Oil Stocks Outlook for the week – 24 to 28.10.2016
(PSUs seen up next week; Cairn India in focus)
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The stocks of state-owned oil marketing companies--Indian Oil Corp
Ltd, Bharat
Petroleum Corp Ltd, and Hindustan Petroleum Corp Ltd are likely to
have a strong
showing next week on the back of robust sectoral fundamentals,
rising fuel demand and
robust refining margins. With major fluctuations in global crude
oil prices unlikely next
week, traders are also likely to remain bullish on stocks of
upstream companies Oil and
Natural Gas Corp Ltd, Cairn India Ltd, and Oil India Ltd.
Among the three major upstream stocks, the focus early next week
will be on Cairn
India that is expected to react positively to the company's
impressive Jul-Sep earnings,
which were announced after market hours today. The company's
consolidated net profit
for the three months ended September rose 139% on year to 7.79 bln
rupees as the oil
and gas explorer was able to expand its operating margin in a
difficult oil price
environment.
Cairn India's consolidated net income from operations declined
9.1% on year to 20.39
bln rupees, while its total expenditure fell almost 18% to 17.81
bln rupees. As a result,
the company's operating margin in Jul-Sep expanded to 51% from
43.4% in the yearago
quarter. In the absence of any major sectoral triggers, the trend
for oil stocks next
week will be largely dictated by global crude oil prices and the
broad market sentiment.
Despite a production cut promised by the Organization of the
Petroleum Exporting
Countries, oil prices may be subdued next week on concerns over
prevailing glut in the
global market.
The outlook for Cairn India is also positive, with resistance for
the stock pegged at 250
rupees and support at 222 rupees. As for downstream stocks, shares
of the three stateowned.
oil refiners may rise next week after witnessing some correction
in recent ones.
Fluctuation in the dollar-rupee exchange rates is also likely to
affect shares of oil
companies. If the dollar strengthens against the rupee, it will
hit refining companies and
benefit upstream players. A weak dollar, on the other hand, is
advantageous for
downstream companies.