GOLDEN RULES FOR TRADING

Oil Stocks Outlook for the Week – 09 to 13.02.2015

Oil Stocks Outlook for the Week – 09 to 13.02.2015

Negative sentiment created by the cut in petrol and diesel prices this week despite a rise in
international oil prices may continue to weigh on the stocks of the state owned oil marketing
companies, Indian Oil Corp Ltd, Bharat Petroleum Corp Ltd and Hindustan Petroleum Corp Ltd, next week. The three companies announced a cut of 2.42 rupees per litre in retail price of petrol and 2.25 rupees per litre in price of diesel, ex-Delhi and this week despite over 15% increase in oil price since the last revision in January. The move hit the positive sentiments generated in these stocks since diesel prices were deregulated which led to a sharp reduction in revenue losses. The move was seen as politically driven due to the assembly elections in Delhi on Saturday. Also, it meant that the companies will have to bear a loss for the time fuel prices are revised again and the companies will not be compensated since the fuels are officially deregulated.

Also, crude oil prices have continued their upward journey further increasing losses on these
fuels. In a likely volatile broad market next week ahead of the results of Delhi assembly elections on Tuesday, stocks of the three companies too may witness volatility while the bias will be negative. Also, all these companies are reporting their Oct-Dec earnings starting with Bharat Petroleum Corp Ltd on Wednesday. The government is yet to announce the compensation for revenue loss on diesel and cooking gas. Also, the company's numbers will be weighed down by inventory losses in view of the sharp fall in crude oil prices during the quarter.

The weak results may also weigh on the companies' stock performances. Oil and Natural Gas
Corp Ltd will also detail its Oct-Dec earnings next week and if the government continues to pass on a part of the downstream subsidy burden to the company, its bottom line will come under severe pressure. The stock will remain under pressure but intra-week movement will depend on news flow on the subsidy sharing front.