Asian Paints, which was once a stock market darling for its steady performance and stellar returns, has faded into the background as competitive intensity in the paints sector has increased, with the entry of deep-pocketed players like Birla and JSW threatening its market dominance.
Yet, the latest spate of buying by mutual funds—who are generally long-term investors—worth ₹10,500 crore in Asian Paints stock last month, raises the question of whether institutional investors are seeing signs of a turnaround for the paint maker.
It must be noted that a major chunk of this buying was driven by mutual funds lapping up the stake sold by Reliance Industries in Asian Paints. Most analysts view these inflows as being made from a long-term perspective into a fundamentally strong business.
“Mutual funds bought over ₹10,450 crore worth of Asian Paints shares in June—an overwhelming majority of the 3.6% stake sold by Reliance Industries. SBI Mutual Fund alone purchased nearly ₹7,700 crore worth of stock, followed by ICICI Prudential and others. This wasn’t a speculative trade—it was institutional accumulation of a fundamentally strong business during a temporary, supply-led correction,” said Harshal Dasani, Business Head, INVasset PMS.
With the massive buying in Asian Paints, the stock became the top bet of mutual funds in the last month, according to an analysis by Nuvama Institutional Research.
Ajay Thakur, Research Analyst, Anand Rathi Institutional Equities, said the flows into Asian Paints were more of a market-driven transaction. From the mutual funds’ side, the buying seems to be with a longer-term perspective, not a short-term play, he added.
Is the worst over for Asian Paints?
Analysts remain largely split on whether the competitive risks for Asian Paints are receding into the background.
According to Dasani, in Q4 FY24, despite topline moderation, Asian Paints’ gross margins improved by over 120 basis points year-on-year—supported by better product mix and input cost management. The competitive threat from new entrants in the paint space, particularly large industrial groups, appears to have been priced in after a 20%+ correction from peak levels, he said.
Jay Gandhi, Analyst, Institutional Research – HDFC Securities, also believes that most investors are probably seeing through the heightened competitive intensity in FY26 and are now looking at paints overall as a contrarian investment play as competitive intensity recedes from FY27 onwards.
Asian Paints, meanwhile, has lost more than expected market share to Grasim in the last 12 months ended March as billionaire Kumar Mangalam Birla’s ambitious paints venture was launched, according to Elara Securities data shared exclusively with Reuters.
Asian Paints’ market share fell to 52% from 59% in the 12 months ending March 31, Elara Securities data shows, raising the pressure on the industry leader to spend more on marketing and discounts to retain its crown.
Asian Paints shares: Time to buy?
Ajay Thakur, Research Analyst, Anand Rathi Institutional Equities, therefore, doesn’t see much of a significant turnaround at this point in the fortune of Asian Paints shareholders. The fundamentals are strong, but I don’t expect a dramatic change in the short term as competitive intensity remains high, Thakur said.
Asian Paints stock has failed to generate returns for its investors in the recent past, declining 19% in the last one year, 30% over two years, and 20% over three years.
However, Dasani believes that with valuations now more reasonable, input costs normalising, and rural demand set to rebound with a good monsoon, Asian Paints looks better placed. Brent crude oil, a key raw material cost component for paint companies, surged over 12% in early June but has since stabilised around the low-$80 levels, easing margin pressure concerns for players like Asian Paints, he said.
“For long-term investors, this remains a quality compounder worth accumulating at current levels,” he added.
Disclaimer: This story is for educational purposes only. 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 making any investment decisions.
