Oil Stocks Outlook for the week – 11 to 15.05.2015
Stocks
of state-owned oil marketing companies Indian Oil Corp Ltd, Bharat Petroleum
Corp
Ltd and Hindustan Petroleum Corp Ltd are seen range bound next week but the
bias
is
seen positive.
While
broad market trend will be key, crude oil prices and rupee-dollar fluctuations
would
continue to dictate the movement in the three stocks. The sharp depreciation of
the
rupee
this week spooked investors, leading to a massive decline in the shares of IOC,
BPCL
and HPCL.
The
rupee dipped below the 64-a-dollar mark on Thursday before recovered. It ended
at
63.93
a dollar on Friday, a depreciation of 1% since last week. Since the companies
import
70-75% of their crude oil feed stock, a depreciation of the rupee hits costs
and a
sharp
fluctuation of the currency could also cause inventory losses.
The
broad market trend will depend on developments in Parliament over key bills
next
week
as well as domestic economic data. On the other hand, sentiments are in favour
of
Oil
and Natural Gas Corp Ltd and Oil India Ltd after media reports quoted
government
officials
as saying that these companies would not have to share the downstream
companies'
subsidy burden this financial year.
If
the government officially confirms this development, further upside is likely
in these
two
companies' stocks. A weaker rupee will also improve their realisation as prices
are
marked
in dollars. Reliance Industries Ltd is, however, seen under pressure as it gets
into further regulatory trouble related to its telecom business. The
Comptroller and Auditor General of India today said RIL arm Reliance Jio
Infocomm received undue advantage amounting to 34 bln rupees after the telecom
department allowed it to provide voice calling facility under the new licensing
regime.
