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Stocks of state-owned oil marketing companies Indian Oil Corp Ltd, Bharat Petroleum Corp Ltd, and Hindustan Petroleum Corp Ltd are seen under pressure next week on concerns over bulk diesel pricing, but the trend will be determined by the rupee-dollar movement. The government is set to partially roll back the deregulation of bulk diesel sale price and allow state transport undertakings to buy at subsidised rates. While the move may not have a big financial impact immediately, markets see it as a step back from the government's stated policy of moving towards total deregulation of diesel prices. Also, the Indian currency has not gained any ground against the dollar in the last two weeks and remained stuck in the 62-63 per dollar range. Crude oil prices, too, haven't softened much, against expectations that the temporary reprieve provided by the western countries to Iran would cool prices.
From $108.70 a barrel last week, the price of Indian basket of crude increased to $109.70 per bbl this week. However, stocks of Reliance Industries are expected to strengthen in the near term mainly because of lower valuations. The stock valuation is "compelling" now as it is trading at 15-20% discount of its historical averages. Also, the chances of the company getting a higher price for its gas output seems to have improved as Oil Minister Veerappa Moily has indicated that the government will allow it to charge a higher price after it agrees to provide a bank guarantee until their dispute is resolved. This move alone could increase earnings by 10% in F2015 (2014-15, Apr-Mar).
Stocks of state-owned oil marketing companies Indian Oil Corp Ltd, Bharat Petroleum Corp Ltd, and Hindustan Petroleum Corp Ltd are seen under pressure next week on concerns over bulk diesel pricing, but the trend will be determined by the rupee-dollar movement. The government is set to partially roll back the deregulation of bulk diesel sale price and allow state transport undertakings to buy at subsidised rates. While the move may not have a big financial impact immediately, markets see it as a step back from the government's stated policy of moving towards total deregulation of diesel prices. Also, the Indian currency has not gained any ground against the dollar in the last two weeks and remained stuck in the 62-63 per dollar range. Crude oil prices, too, haven't softened much, against expectations that the temporary reprieve provided by the western countries to Iran would cool prices.
From $108.70 a barrel last week, the price of Indian basket of crude increased to $109.70 per bbl this week. However, stocks of Reliance Industries are expected to strengthen in the near term mainly because of lower valuations. The stock valuation is "compelling" now as it is trading at 15-20% discount of its historical averages. Also, the chances of the company getting a higher price for its gas output seems to have improved as Oil Minister Veerappa Moily has indicated that the government will allow it to charge a higher price after it agrees to provide a bank guarantee until their dispute is resolved. This move alone could increase earnings by 10% in F2015 (2014-15, Apr-Mar).
