The Hindu Business Line : BPCL, HPCL gain on good dividend yield

AFTER being battered by market players over the last few weeks, the shares of BPCL and HPCL gained sharply on Tuesday on the back of good dividend yield. Market talk that the Government will soon decide on the price hike for petroleum products also boosted sentiment in favour of the two stocks.

In addition, the financial results of HPCL, which were better than market expectations, also enthused the market.

In today's trading, BPCL gained 9.49 per cent to close at Rs 324.10 on the BSE, while HPCL gained 6.70 per cent to end at Rs 320.80.

Analysts said that the shares of these companies had witnessed heavy selling due to the new Government's decision not to divest its stake in them.

However, after the sharp fall, the valuations of these companies have turned attractive. "At current prices, BPCL and HPCL provide good dividend yield, better than bank fixed deposit," said an analyst with a foreign broking firm.

Based on today's closing price, BPCL provides dividend yield of 5.4 per cent and HPCL 6.85 per cent.

BPCL had paid an interim dividend of 60 per cent and proposed a final dividend of 115 per cent.

HPCL paid interim dividend of 60 per cent and proposed a final dividend of 160 per cent.

However, a dealer with a domestic broking said: "When the mood in the market is bearish, it is risky to buy dividend yield stocks as the possibility of capital loss (fall in share price) is high compared to gains from the dividend."

Analysts also said that the outstanding positions in the derivatives segment of these two stocks have also brought some interest in these stocks. "Outstanding positions are very low and the discount on the futures have also come down indicating limited downside," said a derivatives analyst.

However, some market players said that the financial results of these PSUs might be affected in the coming quarters in case the Government does not allow them to increase petroleum prices.

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