GOLDEN RULES FOR TRADING

Oil Stocks Outlook for the week - 18 to 22.05.2015

Oil Stocks Outlook for the week - 18 to 22.05.2015
(Range bound trade and focus on earnings)

Stocks of state-owned oil marketing companies may trade in a range next week as focus will be on companies reporting earnings, but the bias will be positive after yesterday’s hike in petrol and diesel prices.

Indian Oil Corp Ltd, Bharat Petroleum Corp Ltd and Hindustan Petroleum Corp Ltd raised petrol prices by over 3 rupees per ltr and diesel prices by 2.7 rupees per ltr following a rise in global oil prices and depreciation of the rupee over the past fortnight.

The move could lift the shares of the company early next week but further movement will depend on rupee-dollar movement. Also, likely volatility in the broader market may keep a check on the rise in these stocks. All the three companies will report earnings in the week after next, and traders may chose to wait for further clarity on their financial health before taking fresh bets.

The Indian currency has been fluctuating wildly over the last two weeks and had dipped below 64- for-a-dollar mark on Tuesday before recovering and closing at 63.5 per dollar yesterday. While an increase in costs due to the rupee depreciation is now passed on in terms of price hike for petrol and diesel, fluctuations could result in hedging and inventory losses. Crude oil prices, however, continue to remain stable, providing some cushion for traders.

Shares of Oil and Natural Gas Corp Ltd and Oil India Ltd may continue to trade with positive bias next week mainly on account of stable oil prices. However, a correction in rupee could affect the trend. The stocks are in a positive momentum after the government exempted these companies from sharing the subsidy on cooking fuels. The new discoveries along with marginal fields may take the company's output from western offshore to 18 mln tn per year from 16 mtpa now.