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Fall in crude prices to boost paint, tyre companies’ margin

The fall in crude oil prices is expected to boost the profit margins of India Inc, especially that of paint and tyre companies, as the derivative from crude oil is the basic raw material in these sectors.Brent crude prices have fallen six cents to $92 a barrel while the US West Texas Intermediate crude futures declined 16 cents to $90.34 a barrel on Wednesday, on the fear of consistent lending rate hike leading to a global recession, especially in the US and Europe. Brent crude, which is more relevant to India, has fallen from a high of $124 per barrel ever since the US Fed started increasing the interest rates.Demand is backThe fall in raw material prices comes when the demand in both paint and tyre sectors has bounced back after suffering for a prolonged period during the Covid pandemic.Vinod Nair, Head of Research, Geojit Financial Services, said the Brent crude posted its worst weekly drop of the year at 14 per cent to close at $94.7 per barrel, and it was the lowest since February. “Profit from the deflationary raw material prices will start reflecting in the paint and tyre business margins from the second half of this fiscal, while the fall in metal and other costs will also boost margins,” he said.This apart, volume growth in the auto sector is expected to remain robust in double digit after a fulfilling monsoon, upcoming festivals, and the marriage season, he added.