Traders cover shorts in Cairn India as crude oil prices rise

MUMBAI: Shares of Cairn India ended the day at Rs 183.30, up 5.95% on the NSE. The stock surged over 12 per cent intraday as traders covered short positions following a spike in global crude oil prices.

Brent crude futures rose 3.5 per cent Wednesday even as the US output was at the highest monthly level in 43 years. The output is expected to decline in the second half of 2015.

Brent crude was at $66 per barrel, up $1.12 from its previous close.

The rise in Indian equities, following easing concerns on FPI flows to China, also boosted sentiment.

According to analysts tracking the oil sector, traders were covering short positions in the beaten down stock. Any uptick in global crude oil prices will only lead to rise in Cairn’s stock price.

Action is also likely to pick up in the counter following reports that Vedanta may merge Cairn India with itself. The move will give the parent access to Cairn's cash and help reduce debt. The two are shortly expected to inform shareholders about the proposed transaction.