The Asian Paints share price rallied 5.8% to an intra-day high of Rs 2,631 on the National Stock Exchange. There could possibly be two major factors behind this surge. First, a top executive of the key competitor has resigned from his position. Second, the MSCI index will raise the weightage of Asian Paints in the index.
Grasim Industries CEO resigns
Major developments in the competitor firm have perked up investor sentiment. The chief executive officer (CEO) of Grasim Industries’ paint division – Birla Opus, Rakshit Hargave, has resigned.
He stated in his resignation letter that he was stepping down to pursue career opportunities outside the company. “It has been my pleasure to be associated with the company. I extend my deepest gratitude to the Board of Directors, the Management, and all my colleagues for their support extended during my tenure.”
This is material development, as Birla Opus is the second largest in the decorative paints industry with a capacity share of 24%. It commissioned its 6th plant at Kharagpur in October and continues to gain market share across most markets with a rapidly expanding distribution network and brand visibility backed by superior product quality. All eyes are on the leadership change and its possible implications.
MSCI India index rejig
The global index provider MSCI has announced changes in its November review. It will be tweaking the India Standard Index with effect from market closing on November 24. MSCI will change the weightage of existing companies in the Standard Index, including Asian Paints. Among the eight stocks gaining higher weightage in MSCI’s index are Asian Paints, Apollo Hospitals, Lupin, and SRF. The weightage of Samvardhana Motherson, Dr Reddy’s, REC, and Zydus Life has been reduced in the latest review. Overall, India’s weight in the MSCI Standard Index will rise to 15.6% from 15.5%, said Abhilash Pagaria, head of Nuvama Alternative & Quantitative Research.
Crude price outlook
Additionally, the outlook for crude, a key component in paint industry, is also an important factor impacting price movement. Global oil prices fell for a third straight month in October on fears of oversupply as the Organisation of the Petroleum Exporting Countries (OPEC) and its allies increased output, while production from non-OPEC producers is also still growing. After U.S. and British sanctions on Russia’s biggest oil companies two weeks ago tempered the market’s aggressive bearish stance, however, there was a shift in oil price momentum at the end of October, Haitong Securities said.OPEC+’s plan to pause further production increases in the first quarter of next year also partly eased worries about oversupply. Concern over weaker demand, though, still remains.
Asian Paints stock performance
The share price of Asian Paints has risen 2.8% in the last five trading sessions. The stock has given a return of over 10% in the past one month and 7.6% in the previous six months. However, Asian Paints’ stock price has declined by over 10% in the last one year.