GOLDEN RULES FOR TRADING

Oil Stocks Outlook for the week – 29.02.2016 to 04.03.2016 (Refiners seen weak as GRMs taper; focus on Budget)

Oil Stocks Outlook for the week – 29.02.2016 to 04.03.2016
(Refiners seen weak as GRMs taper; focus on Budget)

The shares of oil refining and marketing companies are seen weakening
in the near term, as refining margins have started coming off historic
highs seen in the last quarter, and the first half of the current one. With
winter demand waning and new refining capacities coming up in Asia,
the outlook for gross refining margins have turned bearish. This is likely
to put some pressure on stocks of refiners.

In the immediate term, the focus shall be on the Union Budget for 2016-
17 (Apr-Mar) that Finance Minister Arun Jaitley will present on Monday.
All eyes will be on the likely change in structure of the Oil Industry
Development Cess to make it ad-valorem against a fixed levy of 4,500
rupees per tn from nominated blocks.

An action on this front will positively impact stocks of upstream oil
companies like Oil and Natural Gas Corp Ltd, Cairn India Ltd and Oil
India Ltd. There is also some talk on imposition of customs duty on
imported crude oil, something that is being vehemently opposed by the
industry. However, if the government does go ahead and imposes
customs duty, it will hit refiners as they primarily rely on imported crude.

Any change in excise duty on petrol and diesel after the sharp increase
over the past four months will also impact refiners' stocks. The
government has raised excise duty on the two motor fuels on five
occasions starting November in a bid to meet the fiscal targets for the
current financial year.

Fuel prices are due to be revised early next week, which may have a
sentimental impact on the stocks of oil marketing companies. Oil prices
have been topsy-turvy in the last few weeks, swinging between $25 a
barrel and $32 a barrel. Over the past week or so, they have stayed
around the $30-per-barrel mark. Any significant movement in oil prices,
apart from the broader market and news flow, will also impact oil
companies' stocks.

Bharat Petroleum Corp Ltd has seen decent correction in last series
along with huge formation of short positions. Rollovers were also above
its average. Stock has strong resistance at Rs 810-820 levels and we may
again see a selling pressure from that zone