Reliance Industries Ltd will be in focus next week as it will detail its earnings for the quarter ended September on Monday while stocks of oil marketing companies are likely to take cues from the rupee-dollar movement and crude oil prices next week. Reliance Industries is expected to report a 6% year-on-year decline in net profit for Jul-Sep to 53.67 bln rupees even as revenue may grow 20% to 940.42 bln rupees. The market will be keenly watching the company's gross refining margin and outlook for gas production from the KG-D6 block. Also, the company's likely participation in the auction for 2G spectrum is seen as a negative. Reliance Industries has not yet officially confirmed such move. Reliance Industries is expected to report a sharp sequential improvement in gross refining margin to $9-$10 a barrel, in line with the global trend. Earnings will be a key factor in deciding the near-term movement in Reliance stocks.
The market is of the view that Reliance Industries may surprise positively in terms of refining margin in Jul-Sep and that will take the stocks up to 850 rupees in the near term. However, lack of visibility on any improvement in KG-D6 prospects may weigh on the stocks. Morgan Stanley recently downgraded the stock saying it is turning cautious because of unattractive valuations, especially because they believe the core business will remain under pressure. Lack of near-term triggers and likely weakening of refining environment. The oil marketing companies Indian Oil Corp Ltd, Bharat Petroleum Corp Ltd and Hindustan Petroleum Corp Ltd are seen in a range in the near term, though crude prices and rupee-dollar movement may lead to sharp reactions. The rupee, which regained its strength against the dollar following a spate of reforms announced by the government, fell again this week. Yesterday the Indian currency ended at 52.80 a dollar compared with 51.85 last Friday. Crude oil prices also rose by over $2 a barrel this week. Both these factors as well as the market trend will continue to guide stocks of the state-owned oil companies next week.
