Bank of America has named five stocks in India that could benefit from higher coal and crude oil prices —and some will likely gain market share. U.S. crude is up more than 15% in a month as of Thursday's close while high-grade thermal coal prices continue climbing to new highs. Higher coal prices have forced Indian power companies to drastically cut their coal imports, which has in turn contributed to a worrying shortage in the commodity . While higher oil and coal prices are likely to have limited immediate impact on inflation on India, in part due to tax buffers from the government, they are set to have earnings implications for certain industries and stocks, the U.S. investment bank said in a report dated Sept. 29. "Cement companies, for example, have 75% of their power & fuel costs exposed to coal, 40% of road freight costs (70% of total costs) exposed to diesel," Bank of America analysts said. Sectors like aviation and fast-moving consumer goods could also face higher costs. 5 stocks that may gain Bank of America flagged five stocks that can gain from higher oil and coal prices. The bank has a "buy" call on state-owned Coal India , which accounts for over 80% of the country's coal output. The stock could benefit from the rising price of imported coal as domestic spot prices during e-auctions for the commodity move higher, according to Bank of America. India distributes coal through e-auctions so that buyers can have equitable access to purchase the commodity. "We estimate Coal India to see 20% of its volumes in the e-auction market in FY23 with earnings rising by 11.5% for every 10% rise in e-auction prices," the analysts said. Internationally, the bank is bullish about aluminum prices on the London Metal Exchange due to shortages and higher power costs for Chinese aluminum producers. As such, Indian aluminum and copper manufacturer Hindalco is also on its "buy" list. The bank said Hindalco could see its earnings rise by 1.7% for every $50 per ton rise in prices on the LME. Electric utility company Tata Power could "gain from higher profits in its Indonesian coal mine [joint ventures]," Bank of America said. Elsewhere, a spike in diesel prices could add to market share gains for the state-owned container port operator and cargo carrier Container Corporation of India "from road based logistic operators," while Oil and Natural Gas Corporation could also benefit from higher crude price realization.
Electricity pylons near the Tata Power Co. Trombay Thermal Power Station in Mumbai, India, on Wednesday, Oct. 6, 2021.
Dhiraj Singh | Bloomberg | Getty Images
Bank of America has named five stocks in India that could benefit from higher coal and crude oil prices —and some will likely gain market share.