www.rupeedesk.com
While the stocks of the state-owned oil refining and marketing companies will continue to closely track the rupee-dollar movement next week, a large section of the market participants believe that the stocks may inch up because of the "rock-bottom" valuations. Stocks of Indian Oil Corp, Bharat Petroleum Corp and Hindustan Petroleum Corp may remain in a range with positive bias next week if the Indian currency stays above the 65-rupees-a-dollar mark. Having fallen almost 5% between Monday and Thursday, the rupee staged a sharp recovery yesterday gaining 2% to end at 63.20 a dollar. It snapped a six-day losing streak and registered the highest gain in a day in more than four years.
A major part of the recovery came after equity market closed. The stocks of the three oil retailers may open up on Monday to reflect the gains in rupee. Also some foreign brokerages put out reports this week saying that concerns about the rising revenue losses of the oil marketing companies, because of the subsidised sale of some fuels, are overdone. The government usually assures a minimum profit level for these companies and that will continue even if the fiscal situation is stretched.
We believe that the OMCs (oil marketing companies) are at rock-bottom valuations. As OMCs control 99% of petro-retail and 64% of refining in India, this doomsday expectation is absurd; even if the fiscal is badly stretched. The credit quality of the state-owned oil marketing will likely weaken for the rest of 2013-14 (Apr-Mar), if the government continues to ask them to share a higher burden of fuel subsidies. It though added that, in its base case scenario it expects that the government will fully reimburse marketing companies by the end of the year. Also, the price of Indian basket of crude has remained stable over the last two weeks and may decline going forward as international prices of the commodity have softened.
While the stocks of the state-owned oil refining and marketing companies will continue to closely track the rupee-dollar movement next week, a large section of the market participants believe that the stocks may inch up because of the "rock-bottom" valuations. Stocks of Indian Oil Corp, Bharat Petroleum Corp and Hindustan Petroleum Corp may remain in a range with positive bias next week if the Indian currency stays above the 65-rupees-a-dollar mark. Having fallen almost 5% between Monday and Thursday, the rupee staged a sharp recovery yesterday gaining 2% to end at 63.20 a dollar. It snapped a six-day losing streak and registered the highest gain in a day in more than four years.
A major part of the recovery came after equity market closed. The stocks of the three oil retailers may open up on Monday to reflect the gains in rupee. Also some foreign brokerages put out reports this week saying that concerns about the rising revenue losses of the oil marketing companies, because of the subsidised sale of some fuels, are overdone. The government usually assures a minimum profit level for these companies and that will continue even if the fiscal situation is stretched.
We believe that the OMCs (oil marketing companies) are at rock-bottom valuations. As OMCs control 99% of petro-retail and 64% of refining in India, this doomsday expectation is absurd; even if the fiscal is badly stretched. The credit quality of the state-owned oil marketing will likely weaken for the rest of 2013-14 (Apr-Mar), if the government continues to ask them to share a higher burden of fuel subsidies. It though added that, in its base case scenario it expects that the government will fully reimburse marketing companies by the end of the year. Also, the price of Indian basket of crude has remained stable over the last two weeks and may decline going forward as international prices of the commodity have softened.
