Market Overview
Brent crude futures dropped nearly 5% on Wednesday, slipping below the $60 per barrel mark for the first time since December 2021.
This decline stems from three major global developments:
- A stronger U.S. Dollar Index
- Trade uncertainty triggered by Trump’s 90-day tariff suspension
- OPEC+ signaling higher output amid sluggish demand forecasts
While lower crude prices hurt upstream oil producers, they present opportunities for several Indian companies. Sectors like oil marketing, tire manufacturing, and specialty chemicals stand to benefit. Let’s explore three stocks that are well-positioned to capitalize on this trend.
1. Hindustan Petroleum Corporation Ltd (HPCL)
Why It Stands Out
- HPCL has consistently outperformed rivals such as IOC and BPCL, aided by robust marketing margins
- A proposed demerger of its lubricant business could unlock additional shareholder value
- Its upcoming refinery in Rajasthan, set to go live by late 2025, will increase refining capacity
- When global crude prices dip below $70, Indian OMCs benefit as domestic fuel prices remain stable, allowing them to retain wider margins
Potential Risks
- Falling crude prices in Q4FY25 may lead to inventory losses
- Government interventions, such as price caps, could compress marketing margins
Despite these risks, HPCL remains a solid long-term investment due to its sound fundamentals and consistent dividend history.
2. Apollo Tyres Ltd
Why It Stands Out
- Crude-linked components account for 40–50% of its raw material expenses
- With significant operations in both India and Europe, Apollo stands to benefit from reduced input costs across regions
- Its high sensitivity to raw material prices allows the company to quickly capture margin gains when crude declines
Even though Q3 performance was mixed, the current oil price trend could meaningfully boost Apollo’s profitability in the coming quarters.
3. Navin Fluorine International Ltd (NFIL)
Why It Stands Out
- Falling oil prices help reduce costs for key intermediates, especially in its fluorochemicals division
- The positive impact on margins typically appears with a lag of one to two quarters
- Backed by high return on capital and a strong global customer base, NFIL is poised for continued margin expansion
This makes NFIL a compelling play on the back of crude price softness.
Other Stocks Worth Watching
BPCL
Pidilite Industries
Impact on the Indian Economy
- India imports nearly 85% of its crude oil requirements. A 10% drop in global oil prices can cut headline inflation—both CPI and WPI—by 40 to 80 basis points.
- In February 2025, India’s oil import bill climbed 3% YoY to $10.6 billion, with volumes up by 5% to 19.1 million tonnes. Despite falling prices, domestic demand for energy remains robust.
- A sustained fall in crude prices could shrink India’s current account deficit by nearly 30 basis points, helping control inflation and strengthen the broader economy.
Conclusion
Brent crude falling below $70 is a net positive for India’s macroeconomic health and several input-heavy industries. Companies with large crude-related costs, strong operations, and clear earnings visibility are likely to benefit the most.
What to look for as an investor:
- High dependence on crude-based raw materials
- Operational efficiency and cost control
- Visible growth in earnings and profitability
These companies are well-positioned to outperform if crude prices remain low in the medium term.
FAQs
Key gainers include:
- Oil marketing companies (HPCL, BPCL)
- Tire companies (Apollo Tyres)
- Specialty chemical firms (Navin Fluorine)
- Paint and adhesive makers (Pidilite)
- Airlines and transport firms
Focus on companies with:
- High use of crude-based materials
- Good cost control
- Strong profits and low debt
- Clear growth plans
