Oil Stocks
Outlook for the week – 13 to 17.07.2015
(Range bound trade with positive
bias)
( www.rupeedesk.in )
Stocks of the state-owned oil
marketing companies--Indian Oil Corp Ltd, Bharat Petroleum Corp Ltd
and Hindustan Petroleum Corp Ltd—are
likely to trade in a range next week, but the bias will be
positive. With oil prices falling
and refining margins holding strong, these companies' profitability is
expected to improve in near term
and that will help the sentiment unless there is a sudden reversal in
the oil price trend.
The Indian basket of crude oil
dipped to $56 a barrel this week before recovering to $57.5 on
Thursday. Last week, the basket
was trading over $60. Also, these companies' performance metrics
has been improving ever since the
government deregulated diesel prices last year and also started
making timely payment of
subsidies.
Further, the government has for
the first time given a target for gross refining margins to these
companies which is expected to
push them toward further improving operational efficiency.
However, the focus next week will
shift to companies reporting Apr-Jun earnings and the broad
market trend will be guided by
economic data like inflation for June to be detailed on Monday and
Tuesday.
Since the shares of these
companies have already run up a lot, weakness in the broad market could
cap gains in their shares. We
prefer these stocks over the shares of upstream companies like Oil and
Natural Gas Corp Ltd and Oil
India, which will see erosion in earnings due to declining oil prices.
Reliance Industries, on the other
hand, is going to be the first in the sector to detail earnings and its
GRM figures, likely to be robust,
could lift sentiments further.
