Petrol, diesel rate hike: Oil marketing companies (OMCs) stocks like Indian Oil Corporation Limited (IOCL), Bharat Petroleum Corporation Limited (BPCL), and Hindustan Petroleum Corporation Limited (HPCL) will remain in focus on Monday, 25 May, after petrol and diesel prices were raised for the third time in eight days.
Petrol and diesel prices were increased by 87–91 paise per litre on Saturday, pushing the cumulative rise in retail fuel prices to nearly ₹5 per litre in less than 10 days, as state-run oil companies continued to pass on the impact of surging global crude oil prices.
At the same time, compressed natural gas (CNG) prices were hiked by Re 1 per kg, marking the third increase in the past few days and taking the total increase to ₹4 per kg.
Why are petrol and diesel prices rising?
The consecutive hikes come after an extended pause in retail fuel price revisions and are being driven by higher global crude oil prices, narrowing refining margins, and a weaker rupee, all of which have significantly increased import costs.
According to Sugandha Sachdeva, Founder of SS WealthStreet, the recent hikes are likely to provide some relief to OMC companies and help protect refining and marketing margins after the company had been selling petrol, diesel, and LPG below cost for a prolonged period.
Despite the hikes, oil marketing companies are still estimated to be incurring losses on fuel sales due to elevated crude prices, she added.
Further, crude oil prices have begun to cool off following the recent sharp rally, declining nearly 6% this month amid hopes of easing tensions between the US and Iran, along with expectations that a memorandum of understanding could eventually reopen the Strait of Hormuz and reduce supply disruptions.
“Any sustained decline in crude oil prices from current levels would significantly benefit OMC companies by reducing under-recoveries and improving profitability,” Sachdeva explained.
Which OMC stock to buy amid uncertainty?
Sachdeva, while picking IOC as the top stock to buy, said that the share price has formed a strong base around the ₹130 zone, which continues to act as a key long-term support area on monthly charts and also coincides with important moving averages.
“As long as the stock sustains above these levels, the broader outlook remains positive, with potential upside towards ₹155 levels initially, while a decisive breakout above the same could open the path towards ₹167 from a medium- to long-term perspective,” she added.
Meanwhile, Mahesh M Ojha, VP Research & Business Development at Kantilal Chhaganlal Securities, believes that all three OMCs delivered strong numbers this quarter.
“For conservative investors seeking stable returns and higher dividend yield, Indian Oil Corporation (IOC) appears to be the preferred choice due to its relatively attractive dividend profile,” Ojha said.
Ojha further highlighted that from a value appreciation perspective, HPCL and BPCL also remain well placed, supported by improving operational performance and potential upside in valuations.
Disclaimer: This story is for educational purposes only. The views and recommendations above are those of individual analysts or broking companies, not Mint. We advise investors to check with certified experts before making any investment decisions.
