Oil Stocks Outlook for the week – 26 to 30.05.2014
(www.rupeedesk.in)
Stocks of state-owned oil marketing companies are seen in a narrow range in the coming
week, with all eyes set on companies' Jan-Mar results, rupee-dollar movement, and the
new government's views on fuel pricing. Indian Oil Corp Ltd, Bharat Petroleum Corp
Ltd, and Hindustan Petroleum Corp Ltd will detail Jan-Mar earnings on Wednesday and
Thursday.
The Ministry of Petroleum and Natural Gas has set the subsidy burden of the upstream oil
and gas companies at 670.21 bln rupees for 2013-14 (Apr-Mar), while the government
has provided 707.72 bln rupees as cash subsidy for the year. Public sector oil marketing
companies incurred a total revenue loss of around 1.40 trln rupees. The oil retailers are
now required to absorb 20.76 bln rupees as their part of subsidy share.
However, going back on its earlier decision to keep GAIL (India) Ltd out of the subsidy
web, the oil ministry has asked the company to now pay 19 bln rupees, 5 bln rupees more
than what has already been paid by the company. This is likely to be negative for the
stock and may weigh on it in the near term until the final position is clarified by the new
government.
For 2013-14, ONGC's subsidy burden has been set at 563.84 bln rupees and Oil India has
been asked to provide discounts to the tune of 87.37 bln rupees. The burden on ONGC
and Oil India is also higher than expected and could worry investors.
Meanwhile, the rupee has been consistently strengthening against the dollar, a positive
development for the oil marketing companies. Further appreciation could give more
upside to BPCL, IOC and HPCL shares. Also, the new government's stance on fuel
pricing, especially diesel will be key. If the government halts monthly diesel price hikes,
the stocks of these companies could take a hit.
