www.rupeedesk.in
Stocks of oil marketing companies are expected to trade in a range with negative bias next week as the rupee further weakened against the dollar and crude prices inched up, raising the revenue losses on sale of subsidised fuel. In Apr-Sep, the oil companies incurred revenue loss of around 856 bln rupees. For the full financial year, the figure may top 1.7 trln rupees, which will weigh both on the companies and the government as it fights to contain the burgeoning fiscal deficit. Indian Oil Corp Ltd, Bharat Petroleum Corp Ltd and Hindustan Petroleum Corp Ltd are incurring a loss of 4.11 bln rupees daily on sale of diesel, kerosene and cooking gas. The Indian currency slid sharply yesterday to end below 55 rupees a dollar for the first time since Nov 27.
On the other hand, India's crude oil basket swelled to over $108 a barrel from around $106 last week. However, rising crude oil prices coupled with a weak rupee means better realisation on crude and gas sales in rupee terms, and works in favour of the upstream companies. In a report on Thursday, the market is exaggerating the impact of subsidy uncertainty on Oil and Natural Gas Corp Ltd and Oil India Ltd and thus assigning unwarranted low valuation multiples. A likely weakness in the market may also weigh on stocks of the oil companies. Both, the BSE Sensex and NSE Nifty, fell more than 1% yesterday on concerns over the fiscal cliff issue in US. Also, the markets will be volatile as traders may roll over positions to the January futures series ahead of the expiry of the December futures contract.
