Oil Stocks Outlook for the week (16-20.07.2012)
Stocks of state-owned oil marketing companies are seen
rangebound with a negative bias next week, while those of Reliance Industries
may remain subdued ahead of the company's Apr-Jun earnings, to be detailed
Friday. High volatility in the rupee against the dollar may continue to weigh
on the stocks even as crude oil prices have stabilised, albeit at higher
levels.
The Indian currency declined sharply to a low of 55.94 to a dollar on Thursday, but pulled back sharply today to end at 55.14. Crude oil prices were flat week-on-week at $97.99 per barrel, but still significantly higher than the 18-month low of $89.19 around June-end.
We believe valuations of the three state-owned companies--Indian Oil Corp Ltd, Hindustan Petroleum Corp Ltd and Bharat Petroleum Corp Ltd--are now stretched given the weakness in the broad market. Next week the market will take cues from inflation data for June, which will be released on Monday and focus will be on companies reporting Apr-Jun numbers, so the overall trade in the oil marketing companies' shares is seen muted.
Talks of an imminent hike in diesel, kerosene and cooking
gas prices after the presidential elections on Jul 19 may support the stocks
and prevent sharp declines, dealers said. Among the oil companies, only
Reliance Industries is scheduled to detail earnings next week.
Reliance Industries' net profit for the quarter ended June is seen declining 23% on year to 43.65 bln rupees, mainly because of a continued decline in gross refining margins and falling gas output from KG-D6. The company's GRMs may shrink as much as 30% in Apr-Jun from the year ago period.
