Stock Market Today: The Nifty Oil & Gas index gained up to 2.5% during the intraday trade on Friday, September 27. Oil marketing companies (OMCs) such as Bharat Petroleum Corporation Ltd (BPCL), Hindustan Petroleum Corporation Ltd (HPCL) and Indian Oil Corporation ( IOCL) rose up to 7% and were the lead gainers. BPCL share price also scaled its one-year high and was the top gainer among Nifty50 stocks.
Gujarat Gas, Petronet LNG, Gujarat State Petronet, and GAIL (India) were other key gainers in the index.
Lower crude oil prices improve outlook
The decline in crude oil prices lead the gains for oil marketing companies.
Brent crude prices that were at close to $90 a barrel and even higher in April 2024 are trading close to $70 a barrel levels. Notably, the crude prices are down around 8% in the last one week.
The lower crude prices bode well for the marketing margins of OMCs. Marketing margins are the profits that these companies make by selling auto fuels at their outlets and hence lower costs of crude oil bode well for these margins.
Analysts maintain positive outlook for BPCL, HPCL, IOCL
Against the backdrop of weak crude oil prices and a range-bound refining GRM environment, the outlook for marketing margins remains strong, said analysts at Motilal Oswal Financial Services.
Also, they added that OMCs appear to be trading at the higher end of the historical range, with Street’s earnings estimates at only ₹3-4 per litre marketing margins while current margins are above ₹10 a litre.
These should address concerns not only on the valuations at which OMCs may be trading at but also on any fuel price cuts that OMCs may be asked to undertake ahead of state elections.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions
