IndiGo, SpiceJet, Asian Paints crash as crude crosses $115
What's the story
Shares of crude-sensitive companies such as IndiGo, SpiceJet, and Asian Paints fell up to 8% on Monday. This comes after crude oil prices crossed $115 per barrel. The sudden spike in crude has raised concerns over rising input costs and renewed inflationary pressures. At the time of writing, Sensex was down by nearly 2,400 points or 3%, while Nifty had fallen by nearly 700 points.
Market impact
Airline and tire companies suffer major losses
IndiGo's shares plummeted nearly 8% while SpiceJet's stock fell by nearly 6% in early trade. Tyre manufacturers also suffered major losses, with JK Tyre falling by nearly 6.5% and Apollo Tyres dropping by almost 4%. The decline is attributed to concerns over rising raw material and fuel costs due to the surge in crude oil prices.
Industry impact
Paint companies also affected by surge in crude prices
Paint companies, which heavily rely on crude derivatives for their inputs, were also affected by the surge in oil prices. Asian Paints' stock slipped over 4%, while Berger Paints, Kansai Nerolac and Akzo Nobel India fell between 3% and 4%. The broader market remained under severe pressure with over 2,600 stocks declining against just about 537 advancing on the NSE.
Global impact
Indian markets react to spike in global crude prices
The sell-off in Indian markets was triggered by a spike in global crude prices following the escalation of the US-Israel conflict with Iran. This has raised fears of supply disruptions and shipping risks in the Strait of Hormuz, a key global oil transit route. Analysts say sectors with high crude-linked input costs such as airlines, tire manufacturers, and paint companies are usually the first to react to sharp spikes in oil prices.
Economic implications
Spike in oil prices a major macro shock for markets
VK Vijayakumar, Chief Investment Strategist at Geojit Investments, said the spike in oil prices is a major macro shock for markets. He warned that big oil importers like India will be hit hard if the West Asian conflict lingers long and crude prices remain high. The surge in crude is likely to push inflation higher regardless of whether the full increase is passed on to consumers, which could complicate interest rates and economic growth.