Oil Stocks Outlook for the week – 08 to 12.09.2014

Oil Stocks Outlook for the week – 08 to 12.09.2014

Stocks of state-owned companies are seen range bound next week amid lack of triggers
but the movement in prices of crude oil and rupee-dollar rate will be the key factor.
Shares of all three refiners--Indian Oil Corp Ltd, Bharat Petroleum Corp Ltd and
Hindustan Petroleum Corp Ltd--have rallied significantly in the last few weeks on hopes
of improvement in fundamentals as diesel prices inched closer to market parity.

After the 50-paise hike in diesel prices on Sunday, the revenue loss on the fuel has
declined to just 8 paise a litre. Most market participants now expect the government to
deregulate the fuel.

Investors may be wary of making further positive bets on the three unless crude prices
fall sharply from current levels or the rupee strengthens. Over the last few days, the
Indian currency has been oscillating between 61 and 60 for a dollar. The rupee is
expected to gain some strength in the near term as dollar flows to India may increase due
to monetary policy stimulus announced this week by the European Central Bank.

This could support the Indian currency in the coming days, said Suresh Nair, director at
Admisi Forex India Pvt Ltd. Meanwhile, crude prices continue to remain low at around
$100 a barrel for the Indian basket. Because of the strong support of low crude prices and
strength in the rupee, there is little downside in the three stocks. However, further upside
will depend on the announcement of deregulation.

The ongoing reforms in oil market and the efforts to reduce the subsidy burden of Oil and
Natural Gas Corp Ltd and Oil India Ltd may also keep the shares of these companies in a range with positive bias.