Oil & gas stocks rally on diesel deregulation

Stocks of state-owned oil marketing companies Bharat Petroleum Corporation Ltd (BPCL), Hindustan Petroleum Corporation Ltd (HPCL) and Indian Oil Corporation (IOC) were in the limelight on Monday, surging up to 7.3 per cent, as diesel deregulation will cut the subsidy burden. HPCL gained 7.3 per cent to settle at Rs 526.95, while shares of BPCL surged 4.6 per cent to Rs 696.55 on the BSE.

Shares of IOC were up 3.8 per cent to Rs 379.60.

Buying was also seen in other oil and gas stocks, with Oil and Natural Gas Corporation (ONGC) surging 5.4 per cent, Petronet LNG (3.7 per cent), GAIL (2.4 per cent), OIL (1.4 per cent). The BSE oil and gas index ended at 10,746.97, up 1.9 per cent.

"The raise on natural gas prices, combined with deregulation reforms on the government's previous control of diesel prices, allowed the markets to surge further," said Raghu Kumar, Cofounder, brokerage firm RKSV.

In a major reform push, the government deregulated diesel prices and raised natural gas rate by 46 per cent, that will push up fertiliser, power, compressed natural gas and PNG rates. The deregulation of diesel prices resulted in a cut of Rs 3.37 a litre.

"Markets were clearly enthused by the intent shown and key decisions taken for the oil & gas sector," said Devang Mehta, senior VP & head - equity advisory, Anand Rathi Financial Services.