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Stocks of state-owned oil marketing companies are expected to remain choppy in a likely edgy market, and will mostly take cues from the rupee-dollar movement. Two of the three companies--Bharat Petroleum Corp and Hindustan Petroleum Corp--will also report their Jul-Sep earnings next week and are expected to turn up good profits after the government cleared a significant amount of subsidy to compensate for revenue losses on fuels like diesel, kerosene and cooking gas. The government will give 167 bln rupees to these companies, including Indian Oil Corp, for revenue losses incurred in Apr-Sep. This will wipe out the losses of the refiners for the six month period and help them report significant profit for Jul-Sep as the entire amount will be accounted for in the quarter's earnings.
Indian Oil Corp yesterday reported a net profit of 16.84 bln rupees for the quarter ended September while its revenue grew at a slower than expected pace of 4% to 1.1 trln rupees. More importantly, the rupee managed to hold on to its position after declining initially against the dollar this week after the oil companies moved some of their dollar demands to the market. The companies were so far meeting their dollar requirements entirely from a special window opened by the Reserve Bank of India but the regulator asked them to move 30-40% of their demand to the market this week. This may have a marked impact on the Indian currency next week as the companies' dollar demand rises. However, crude oil prices have declined this week and are expected to remain soft in the near term.
The Indian basket of crude fell to $103.5 a barrel this week from around $107 last week. This will more than offset the weakness in the rupee and may support the PSU companies' stocks. Reliance Industries is seen recovering next week after a sharp fall in the stock this week. Concerns remain on the company's performance due to weakening gross refining margin and muddled outlook on its upstream asset KG-D6 in the near term. However, the stock is oversold and may not fall much from current levels.
Stocks of state-owned oil marketing companies are expected to remain choppy in a likely edgy market, and will mostly take cues from the rupee-dollar movement. Two of the three companies--Bharat Petroleum Corp and Hindustan Petroleum Corp--will also report their Jul-Sep earnings next week and are expected to turn up good profits after the government cleared a significant amount of subsidy to compensate for revenue losses on fuels like diesel, kerosene and cooking gas. The government will give 167 bln rupees to these companies, including Indian Oil Corp, for revenue losses incurred in Apr-Sep. This will wipe out the losses of the refiners for the six month period and help them report significant profit for Jul-Sep as the entire amount will be accounted for in the quarter's earnings.
Indian Oil Corp yesterday reported a net profit of 16.84 bln rupees for the quarter ended September while its revenue grew at a slower than expected pace of 4% to 1.1 trln rupees. More importantly, the rupee managed to hold on to its position after declining initially against the dollar this week after the oil companies moved some of their dollar demands to the market. The companies were so far meeting their dollar requirements entirely from a special window opened by the Reserve Bank of India but the regulator asked them to move 30-40% of their demand to the market this week. This may have a marked impact on the Indian currency next week as the companies' dollar demand rises. However, crude oil prices have declined this week and are expected to remain soft in the near term.
The Indian basket of crude fell to $103.5 a barrel this week from around $107 last week. This will more than offset the weakness in the rupee and may support the PSU companies' stocks. Reliance Industries is seen recovering next week after a sharp fall in the stock this week. Concerns remain on the company's performance due to weakening gross refining margin and muddled outlook on its upstream asset KG-D6 in the near term. However, the stock is oversold and may not fall much from current levels.
