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RIL, 5 sectors to gain from the sharp fall in oil prices

Oil prices have been hit hard due to low demand after novel coronavirus or COVID-19 forced the world to either go on lockdown or partial shutdown. Oil prices are at their lowest level since 2003.

The price war raised by Saudi Arabia, the world’s largest oil producer, after OPEC and its allies failed to agree on production cuts last month also put a lot of pressure.

International benchmark Brent crude futures dropped to $24.68 a barrel intraday on March 23, the lowest since April 2003, down 65 percent from its 2020 peak seen in January. Today at the time of writing this copy, oil price gained 3.44 percent to trade at $27.96 a barrel amid hopes that the United States will sign a $2 trillion stimulus deal to support the economy from COVID-19.

The steep fall in oil price is definitely positive not only for India, which imports around 85 percent of the requirement but also for companies which use as their raw material in any form.

We spoke to analysts to find out what are those sectors or stocks to get benefitted from falling oil price. Most analysts feel oil marketing, paint and tyre companies gained the most as crude oil is their direct raw material for their products.

“Amid volatile crude prices, oil marketing companies (OMC), paints and tyre sector will be benefited most. We would recommend buying paint

and selective tyre companies in this turmoil. We would recommend investors to refrain buying OMCs from current levels as demand may decline due to coronavirus outbreak globally,” Gaurav Garg, Head of Research at CapitalVia Global Research Limited- Investment Advisor told Moneycontrol.

AK Prabhakar of IDBI Capital also said normally oil marketing companies were going to benefit, while paint and tyre sectors will also be benefited as crude is the raw material for them.

It will also benefit the auto sector in general as low price induces to buy vehicles, but as the virus forced to do lockdown, everything comes to a standstill and no demand to auto also.

Source
moneycontrol
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