Shares of Asian Paints declined sharply in early trading on Monday, March 9, as rising crude oil prices and weakening demand trends weighed on sentiment across the paint sector.
As of 9:17 AM, Asian Paints was trading at Rs 2,174.80 on the NSE, down 4.59% or Rs 104.70 from the previous close of Rs 2,279.50. The stock touched an intraday low of Rs 2,169 during early trade, reflecting strong selling pressure from investors concerned about rising input costs and sector-wide challenges.
Crude-linked raw material costs under pressure
Paint manufacturers are particularly sensitive to fluctuations in crude oil prices because a significant portion of their raw materials are petroleum derivatives. These include solvents, resins, emulsions and binders that are widely used in paint production.
Industry estimates suggest that crude-linked inputs account for nearly 40–60% of raw material costs for paint companies. As global crude prices rise, the cost of these materials increases, putting immediate pressure on margins.
The recent surge in oil prices has been driven by escalating geopolitical tensions in West Asia following military developments involving the United States, Israel and Iran. Brent crude has moved sharply higher in recent sessions, raising concerns about the stability of global oil supply.
Analysts say every increase in crude prices can have a noticeable impact on profitability for paint manufacturers, with higher input costs potentially compressing EBITDA margins across the sector.
Strait of Hormuz concerns amplify oil price risks
The situation has also raised concerns around the Strait of Hormuz, a key global oil shipping route through which a large portion of the world’s crude supply flows.
Nearly 20% of global oil shipments and more than 40% of India’s crude imports pass through this narrow waterway. Any disruption to tanker traffic in the region could push oil prices even higher.
Consultancy firm Wood Mackenzie has warned that prolonged disruptions could potentially push oil prices above $100 per barrel, creating further cost pressures for industries dependent on petrochemical inputs.
Paint stocks decline across the sector
Investor concerns have already translated into sharp declines in paint stocks over recent trading sessions.
Shares of Berger Paints have fallen around 7% in the past month, while Asian Paints and Akzo Nobel India have slipped roughly 5%. Kansai Nerolac Paints has declined about 11%, and Shalimar Paints has dropped more than 14% over the same period.
Brokerage firm HSBC has maintained a “hold” rating on Asian Paints, but lowered its target price to Rs 2,600 from Rs 2,900, citing concerns around margin pressure and slower industry growth. The brokerage also retained a hold rating on Berger Paints while cutting its target price to Rs 500 from Rs 540.
Demand trends add further pressure
Apart from rising input costs, the paint sector is also dealing with softer demand trends.
According to industry commentary, consumer spending patterns have shifted in recent quarters. Many households are allocating more budgets toward travel, hospitality and experiences rather than home improvement activities such as repainting.
During a recent earnings call, Asian Paints Managing Director and CEO Amit Singhal noted that the frequency of painting cycles has slowed as consumer priorities evolve. Events that traditionally triggered repainting activity, such as weddings and celebrations at home, are increasingly shifting toward destination venues, reducing the need for home renovations.
At the same time, demand trends have diverged across regions. Rural markets have performed relatively better in recent months due to favourable rainfall and improving sentiment, while urban demand has remained more subdued.
Competition intensifies across the industry
Competition within the paint sector has also intensified, making it harder for companies to pass on rising costs to customers through price increases.
Major players including Berger Paints, Akzo Nobel India and Kansai Nerolac continue to compete aggressively for market share, limiting pricing flexibility for industry leaders like Asian Paints.
Analysts say the combination of higher input costs, softer demand growth and strong competition could keep margins under pressure in the near term, making the sector more sensitive to fluctuations in crude oil prices.
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