Credit Suisse report says lower commodity prices are a boon for India but the advantages are overstated

The fall in crude oil prices to below $60 a barrel are set to positively impact consumer staples, consumer discretionary spends (like tyres, paints), cement and telecom companies, says global bank Credit Suisse. On the economy, it says the consensus view of lower commodity prices being a boon for India is perhaps directionally appropriate, but overstates the advantages.

Here are the sectors set to gain from the falling oil prices:

Consumer goods: The home & personal care companies have 40-50% of input costs linked to crude oil, and paints up to 25%. Some of the benefits though would be offset by the higher advertising spend by FMCGs and a likely price cut in the case of paints. CS estimates a 10% drop in crude prices could result in a 1-7% increase in EPS (earning per share). There are also other benefits from reduced freight costs (5% of sales) and power and fuel costs (largely diesel, another 5-6%) that will show up with a lag, if they do.

Tyres: Rubber forms 40% of raw material and crude linked products form the rest. The global bank estimates a 10% change in crude increases EPS by 20%.

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