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Stocks of state-owned oil marketing companies are seen subdued next week because of the sharp fall in the rupee against the dollar. Rising crude prices will also erode the benefits of the recent increase in fuel prices. The rupee continued to slide against the dollar this week. Indian currency touched a new 11-month low of 57.11 to a dollar, but ended a tad higher at 57.06, a decline of almost 1% in one week. Last week, the rupee depreciated around 2% against the greenback.
Crude oil prices too reversed trend and started rising, gaining almost $2 a barrel this week. The Indian basket of crude was at $101.13 a barrel on Thursday. The state-owned refining and marketing companies--Indian Oil Corp Ltd, Bharat Petroleum Corp Ltd, and Hindustan Petroleum Corp Ltd--import almost 80% of their crude oil requirement, and a decline in the rupee makes the commodity costlier for them.
Last week, the companies had announced a hike of 50 paise per litre on diesel and 75 paise per litre on petrol. However, gains from the increase were almost wiped out by the sudden rise in crude prices and sustained depreciation of the rupee. Both the factors will continue to weigh on the stocks, and traders will keep a close watch on them. The rupee is expected to weaken further in the next week.
The broad market is expected to trade in a narrow range next week, as traders may refrain from taking aggressive positions in the run-up to the policy review. A subdued broad market will further weigh on the shares of the oil marketing companies.
However, BPCL is seen better off among the three because of both its better performance metrics and upstream portfolio. BPCL has been outperforming its peers due to superior operational performance as well as higher quality of capex. A further fall in interest expense will be the key near term earnings driver.
