Oil Stocks Outlook for the week – 24 to 28.10.2016 (PSUs seen up next week; Cairn India in focus)

Oil Stocks Outlook for the week – 24 to 28.10.2016
(PSUs seen up next week; Cairn India in focus) )

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The stocks of state-owned oil marketing companies--Indian Oil Corp Ltd, Bharat
Petroleum Corp Ltd, and Hindustan Petroleum Corp Ltd are likely to have a strong
showing next week on the back of robust sectoral fundamentals, rising fuel demand and
robust refining margins. With major fluctuations in global crude oil prices unlikely next
week, traders are also likely to remain bullish on stocks of upstream companies Oil and
Natural Gas Corp Ltd, Cairn India Ltd, and Oil India Ltd.

Among the three major upstream stocks, the focus early next week will be on Cairn
India that is expected to react positively to the company's impressive Jul-Sep earnings,
which were announced after market hours today. The company's consolidated net profit
for the three months ended September rose 139% on year to 7.79 bln rupees as the oil
and gas explorer was able to expand its operating margin in a difficult oil price

Cairn India's consolidated net income from operations declined 9.1% on year to 20.39
bln rupees, while its total expenditure fell almost 18% to 17.81 bln rupees. As a result,
the company's operating margin in Jul-Sep expanded to 51% from 43.4% in the yearago
quarter. In the absence of any major sectoral triggers, the trend for oil stocks next
week will be largely dictated by global crude oil prices and the broad market sentiment.
Despite a production cut promised by the Organization of the Petroleum Exporting
Countries, oil prices may be subdued next week on concerns over prevailing glut in the
global market.

The outlook for Cairn India is also positive, with resistance for the stock pegged at 250
rupees and support at 222 rupees. As for downstream stocks, shares of the three stateowned.

oil refiners may rise next week after witnessing some correction in recent ones.
Fluctuation in the dollar-rupee exchange rates is also likely to affect shares of oil
companies. If the dollar strengthens against the rupee, it will hit refining companies and
benefit upstream players. A weak dollar, on the other hand, is advantageous for
downstream companies.