Crude oil rally redraws sectoral winners: ONGC, Oil India gain; OMCs, Asian Paints slip up to 4%

Shares of oil-sensitive stocks were on investors' radar on Wednesday, July 8, after crude oil prices surged more than 5% overnight amid renewed geopolitical tensions in West Asia.

The rally came after the US revoked a temporary sanctions waiver that had allowed Iranian oil exports, following attacks on multiple tankers near the Strait of Hormuz, stoking fears of supply disruptions.

Brent crude climbed above $75 a barrel, while WTI crude rose past $72, lifting upstream oil producers but weighing on sectors sensitive to higher crude prices.

ONGC: Shares of ONGC were trading over 1% higher at ₹246.71 apiece on the NSE, while Oil India was up 1.22% at ₹428.30. On the other hand, Indian Oil Corporation was down 3% at ₹137.75, Bharat Petroleum Corporation was down 4% at ₹301.15, while Hindustan Petroleum Corporation (HPCL) traded over 4% lower at ₹388.30.

Among paints, Asian Paints was down 1.5%, while Kansai Nerolac Paints was down around 1% at ₹205.95.

Among tyres, JK Tyre & Industries was down 1.33%, while CEAT Ltd traded 0.3% lower at ₹3,901.40. MRF Ltd shares traded around 1.5% lower at ₹1,36,620 apiece on the NSE.

Among aviation stocks, Interglobe Aviation (IndiGo) shares were down over 2% at ₹5,281 apiece on the NSE, and Spicejet Ltd was down 1%.

What you need to know

Crude oil price movements have varying implications across sectors.

• Upstream oil producers such as ONGC and Oil India typically benefit from higher crude prices as they realise better prices for the oil they produce, supporting revenue and profitability.

• Oil marketing companies (OMCs) such as IOC, BPCL and HPCL, however, often face margin pressure if retail fuel prices are not raised in line with higher crude costs.

• Paint manufacturers like Asian Paints and Berger Paints are impacted as crude-linked derivatives account for a significant portion of their raw material costs, squeezing margins.

• Tyre makers, including MRF, Apollo Tyres and CEAT, also see input costs rise due to higher prices of synthetic rubber and other petroleum-based materials.

• Aviation companies such as IndiGo and Air India are among the worst affected, as aviation turbine fuel (ATF), a key operating expense, becomes costlier, weighing on profitability unless the higher costs are passed on through fares.

At the macro level, persistently high crude prices can widen India's trade and current account deficits, stoke inflation, weaken the rupee and increase the country's import bill, posing challenges for overall economic growth.