RUPEE DESK- Oil Stocks Outlook for the week (11-15.06.2012)
Stocks of state-owned oil companies are seen mixed next week amid a continued fall in crude prices and easing rupee-dollar situations, while Reliance Industries stocks are seen weak in the near term. Following a sustained decline in crude oil prices over the past few weeks, pressure had eased on the state-owned oil marketing companies--Indian Oil Corp Ltd, Bharat Petroleum Corp Ltd and Hindustan Petroleum Corp Ltd--which reflects in the performance on their stocks.
On Thursday, price of the Indian basket of crude hit an eight-month low of
$98.37 a barrel. The rupee also recovered sharply on Thursday and closed above
55 for a dollar for the first time in nearly three weeks. Today, however, the
Indian currency declined again to close at 55.42 per dollar. The market will
watch the rupee-dollar movement closely and stocks of both upstream and
downstream oil companies will track it.
A change of every one rupee in the value of dollar is equivalent of $3 per
barrel change in crude prices for Indian oil companies. The Street is also
keenly awaiting a decision on hike in prices of diesel and cooking
gas--something the government has not been able to push through despite public
comments by senior officials and even the prime minister.
However, the market has not factored in any possibility of a hike in diesel and cooking gas prices, and any development on this front will lead to a significant rally in these stocks. Reliance Industries stocks are though seen subdued next week after a sharp rally this week made it the biggest gainer among oil companies. Chairman Mukesh Ambani's announcement, at the annual general meeting on Thursday, of Reliance Industries' plan to invest over 1 trln rupees over the next 4-5 years with an aim to double operating profit did not excite the Street. RIL's recent AGM did not address the key issues facing the company: use of cash, continued disappointments in the E&P (exploration and production) segment and future growth areas that can create meaningful value. Ambani also indicated that gas output from KG-D6 will continue to remain under pressure till it finalises and implements a comprehensive development plan--a process that may take 2-3 years. This will continue to weigh on the stock
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