited upside risk.

Aviation & Travel
InterGlobe Aviation rose 4.6 per cent, and Spicejet soared 7.3 per cent as airlines will benefit from the drop in crude, which feeds directly into aviation turbine fuel (ATF) costs — a major expense item.

“If there is a peace deal between the US and Iran, then the travel and tourism in that space could improve and give airline companies a leg up,” said Agrawal of SBI Securities. A stronger rupee could provide an additional tailwind, as aircraft leasing costs are denominated in dollars, he said.

Among travel and tour operators, Le Travenues Technology jumped 12.2 per cent, Yatra Online rose 6.7 per cent, and TBO Tek gained 7.7 per cent.

Paints

Paint companies, heavily reliant on crude derivatives that account for 30–35 per cent of raw material costs, saw relatively modest gains.

Asian Paints rose 2.1 per cent, while Berger Paints India and Kansai Nerolac edged up 0.2 per cent each.

Most companies had already raised prices to offset earlier oil spikes, helping margins remain stable in the March quarter.

“The gains could be sustainable in paint stocks as they managed to sustain the pressure despite higher oil prices,” said Chheda. “Asian Paints is the top pick in the sector,” he said.

Oil Exploration Companies
Upstream oil producers, however, came under pressure as falling crude prices directly hit realisations. Oil India declined 2.7 per cent, while Hindustan Oil Exploration and ONGC fell 1.3 per cent and 2.5 per cent, respectively.

Investors should avoid these stocks if oil prices continue to trend lower, said Agrawal.