Oil & gas stocks rally for second consecutive day on Budget announcements

The move, experts believe, will be positive for all public OMCs and upstream companies

Shares of oil & gas stocks gained up to 2% after finance minister Arun Jaitley announced to create an integrated public sector oil major after merging the oil sector PSUs across the value chain in order to enhance their capacity to bear higher risks. 

The move, experts believe, will be positive for all public oil marketing companies (OMCs) and upstream companies. 

Reacting to the development, the BSE oil & gas index rose as much as 1.5% to 13227 in an otherwise flat market. The index had gained 1.5% in Wednesday's trade. 

Stocks of Upstream oil players such as Oil India, IOC, HPCL and BPCL gained anywhere between 1-3% in intraday deals. Petronet LNG added over 2% to Rs 396 after the government reduced basic customs duty on LNG from 5% to 2.5%. 

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Brokerage IndiaNivesh, however, feels the budget impact on the oil & gas sector will be neutral. 

"The budget impact seems neutral for the oil & gas sector. In this budget government has fairly focused on infrastructure development, strategic reserves, but lowered subsidy payments. The provision is made for subsidy on account of arrears of previous years/schemes (freight subsidy and subsidy on LPG and krosene for PDS), payment to oil companies on account of subsidies for supply of natural gas to north-eastern regions etc. (significant reduction of Rs 2,720 crore),” said IndiaNivesh in a post-Budget research report.  

"No significant is employed on R&D. To e enhance strategic oil reserves, the govt has planned to set up two more strategic oil reserves at Chandikhole in Odhisha and Bikaner in Rajasthan, taking our strategic reserve capacity to 15.33 mt," the brokerage added.