The Hindu Business Line : Oil marketing PSU stocks see accumulation

Oil marketing PSUs Hindustan Petroleum Corporation Ltd (HPCL) and Bharat Petroleum Corporation Ltd (BPCL) counters saw build-up of volumes during the last two days on expectations of some Government action on the Rangarajan Committee report on reducing the subsidy burden on these companies.

"There has been accumulation in HPCL and BPCL counters in the last couple of days on Government action on Rangarajan Committee Report," said an analyst, who tracks the oil and gas sector, with a leading brokerage.

The Government today issued oil bonds to three PSU oil marketing companies to compensate them for under-recoveries in the sale of domestic LPG and kerosene. HPCL, BPCL and IBP have been under severe pressure due to firm international prices of crude oil and petroleum products.

On the BSE, BPCL rose 2.60 per cent to Rs 437.95 from the previous close of Rs 426.85 on a turnover of 96,089 shares, compared to the two-week average of 83,500 shares. On the NSE, the shares closed higher by 2.76 per cent at Rs 438.85 on volumes of 3.9 lakh shares. The shares have gained by 5.64 per cent from last Thursday (March 16).

HPCL counter also attracted accumulation at Rs 325-levels during the last couple of sessions, dealers said. On Thursday, the shares closed higher at Rs 326.75 on BSE, compared to the previous close of Rs 326.30; over 1.19 lakh shares were traded on the counter.

On NSE, the shares closed at Rs 327.30, up 0.63 per cent from Wednesday's Rs 325.25. Over 2.53 lakh shares were traded on the counter.

Hike after polls?

Analysts expect the Government to revise the prices of petrol and diesel upwards after the Assembly polls. "There are still a lot of uncertainties for investors in these stocks. But, they can take a contrarian call," said the analyst. Oil marketing companies are pleading for a hike of at least Rs 4 per litre on petrol and diesel, but the Government is not likely to agree for such huge hikes, he said. It is felt that there could be minor hikes in the LPG prices as well.

HPCL, BPCL and IBP have been reeling under huge losses, resulting in the sector becoming an underperformer in an otherwise broad-based bull market.

Mr Prayesh Jain, Analyst (Oil & Natural Gas), India Infoline, said taking a call on PSU oil marketing companies was "risky" considering "too many uncertainties" such as rising crude prices and non-autonomy in pricing issues. "We are advising our clients to stay out from the sector," he said.

In the exploration sector, analysts said Oil and Natural Gas (ONGC) looked attractive, considering that any decision on hiking the prices will have a positive impact on the company. "ONGC also looks attractive in terms of valuation, compared to similar companies in the other Asian markets," said a dealer.

The ONGC stock closed today at Rs 1,218.80 on the BSE as against the previous close of Rs 1,224.55