Airlines, tyres, paints stock slump amid market selloff on Russia-Ukraine crisis

Shares of airline, tyre and paint companies slumped on the BSE and NSE bourses on Thursday, as BSE Sensex and Nifty 50 crashed over 3% after Russia’s Vladimir Putin announced military operations on Ukraine. Stocks of airline, tyre and paints also witnessed the sell-off as oil breached the $100 per barrel mark. Crude oil prices are a major headwind for both paints and transport sectors. 

The shares of paint companies such as Nerolac Kansai Paints Ltd, Berger Paints India and Indigo Paints Ltd were down 4% from last close. Nerolac Kansai Paints Ltd fell over 4.7% to Rs 442.60 a piece in intraday trading, while Berger Paints and Indigo Paints touched intraday low of Rs 700 and Rs 1,720 respectively. Alongside paint companies, airline stocks were also in red on BSE and NSE bourses. Interglobe Aviation Ltd, the owner of Indigo slumped 7.5% to Rs 1,885.55 apiece, and SpiceJet dropped by 5.7% in intraday trading. 

Rising oil prices impact the price of aviation turbine fuel (ATF), hence can create ripples in airline stocks. While for paints and tyre industry, since crude/petroleum derivatives are part of raw materials, rising oil prices could increase their costs and cut company’s profit margins. Oil derivatives form a major part of the manufacturing process.

Tyre-makers, Ceat Ltd and Apollo Tyres Ltd, hit 52-week lows

Stock of at least two of the tyre-makers, Ceat Ltd and Apollo Tyres Ltd, hit fresh 52-week lows on Thursday. Ceat and MRF Ltd were down nearly 3.5% hitting session low of Rs 953.40 ashare and Rs 63,500 ashare respectively. While Apollo Tyres Ltd and JK Tyre & Industries Ltd tumbled nearly 7% to Rs 187.25 apiece and Rs 105.70 apiece respectively. For the tyre industry, crude derivatives are used to manufacture a tyre, and it takes up nearly half the cost of making one.

Oil prices surged on Thursday, with Brent breaching $102 a barrel for the first time since September 2014 and West Texas Intermediate (WTI) touched $97.40 a barrel, highest since August 2014, according to Reuters, as Russia attacked Ukraine, exacerbating concerns that a war in Europe could disrupt global energy supplies.

Investors’ wealth tumbled by more than Rs 8 lakh crore in less than an hour of trade on Thursday spooked by hostilities in Russia. The fall in markets today is a reaction to Russia’s actions but markets have been factoring such a development, Deepak Jasani, Head of Retail Research, HDFC Securities said. “However, the repercussion of these actions in terms of impact on commodity prices, including crude, supply disruptions and the sanctions that can be levied by the western nations remains uncertain and could result in next leg down after a brief recovery,” he added.