Oil Stocks Outlook for the week – 22 to 26.06.2015

Oil Stocks Outlook for the week – 22 to 26.06.2015

Low crude oil prices and robust demand resulting in strong refining margins may keep shares of state-owned oil marketing companies --Indian Oil Corp Ltd, Bharat Petroleum Corp Ltd and Hindustan Petroleum Corp Ltd -- upbeat in the near term. We now recommend investing in public sector downstream companies since deregulation of diesel prices have lifted their margins significantly.

Reliance Industries Ltd's counter may also see upward momentum aided by positive developments with regard to its telecom arm Reliance Jio. These included grant of provisional approval to the company's proposed multi-system operations and a clear timeline given by it with respect to launch of its 4G services.

A choppy market with a positive bias is also likely to have some bearing on oil stocks. No major triggers that may have a direct impact on oil stocks are likely next week. Refining and marketing margins have been on an uptrend this year. Low oil prices have led to sharp upswing in oil products demand led by growth in US, China, and India.

Refining being the primary business of RIL, higher margins will result in improved profits. The buoyant outlook for margins may reflect in its shares. Citi Research in its report has stated it expects the company's operating profit to show growth after years of sustained decline, a turnaround of return rations and reduction in proportion of unproductive capital.

Cairn India Ltd's counter, however, is likely to trade with a negative bias as it may continue
to be weight down by the company's proposed merger with parent Vedanta Ltd. Any positive
development on Cairn India's production sharing contract extension request for its flagship Rajasthan block may help the company's scrip.