Oil's new normal to be $80? Ambit downgrades HPCL, BPCL, IOC shares to 'Sell', slashes target price by up to 57%

As oil prices skyrocket, Ambit Institutional Equities issued ‘Sell’ ratings for the shares of oil marketing companies like HPCL, BPCL and IOC, and cut their target prices by 45% to 57%. The brokerage said $80 per barrel is the new normal for Brent, as infrastructure damage, geopolitical risk premiums and inventory restocking would likely keep oil prices elevated even after the Middle East conflict cools down.

In its report, Ambit said that its ‘Sell’ ratings were driven by balance sheet risk arising from elevated oil prices till FY30, coupled with insufficient government relief and rupee depreciation. It raised its Brent oil estimates from $65 per barrel to $85 per barrel in FY27, and $70 per barrel till FY30. “We also factor in a one-year delay to the gas glut (H2 FY29). This shift is underpinned by supply disruption at Qatar’s Ras Laffan, alongside persistent EU restocking demand and a strategic reconsideration of new regasification capacities. We believe this crisis threatens to undermine the emergence of gas as a transition fuel,” it added.

Ambit said that the political reality following the 2024 Lok Sabha elections and fiscal pressures from the rupee’s sharp depreciation will likely prevent the government from being generous with its relief for the state-run OMCs. This comes after the brokerage held bullish calls for the stocks earlier, following their stellar share price performance between June 2022 and February 2026. “We believe that, in FY26 to FY28, the opposite would happen. Hence, we would see any knee-jerk correction in Brent crude or government action of Rs 1 to Rs 2/litre increase in RSP as triggers to exit OMCs,” it explained.


According to Ambit, Hindustan Petroleum Corporation (HPCL) is currently the most vulnerable, with a combined refining cover of less than 50%, leaving it far more exposed to marketing under-recoveries compared to BPCL (nearly 70%) and IOCL (around 75%).

“For OMCs, a retail price freeze triggers pain from both sides simultaneously. Frozen retail prices against elevated crude costs generate sustained marketing losses, directly eroding book value, the denominator in P/B. Simultaneously, markets re-rate the multiple lower given earnings uncertainty, compressing the numerator. The result: P/B collapses from both ends at once. We saw something similar play out in FY22 to FY23 during the Russia-Ukraine conflict. With crude currently elevated and retail prices frozen, the setup looks identical. We see no reason this cycle will be different unless a material enough RSP hike or excise cut is announced, which we believe is highly unlikely due to fiscal and political reasons,” it said.

Ambit downgraded the shares of IOCL from ‘Buy’ to ‘Sell’, and reduced its target price by 45% to Rs 118 apiece. The latest target price implies a downside potential of more than 16% from the previous closing price of Rs 140.52 apiece.

It also downgraded BPCL shares from ‘Buy’ to ‘Sell’, while slashing its target price by 50% to Rs 224 apiece, implying a 21% downside potential from the previous closing price of Rs 284.55 apiece.

HPCL shares saw the steepest target price cut of 57% to Rs 254 apiece, while being downgraded from ‘Buy’ to ‘Sell’. The latest target price implies a downside potential of more than 26% from the previous closing price of Rs 344 apiece.

RIL and upstream are the only winners

Ambit, however, noted that upstream companies will likely be the only winners even after windfall taxes, as they benefit from higher realisation of $70 per barrel and the rupee depreciation. Mukesh Ambani-led Reliance Industries (RIL) will benefit from the latter and a reduction in new global investments in petrochemicals, it said.

Ambit maintained a ‘Buy’ call on the shares of RIL, IGL, MGL, Gujarat Gas, Oil India, ONGC, GAIL and PLNG. GAIL is losing volumes but is seeing material trading gains, and hence will not see an adverse book value impact from this crisis, it said, adding that city gas distribution companies’ loss in industrial volumes insulates them from under-recoveries, unlike OMCs.

“The government could encourage oil and gas companies to sign long-term sourcing or investment deals with the US, like Reliance. This will achieve twin objectives of India fulfilling its bilateral trade commitments with the US and the latter improving its trade balance and securing long-term customers for its energy,” it added.

Macros to remain adverse for India

The global energy complex has entered a period of structural dislocation following the 2026 Middle East conflict, Ambit said, noting that the effective closure of the Strait of Hormuz has forced a 95% reduction in maritime transit, rerouting trade via the Cape of Good Hope and inflating freight rates by 50%.

Ambit sees Brent crude hovering in the range of $80 to $100 per barrel, supported by a physical market shortage of 7 mbd and urgent OECD/SPR restocking requirements. This macro shock represents a long-term repricing of geopolitical risk in the global energy supply chain, it added.

“While physical damage assessments to upstream and refining infrastructure remain preliminary, initial indications point to meaningful disruptions. Layering on this, geopolitical risk premiums are being embedded in near-term crude prices, while demand is being amplified by inventory restocking as importers rush to rebuild depleted SPR and OECD stocks. Taken together, these three factors underpin our view of sustained near-term crude price elevation,” it wrote.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times.)