www.rupeedesk.in
Stocks of state-owned oil marketing as well as upstream companies are seen rangebound next week. The former will track movement in global crude oil prices as well as the trend in dollar/rupee pair. The rupee weakened significantly against the dollar this week. Yesterday the Indian currency ended at an 11-month low of 56.50 to a dollar, a decline of almost 2% over one week. With the state-owned refining and marketing companies importing almost 80% of their crude oil requirement, a decline in rupee makes the commodity costlier for them. However, the price of Indian basket of crude has remained around $100 a barrel, with only minor variations. The current financial year is expected to be good for the oil marketing companies Indian Oil Corp Ltd, Bharat Petroleum Corp Ltd, Hindustan Petroleum Corp Ltd as subsidy burden is likely to come down significantly.The market will closely monitor the progress on fuel reforms during the year as the country approaches general elections in 2014. The government allowed state-owned companies to raise diesel prices in small measures over a period of time. Since then, the revenue loss on the fuel has come down to around 3.5 rupees a litre, less than half of what it was earlier, because of price hikes and fall in crude prices. These companies are expected to announce another round of price hike soon and if that happens, stocks of the three companies may get a boost. The reduction in subsidy is also good for the upstream companies Oil and Natural Gas Corp and Oil India as they had to stock a substantial portion. For BPCL, an additional trigger would be the announcement of the sale of 20% stake in the Rovuma basin block in Mozambique by partners Videocon Industries and Anadarko Petroleum Corp. The valuation for this stake sale will provide a benchmark for BPCL's 10% stake in the asset and may lead to re-rating of the stock. The announcement on stake sale is expected in just over a week.
