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HPCL, BPCL, IOC: Will OMC stocks remain under pressure on excise duty cut?

According to the current chart structures, shares of OMCs needs to hold their relevant support levels to stay afloat.

Topics
Market Outlook | HPCL BPCL Indian Oil | Excise duty cuts

Avdhut Bagkar  |  Mumbai 

Ethanol Blending, Petrol, Petroleum
Excise duty cut

In a bid to provide relief to the common man, the Finance Minister Nirmala Sitharaman announced a cut in excise duty on and diesel by Rs 8 and Rs 6 per litre over the weekend. The FM also announced a Rs 200 subsidy on LPG users under the Ujjwala Yojana Scheme.

Following this development, shares of OMC (Oil Marketing companies ) like Bharat Petroleum Corporation, Hindustan Petroleum Corporation and Indian Oil Corporation are likely to be in focus in the near term. Depsite gains on the benchmark indices, the OMCs were seen trading on a flat note so far on Monday.

"Government recently announced to cut excise duty on and diesel by Rs 8/6/litre given rising inflationary pressures. Accordingly, we cut FY23E earnings of HPCL/BPCL by 56-40 per cent as we lower marketing loss for diesel to Rs 3/litre (from +4/litre earlier), while increasing GRMs. OMCs ability to reduce high marketing losses of Rs 6/10/litre for Q1FY23 on and diesel will be contingent on crude price correction, as high inflationary pressure will prevent meaningful retail price hikes despite excise duty cuts," wrote analysts at Prabhudas Lilladher in a recent note.

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First Published: Mon, May 23 2022. 13:44 IST
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