Oil retailers' share prices soar

BPCL gained nearly 4% to Rs 674, while HPCL gained more than 2% to Rs 451

Shares of oil marketing companies (OMCs) gained on expectations that softening in Brent crude prices and increase in diesel prices will help improve financials. Brent on Tuesday declined about two per cent to a 14-month flow, following positive developments in Iraq, which reduced threats to the nation’s oil production and exports from militants.

Shares of Bharat Petroleum Corporation (BPCL) gained nearly four per cent to Rs 674, while Hindustan Petroleum Corporation (HPCL) gained more than two per cent to Rs 451. Indian Oil Corporation (IOC) also gained about two per cent to Rs 358. Shares of three OMCs have been on an uptrend in recent days.

Global brokerage Goldman Sachs issued a ‘buy’ rating on BPCL and HPCL stating low oil prices will result into low diesel losses and high petrol margins. “…we believe they (HPCL & BPCL) are good ways to take exposure to medium/long-term oil demand growth in India, with strategic marketing assets at reasonable valuations,” said Goldman in a report.

“We believe any policy move towards actual de-regulation of diesel prices, with OMCs having freedom to change retail prices in line with international oil prices and the dollar-rupee rate, is a key catalyst for OMCs,” it said. The brokerage has set a price target of Rs 701 on BPCL, Rs 538 on HPCL and Rs 419 on IOC.