Shares of India's leading oil marketing companies (OMCs) experienced a significant rally on Thursday, with Indian Oil Corporation Ltd (IOC), Hindustan Petroleum Corporation Ltd (HPCL), and Bharat Petroleum Corporation Ltd (BPCL) all seeing gains of up to 4% in their stock prices. This upward movement was primarily driven by a sustained fall in global crude oil prices, marking the third consecutive day of declines.
Despite a notable move by Nayara Energy, the country's largest private fuel retailer, to cut petrol prices by Rs 5 per litre and diesel prices by Rs 3 per litre nationwide, OMC stocks continued their ascent. Investors appeared to weigh the benefits of lower crude acquisition costs more heavily than potential impacts from retail price adjustments.
Individual Performance Highlights
- Hindustan Petroleum (HPCL) led the gains, climbing 3.58% to reach Rs 392.20 per share.
- Bharat Petroleum (BPCL) followed, rising 3.33% to a high of Rs 314.35 on the BSE.
- Indian Oil Corporation (IOC) saw its shares increase by 2.75%, closing at Rs 143.75.
Analyst Outlook and Market Dynamics
According to analysis from ICICI Securities, the market dynamics suggest a bullish outlook for OMCs, at least for the immediate future. The brokerage noted that crude oil settling into a narrower price range could lead to reduced product prices while maintaining product spreads higher than pre-war levels. This scenario implies that retail margins could remain robust, potentially staying in the range of Rs 8–10 per litre, assuming no new regulatory actions on excise duties or pricing by the OMCs themselves.
ICICI Securities had previously projected a challenging first half of fiscal year 2027 (H1FY27E) for OMCs, citing high retail losses and the potential for inventory losses due to sharp downward movements in oil and product prices. However, with updated assumptions for the remainder of FY27E and a more optimistic forecast for FY28E, the earnings per share (EPS) for IOCL, BPCL, and HPCL are expected to see significant upsides.
The brokerage has consequently upgraded its rating for HPCL to 'Buy' and reiterated its 'Buy' recommendations for both IOC and BPCL. While acknowledging that uncertainties persist, particularly regarding any final 'peace' agreements that could reintroduce price volatility, the current signals on pricing and margins point towards a favorable environment for oil marketing companies.