GOLDEN RULES FOR TRADING

Oil Stocks Outlook for the week – 26 to 30.09.2016

  Oil Stocks Outlook for the week – 26 to 30.09.2016

 Shares of retailers seen trading range-bound 


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   Next week, stocks of state-owned oil refining companies--Indian Oil Corp Ltd, Bharat Petroleum Corp Ltd,  and  Hindustan  Petroleum  Corp  Ltd--are  seen  trading  positively,  albeit  within  a  range.  With refining  margins  improving  globally  and  strong  fundamentals  in  the  domestic  market,  these  stocks are likely to continue with the positive momentum in the near term, despite some minor correction and  consolidation  intermittently.  Over  a  longer  term,  Indian  Oil  is  the  preferred  pick  for  most analysts. They expect India's largest oil retailer to be the biggest beneficiary of the continuous rise in domestic demand for petroleum products.   The  company  offers advantage of scale in  refining,  petrochemical and  marketing business,  and  its new  projects  will  improve  efficiency.  In  the  absence  of  any  other  major  triggers,  the  trend  for  oil companies over the next  few sessions will be determined by the  movement in crude oil prices and sentiment in the broad market. Crude oil futures on domestic and global exchanges are seen falling, as  market  participants  are  cautious  ahead  of  a  meeting  of  major  oil  producers  next  week.  The Organization of the Petroleum Exporting Countries and other oil producers are meeting next week in Algiers to discuss ways to stabilise the market, including a freeze on output. However, high levels of crude oil production by OPEC countries such as Saudi Arabia and Iran indicate that a deal to freeze output  may be unlikely.  The meeting  next  week is  expected  to  end without  any  result.  The global bank also cautioned that prices could fall due to "high net long positioning" of investors.   Crude oil exports from Libya, too, could increase after the country re-established control over its oil ports seized by militants. A decline in oil prices would be a negative for upstream companies such as ONGC, Oil India and Cairn India Ltd, but a positive for downstream companies, and may impact the stocks accordingly. Despite the weakness in crude oil prices, stocks of upstream companies appear to be positive on the charts. Among upstream companies, ONGC is the preferred pick, as most analysts believe that its  valuations are cheap. Fluctuation  in the  dollar-rupee exchange rate is  also likely to affect  the  shares  of  oil  companies.  If  the  dollar  strengthens  against  the  rupee,  it  will  hit  refining companies  and  benefit  upstream  players.  A  weak  dollar,  on  other  hand,  is  advantageous  for downstream companies


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