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Stocks of the state-owned oil marketing companies Indian Oil Corp Ltd, Bharat Petroleum Corp Ltd and Hindustan Petroleum Corp Ltd are seen up next week in line with a likely positive broad market. Softening crude oil prices and recovery in rupee are likely to further help these stocks. The Indian basket of crude is hovering around $107 a barrel for the last two weeks. The rupee meanwhile regained some strength against the dollar this week. From 54.90 for a dollar last Friday the rupee recovered to end at 54.28 for a dollar. A stronger rupee reduces costs for oil companies as they have to import almost 75% of their crude oil requirements. The outlook on these companies has turned positive as they have been raising prices of petrol regularly and so far have also managed to hike diesel prices by 50 paise per litre twice. If these companies announce another hike in diesel price later this month, as is widely expected, the stocks may get a significant boost.
It remains positive on oil marketing companies as their revenue losses on subsidised fuel sales are likely to decline going forward because of the softening crude prices and regular price hikes of petrol and diesel. Recent uptrend in refining margins globally is also seen as positive for these companies as well as Reliance Industries. Reliance Industries stocks to 'overweight', from 'underweight', this week because of the improving environment for its core business. "RIL's operating environment is improving across its core businesses, which should spur a renewed earnings upgrade cycle. Reliance Industries' 2013-14 and 2014-15 earnings estimates by 6% and 5%, respectively, for the first time in two years. This may keep the stocks upbeat in the near term.
