BSE Oil & Gas index gains 1%; ONGC, GAIL, OIL up

NEW DELHI: Shares of government-owned oil marketing companies rallied in early trade Thursday after they announced the biggest-ever hike of about Rs 7.50 per litre in petrol prices last evening.

At 10:40 a.m., shares of Bharat Petroleum Corporation, Hindustan Petroleum Corporation and Indian Oil Corporation are trading higher 1-2 percent on the National Stock Exchange.

While Oil and Natural Gas Corporation surged over 3 percent becoming the top Sensex gainer at Rs 251.25, GAIL rose 2 percent to Rs 330.40 and Oil India Ltd surged over 2 percent to Rs 458.

“Upstream companies continue to be clearer beneficiaries of a price hike in our view. We prefer OIL over ONGC here given its higher leverage to such an outcome,” CLSA said in a report.

OMCs raised petrol prices by 11.5 percent to offset underrecoveries. They last raised prices in December 2011.

“While this is positive for IOC, BPCL and HPCL, the more important adjustments to diesel, LPG and kero prices are still pending,” the CLSA report added.

In the sector, it prefers "upstream over downstream companies to play this theme where Oil India is our best idea. BPCL and Cairn India remain our top picks in the sector".

“Without this hike, OMCs would stand to lose Rs 8,000 crore in FY2013 compared to Rs 4,870 crore in FY2012, considering the 10 percent depreciation in the rupee against the dollar during the past three months,” a report from Angel Broking noted.

“However, at the current crude prices, OMCs continue to lose Rs 512 crore per day, mainly due to selling diesel, kerosene and domestic LPG at lower prices,” the report added.

R.K. Singh, CMD of BPCL, told ET Now in an interview that it expected "the government to take a call and raise the price of all three items, i.e. diesel, LPG and kerosene, because the underrecovery on diesel today is Rs 13.64 and that on LPG is about Rs 480 per cylinder".

Technical Check:

"IOC, HPCL and BPCL all three stocks are looking positive in the short term and are expected to move up at least 5 to 8 percent in the next two weeks. All three stocks have been forming lower tops and higher bottoms with the daily momentum indicators on the positive side," Somil Mehta, Senior Tech Analyst (Equity) at Sharekhan Ltd, said.

"For IOC, support is seen at levels around Rs 275-269 while resistance is placed around Rs 291-308. For HPCL, support is seen at levels around Rs 310-301 and resistance is placed around Rs 332-350. And for BPCL, support is seen at Rs 732-716 and resistance is placed around levells of Rs 769-786," Mehta added.