Oil Stocks Outlook for the week - 04 to 08.08.2014
( www.rupeedesk.in )
( www.rupeedesk.in )
Stocks of state-owned
oil-marketing companies are seen rising in the near term as their
revenue loss on diesel is likely
to be wiped out within three months, lifting the heaviest
subsidy burden off their backs.
However, the sudden depreciation of the rupee this week
could weigh on these stocks.
The movement of the rupee against
the dollar is likely to dictate the trend for shares of
Indian Oil Corp Ltd, Bharat
Petroleum Corp Ltd, and Hindustan Petroleum Corp Ltd in
the first half of next week. The
rupee today ended at an over four-month low against the
dollar.
Being huge importers of crude
oil, the depreciation of the rupee adds to the company's
revenue losses on subsidised
fuel. The rupee fell beyond the 61 per dollar mark to end at
61.17 for a dollar today, on the
back of US currency's broad strength and a sharp fall in
domestic equities. The rupee fell
nearly 1.8% against the greenback this week.
The Indian currency is expected
to open stronger next week after a muted US payroll
data, which led to some recovery
in euro and other currencies. This could provide some
upside to the three stocks,
especially since their revenue loss on diesel has declined to just
1.33 rupees a litre, raising
hopes of deregulation within three months.
This week, the three oil
marketing companies announced a 50-paise per litre increase in
price of diesel for retail
sale.Their losses on subsidised fuels declined over 13% this week
to just 2.26 bln rupees daily
this fortnight following weakening of crude prices, and due
to the rupee's stability in the
past month. However, this figure could rise a little unless the
rupee regains lost ground by the
time of next revision of prices on Aug 16. Stocks of
upstream companies--Oil and
Natural Gas Corp Ltd, Oil India Ltd, and GAIL (India)
Ltd--are seen following their
downstream peers.
The three companies are likely to
bear around 155-bln-rupee subsidy burden
of the marketing companies in
Apr-Jun, which is significantly lower than the
figure for Jan-Mar.Going forward,
this burden is likely to fall even further as revenue losses on subsidised fuels
decline.
