US-Iran news impact? IndiGo, BPCL, HPCL, IOC, Asian Paints, Ceat, JK Tyre rally up to 11%; here’s why

Shares of airline operators such as InterGlobe Aviation Ltd (IndiGo), oil marketing companies namely Bharat Petroleum Corporation Ltd (BPCL), Hindustan Petroleum Corporation Ltd (HPCL) and Indian Oil Corporation Ltd (HPCL), tyre makers such as Ceat Ltd and MRF Ltd, and other crude-linked sectors climbed up to 11 per cent in Wednesday's trade following the temporay two-week ceasefire between the US and Iran, which paved way for reopening of the Strait of Hormuz.

In the case of OMCs, a fall in crude oil prices ease concerns over mounting auto fuel underrecoveries.  On Wednesday, HPCL shares surged 9.03 per cent to hit a high of Rs 361.35 apiece. BPCL soared 8.83 per cent to Rs 301.90. IOC jumped 8.21 per cent to Rs 145.55.

Tyre stock Ceat Ltd gained 6.02 per cent to Rs 3,594.70. MRF Ltd advanced 3.88 per cent to Rs 1,32,165.15. JK Tyre climbed 8 per cent to Rs 424.80. Rubber chemicals and petroleum derivatives drive tyre production. Low cost carried IndiGo saw its shares rising 10.98 per cent to Rs 4,737.40. 

For aviation sector, ATF fuel accounts for 30–40 per cent of airline operating costs. A fall in crude oil prices thus lead to margin expansion. 

Paints maker also gained. Asian Paints Ltd rose added 5.29 per cent to Rs 2303.30. Kansai Nerolac Paints Ltd gained a similar 5.7 per cent to Rs 188.20.  Paint companies use petroleum derivatives as raw materials. A rise in crude oil prices lead to input cost inflation and result in margin compression.

Companies in sectors such as paints, aviation and various consumer goods recently announced price hikes in response to hike in crude oil prices.

SBI Securities in a note said the steep fall crude oil prices is positive for OMCs such as BPCL and IOCL, HPCL and airline stocks. It said the development will be positive for stocks of chemicals, paints, tyre and  plastics companies. It will be negative for upstream oil companies like ONGC, Oil India, and Vedanta. it said. 

The near-term narrative has shifted toward a more constructive tone, with the potential for broad-based buying interest, particularly in sectors that had come under pressure amid elevated oil prices and geopolitical concerns, said  Ponmudi R, CEO at Enrich Money.