Oil stocks fall on talk of poll sops, some say time to buy
Stocks of oil marketing companies dropped on Monday as reports that the government may consider cutting retail fuel prices prompted traders to cut some of their bullish bets. Analysts said these stocks were overbought after the recent run-up but a reversal might be an opportunity to load up on some of them.
Among oil marketers, Hindustan Petroleum fell 4.36%. Indian Oil and Bharat Petroleum both lost about 1%.
The BSE Oil & Gas index was also down by 0.15%. Among oil explorers, ONGC gained 1.1%, while Oil India shed 0.3%.
"OMCs have seen some profit booking in the short run as they are in the overbought territory and are experiencing a temporary pullback," said Ruchit Jain, lead research analyst at 5Paisa.com.
The BSE Oil and Gas index is still positive and a reversal in the trend is unlikely, he said.
Since October 26, when the market bounce began, HPCL shares surged 49%, BPCL jumped 39% and IOC rose 36%.
The BSE Oil & Gas index gained 24% and the Sensex moved up 10.7% in this period.
The rebound came in the wake of global crude prices falling from $87 a barrel to $75.6 and strong September quarter results. When global oil prices fall, it boosts the profitability of OMCs. «OMCs have healthy operating margins and the advantage of discounted Russian crude coming in as raw materials,» said Avishek Datta, research analyst at Anand Rathi.
