Stocks of oil marketing companies are seen up in the near term due to the fall in crude oil prices and the firm trend in rupee against the dollar. However, the broad market trend may continue influencing the movement in stocks of the state-owned oil marketing companies Indian Oil Corp Ltd, Bharat Petroleum Corp Ltd, and Hindustan Petroleum Corp Ltd. The rupee has regained its strength against the dollar following a spate of reforms announced by the government over the last few weeks to attract foreign capital. The Indian currency ended at 51.85 a dollar yesterday, up from 52.85 a week ago. The Indian unit has recovered from a low of nearly 56 rupees against the dollar in early September. As oil marketing companies import over 75% of their crude oil needs, any gain in the Indian currency reduces their import bill in rupee terms. The Indian basket of crude risen by almost $3 this week to $107.76 a barrel on Thursday.
The financial performance of oil companies is seen improving following the hike in diesel prices, and the cap on number of subsidised cylinders of cooking gas per family can avail. The move will beef up these companies' margins, as it will trim their revenue losses, and thereby lower their interest cost on short-term borrowings. State-owned oil marketing companies' daily revenue loss on sale of subsidised fuels is expected to have declined 12% to 4.37 bln rupees for Oct 1-15 because of lower crude oil prices and stronger rupee. The revenue loss on sale of diesel has fallen to 11.65 rupees per ltr from 13.86 in the preceding fortnight. Improvement in gross refining margins globally will also help the refiners improve their bottomline. Refiners (are) poised for a good Q2FY13 (Jul-Sep). Reliance Industries stocks also are seen firm in a positive broad market but may weaken on profit booking if the market slows down. We believe refining strength will likely lift margins and drive earnings over the medium term.
