Why paint stocks are rallying?
Paint stocks rallied despite the broader market’s tone has been bearish for five trading sessions in a row. In the sector, Asian Paints emerged as the top gainer on BSE Sensex on Wednesday. The majority of paint stocks were in the green, and even outperformed overall markets. Experts believe that the green shoots in demand on account of the rise in real estate are adding colours to the sector.
On BSE, Asian Paints’ share price closed at ₹2,829.40 apiece up by 3.03%. It was the top performer on Sensex. The company’s market cap is over ₹2.71 lakh crore.
Asian Paints is the largest company in the paint sector in terms of market share.
Except for Kansai Nerolac and Shalimar Paints, all other paint stocks rose today.
Akzo Nobel India stock gained over 1.5%, while Berger Paints share price was up by 1.7% and Indigo Paints gained by over 4%. Sirca Paints also advanced marginally.
On the other hand, Shalimar Paints stock dipped over 2.4%, while Kansai Nerolac dipped marginally.
Talking about paint stocks performance, Antu Thomas, Research analyst at Geojit Financial Services said, “The green shoots in demand on account of a pick-up in real estate is adding colours to the sector. Brent crude is currently trading at a three-month low and the deflationary trend in other raw material prices will get reflected in margins in the coming quarters.”
At present, Thomas said, “the paint stocks are trading below their long-term valuation, which provides a bargain opportunity to the investors as the story remains intact.”
However, Thomas also said, the sustenance of this rally will depend on a prolonged demand recovery in discretionary spending and a drop in inflation.
Markets extended their losses on Wednesday to close near the day’s low as banking stocks continue to remain under pressure amidst financial sector worries. Global markets were feeble with a focus on economic data. Domestic equities are in red for the fifth day in a row with Sensex erasing over 2,792 points and Nifty 50 giving up over 782 points in these sessions.
On Wednesday, Sensex closed at 57,555.90 down by 344.29 points or 0.59%. Nifty 50 tumbled by 71.15 points or 0.42% to end at 16,972.15.
Failure of two banks namely Silicon Valley Bank and Signature Bank at the US has sparked fears over the liquidity position in banking sector across the country. Even European markets face the heat!
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.
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Ganesh
http://ganesh@finplay.inFinance enthusiast, Mutual fund expert.