Why Asian Paints Share Price is Rising

Like two opposing currents in the same ocean, the Indian stock market on 4 September 2024, showcased a stark contrast in movement.

While oil marketing companies like ONGC, Oil India, and GAIL faced the headwinds of a market downturn, paint stocks such as Asian Paints and Indigo Paints rode the tailwinds of a bullish surge.

This divergence was striking, as both sectors reacted to the same underlying factor, yet their paths diverged dramatically.

This juxtaposition of fortunes within the market highlights how interconnected forces can push one sector down while lifting another.

As the market reacted to the day's events, investors turned their attention to the paint sector, driving up share prices and sparking conversations about what fueled this rally.

We've already discussed why the oil marketing sector stumbled in our article titled: Why are OMC Stocks Falling?

It's time to focus on why paint stocks, including Asian Paints, soared amidst this market duality.

Falling Crude Oil Price

Indian paint stocks, led by Asian Paints, experienced a surge even as broader market indices traded in the red due to weak global cues.

This rally in paint stocks followed a significant drop in crude oil prices, which fell sharply amid concerns over declining demand in the global market.

Industries that heavily rely on crude oil as a key input, like the paint sector, stand to benefit when oil prices decline.

Paint production depends on petrochemicals, which are derived from crude oil. A reduction in crude oil prices directly lowers the cost of essential raw materials, including solvents, resins, and additives.

For Asian Paints, this drop in raw material costs has been advantageous. With cheaper inputs, the company can reduce production expenses, resulting in higher profit margins. This improvement in profitability has caught the attention of investors, pushing the stock price higher.

On 4 September 2024, Asian Paints share price climbed 3%, reaching its highest level in eight months.

The positive sentiment wasn't limited to Asian Paints alone. Other paint stocks also rallied on the back of falling crude oil prices.

Indigo Paints saw a 6% jump, marking its highest level since late July. Berger Paints' stock rose by 2.6%. Kansai Nerolac Paints increased by 2.5% and Akzo Nobel India gained 1.1%.

The broader trend indicates that as crude oil prices continue to decline, paint companies stand to benefit from reduced costs. This market dynamic has positioned Asian Paints and its peers in a favourable light, attracting investor interest and driving up their stock values.

What Next?

Asian Paints is looking ahead with plans that are both ambitious and well-structured.

The company is focused on maintaining healthy volume growth, having achieved a five-year CAGR of 15.3%. Despite short-term challenges, Asian Paints is confident in its long-term strategies.

The recent capacity expansion at the Mysuru plant, which doubled its capacity to 0.6 million KL, signals the company's intent to meet future demand and sustain growth.

Their focus on innovation is also a key part of their future strategy. Products like NeoBharat Latex paint, targeting the unorganised market, have already shown promise. This strategy of expanding into new market segments is expected to boost revenues.

Furthermore, the ongoing investments in the Beautiful Homes Painting Service and other home decor initiatives, such as partnerships with well-known brands, show that Asian Paints is committed to growing beyond traditional paint products.

In the industrial segment, Asian Paints plans to capitalise on the growing auto sector, which has been a bright spot. The company's performance in auto refinishes and Auto OE business has been strong, and they intend to maintain this momentum.

Internationally, while challenges remain due to currency fluctuations and economic slowdowns in some markets, Asian Paints is optimistic about recovery in markets like Sri Lanka and Ethiopia.

The company is also dedicated to sustainability, with a strong focus on ESG initiatives, including increasing renewable energy usage and water conservation efforts.

Here's a summary of the company's outlook for FY25.

Asian Paints FY25 Outlook

How Asian Paints Share Price has Performed Recently

In the past five days, Asian Paints share price has rallied 3.6%. In the last month, it is up 5%.

In 2024, so far its share price has tumbled 4.4% and it has gone up 0.8% in the last year.

The stock touched its 52-week high of Rs 3,422 on 29 December 2023 and a 52-week low of Rs 2,671 on 10 May 2024.

About Asian Paints

Asian Paints is one of India's most well-known paint companies.

Founded in 1942, it's also India's largest paint company. It also produces varnishes, enamels, or lacquers, surface preparation, organic composite solvents, and thinners.

The firm has business in 15 countries and has 26 paint production sites worldwide, serving customers in over 60 nations. It sells its products under numerous names such as Apcolite, SCIB, and Causeway Paints.

The firm is also well known for its supply chain approach. Its supply chain is critical to its competitiveness by offering flawless product quality and exceptional service while keeping prices down.

You can compare Asian Paints with its peers on our website.

Asian Paints vs Berger Paints

Asian Paints vs Shalimar Paints

Asian Paints vs Indigo Paints

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Happy investing!

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