Is The Oil Boom For Real?

Is The Oil Boom For Real

The meteoric rise in oil and refining stocks has fuelled the market rally. Will it last? Most analysts do not think it is a flash in the pan

 

Oil and refinery stocks have been rising like there is no tomorrow. In just two months, they have posted collective gains in market capitalisation of 60 per cent.

 

IBP topped the table with a gain of, hold your breath, 179 per cent, with its share price shooting up from Rs 210 on May 2 to Rs 586 on June 26.

 

Even the worst performer, Hindustan Petroleum (HPCL), managed to post worthwhile gains of 22 per cent.

 

 

Will oil slip from this lofty perch? An answer to this question is important to the whole market since the current rally has been spearheaded primarily by two sectors - oil and banks.

 

If one were to look at the market as a whole, oil fuelled 44 per cent of the nearly Rs 100,000 crore gain in market capitalisation between June-end last year and now. And while banks appear to be peaking, oil continues to be on the boil.

 

Market analysts discount the possibility of any major meltdown. Says Satyam Agarwal, analyst with research brokerage Motilal Oswal Securities: