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Stocks of state-owned oil marketing companies may remain rangebound with an upward bias next week, while those of Oil and Natural Gas Corp Ltd and Cairn India Ltd are seen firm. The government talking about its intent to reduce subsidy burden by raising diesel prices will keep stocks prices of Indian Oil Corp Ltd, Bharat Petroleum Corp Ltd and Hindustan Petroleum Corp Ltd firm as the move, when it happens, will be a significant positive for these companies. However, rising crude oil prices and a weak rupee may prevent any significant rise in stocks. Oil minister Veerappa Moily told reporters yesterday that the government is working on deregulating price of diesel, which accounts for most of the revenue losses incurred by oil marketing companies on sale of subsidised fuel.
Last week, the government said it is keen on hiking prices of kerosene by 10 rupees a ltr over the next two years, and increasing diesel prices by the same quantum over 10 months. The price of the Indian crude oil basket firmed up by over a dollar this week to $109.66 a barrel on Thursday while the rupee, which strengthened early in the week, dropped sharply on Thursday and Friday. Continued weakness in the rupee could weigh on stocks of oil marketing companies. Higher crude prices would weigh on the state-owned companies. Among the three companies, BPCL is the better bet because of its promising upstream portfolio. We expect news flow for BPCL to stay supportive in 2013-14 (Apr-Mar) as its consortium drills more exploration and appraisal wells in Mozambique and Brazil and (as) clarity emerges on the E&P resource base and monetization plan in Brazil.
Cairn India stocks may get a boost from the government's approval to raise the output from its Barmer block in Rajasthan to 300,000 barrels per day from 175,000 barrels now. The move will help boost the company's revenues and profitability significantly. It will also be a positive for ONGC, which owns 30% stake in the Barmer block. Cairn as its top pick as it expects it to benefit from higher crude oil prices and volume growth. Stocks of Cairn are trading at a discount to its peers and hence offer value. Stocks of Reliance Industries though may remain in a range with a weak bias. Weak refining and petrochemical margins may prevent any significant upside in the company's stock from current levels but a firm market may prevent much downside.
Stocks of state-owned oil marketing companies may remain rangebound with an upward bias next week, while those of Oil and Natural Gas Corp Ltd and Cairn India Ltd are seen firm. The government talking about its intent to reduce subsidy burden by raising diesel prices will keep stocks prices of Indian Oil Corp Ltd, Bharat Petroleum Corp Ltd and Hindustan Petroleum Corp Ltd firm as the move, when it happens, will be a significant positive for these companies. However, rising crude oil prices and a weak rupee may prevent any significant rise in stocks. Oil minister Veerappa Moily told reporters yesterday that the government is working on deregulating price of diesel, which accounts for most of the revenue losses incurred by oil marketing companies on sale of subsidised fuel.
Last week, the government said it is keen on hiking prices of kerosene by 10 rupees a ltr over the next two years, and increasing diesel prices by the same quantum over 10 months. The price of the Indian crude oil basket firmed up by over a dollar this week to $109.66 a barrel on Thursday while the rupee, which strengthened early in the week, dropped sharply on Thursday and Friday. Continued weakness in the rupee could weigh on stocks of oil marketing companies. Higher crude prices would weigh on the state-owned companies. Among the three companies, BPCL is the better bet because of its promising upstream portfolio. We expect news flow for BPCL to stay supportive in 2013-14 (Apr-Mar) as its consortium drills more exploration and appraisal wells in Mozambique and Brazil and (as) clarity emerges on the E&P resource base and monetization plan in Brazil.
Cairn India stocks may get a boost from the government's approval to raise the output from its Barmer block in Rajasthan to 300,000 barrels per day from 175,000 barrels now. The move will help boost the company's revenues and profitability significantly. It will also be a positive for ONGC, which owns 30% stake in the Barmer block. Cairn as its top pick as it expects it to benefit from higher crude oil prices and volume growth. Stocks of Cairn are trading at a discount to its peers and hence offer value. Stocks of Reliance Industries though may remain in a range with a weak bias. Weak refining and petrochemical margins may prevent any significant upside in the company's stock from current levels but a firm market may prevent much downside.
