Stock Fundamentals

OMCs trip on crude rally

Anand Kalyanaraman | Updated on July 03, 2018 Published on July 01, 2018

The stocks of public sector oil marketing companies were hammered last week — Indian Oil slipped 8.5 per cent; BPCL fell about 13 per cent, while HPCL crashed nearly 17 per cent. The sharp drop in these stocks coincided with the rally in crude oil prices to about $78 a barrel last week; this followed a lower-than-expected oil output increase decision by the OPEC. Also, it did not help that the rupee’s weak run continued it touching nearly 69 to the dollar.

 

The market seems concerned that with a hectic election cycle slated over the next year, the PSU oil marketing companies will lose their pricing power and will have to take hits on their marketing margins. A pattern is emerging of the PSU OMCs capitulating to the diktats of their major shareholder — the government — and losing their so-called pricing freedom on petrol and diesel during polls. It happened during the run-up to the Gujarat State elections last December and, more recently, prior to the Karnataka State elections.

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