₹1.5 trn hit to exchequer as govt cuts petrol, diesel excise: Deven Choksey

Kunal Kamble technical analyst at Bonanza explains that the technical charts suggests a negative bias for OMCs - HPCL, BPCL and IOC - with recent swing lows as key support zone.

Shares of oil market companies retreated up to 6 per cent from intra-day highs amid high trading volumes on Friday even as the government slashed excise duty on petrol and diesel by ₹10 per litre.  Analysts believe the move to cut excise duties is a strategic fiscal shield by the government, but it could dent its earnings ₹1.5 trillion per year.  "With Brent crude spiking toward $115 per barrel due to the escalating West Asia conflict, the Centre's move to slash excise duties is a strategic fiscal shield. It prevents a retail fuel shock while stopping the OMCs from falling into a 2022-style earnings abyss," says Deven Choksey, Promoter & Managing Director of DRChoksey FinServ.  In its bid to counter high energy prices, the government on Friday reduced excise duty on petrol from ₹13 per litre to ₹3 per litre, and that on the sale of diesel from ₹10 per litre to Nil.  Globally, crude oil prices have surged up to 40 per cent since the start of the West Asia conflict on February 28, 2026. Prices remain at elevated levels owing to Iran's blockade of the Strait of Hormuz, a critical route through which nearly a fifth of the world's crude oil and gas supply, estimated at 20-25 million barrels per day, is transported. READ MORE  Earlier today, HPCL, BPCL and IOC jumped to intra-day highs of ₹358, ₹298 and ₹144, respectively. However, as of 10:10 AM, OMC stocks erased gains and slipped into the red, trading with losses in the range of 0.5 – 2 per cent at ₹343, ₹282 and ₹137.70, respectively.  

Excise cut on fuels: The Fiscal & Corporate Impact Analysis by Deven Choksey

Prevents earnings washout for OMCs

Deven Choksey believes that oil market companies - HPCL, BPCL and IOC - were staring at marketing margin losses of roughly ₹11 per litre on petrol and ₹14 per litre on diesel with crude oil at $105 per barrel.  This excise cut (₹10/L) effectively neutralizes these losses, allowing OMCs to maintain a near-breakeven or slight positive margin without raising retail prices, says Choksey.  ALSO READ | ONGC stock may zoom 65%, OMCs may not hike petrol, diesel prices soon: CLSA  Further, the analyst highlights that the 65-day commercial stock held by OMCs provides a temporary cushion to Q4FY26 & Q1FY27 earnings given the rapid rise in crude oil prices. 

Fiscal & Macro: Stability over Consolidation

Choksey projects that every ₹1 per litre cut in excise results in an annual revenue loss of ~₹14,000–16,000 crore. Thus a ₹10 per litre cut implies a massive ₹1.5 trillion hit to the exchequer.  "The excise duty cut could widen the Fiscal Deficit by ~40-45 bps, potentially pushing the FY27 target from 4.3 per cent toward 4.75 per cent. Further, by absorbing the shock, the government prevents a 100–150 bps spike in CPI inflation," explains Choksey in a note. The analyst also highlights that this protects Private Final Consumption Expenditure (PFCE), keeping India's GDP growth on track for 6 per cent - 6.5 per cent despite the global war premium. 

Technical outlook on OMCs by Kunal Kamble, Sr. Technical Research Analyst at Bonanza

  Kunal Kamble believes that OMCs - HPCL, BPCL and IOC - are exhibiting a weak-to-neutral trend on the charts.  "The trio are exhibiting a weak-to-neutral trend collectively, with charts indicating a broader consolidation after a sharp corrective phase. Structurally, the pack is forming lower highs with prices hovering around key moving averages, suggesting lack of strong buying conviction," explains Kamble.  The analyst further highlights that the relative strength vs the broader market has also softened, pointing to underperformance.  As a trading strategy, Kamble reckons support zone for the OMCs around the previous swing lows, which is roughly 3–5 per cent below current levels. The lows can be views as a critical breakdown zone for the pack, says the analyst. 

 

 

  On the upside, the major resistance zone is seen 8–12 per cent higher from current levels. This implies possible a likely resistance zone for BPCL around ₹305 - ₹315 levels. Whereas, in case of HPCL (₹370 - ₹385) and IOC (₹148 - ₹153).  Overall, Kamble cautions that the outlook remains negative and a decisive breakdown below recent lows can trigger further downside.    Disclaimer: Views and outlook shared on the stock belong to the respective brokerages and are not endorsed by Business Standard. Readers' discretion is advised.