Oil Stocks Outlook: Weak in line with broader indices next week

[N.Sukumar]

NEW DELHI - Shares of oil companies are likely to remain weak in
tandem with broader indices, which are seen down on the back of 13-
year-hig inflation.

Bombay Stock Exchange's 30-share Sensex today closed at 14571.29, down
3.4% from Thursday, while National Stock Exchange's 50-Share Nifty
fell 3.5% to close at 4347.55.

Investors are wary that Reserve Bank of India will now resort to
further
monetary tightening to bring down the inflation rate.

India's headline inflation, as measured by the Wholesale Price Index,
rose to a 13-year-high of 11.05% for the week ended Jun 7 compared
with 8.75% a week ago.

The spurt was primarily due to increase in auto fuel and cooking gas
prices with effect from Jun 5. Finance Minister P. Chidambaram today
said the government will take stronger steps on both demand and
monetary sides to curb galloping prices.

The government had earlier this month raised fuel prices due to
spiralling global oil prices that had breached the $140-a-barrel mark.

Besides weakness in broader indices, high oil prices are also having a
severe impact on the sentiment of oil marketing stocks.

The oil retailing stocks could get some reprieve if Saudi Arabia, the
world's largest oil exporter, announces increasing production to curb
spiralling prices.

Any output increase usually cools off global oil prices. If Saudi
Arabia
does so, oil prices react to it, there could be some buying in stocks
like
Indian Oil, Bharat Petroleum and Hindustan Petroleum.

Last month, Saudi Arabia had increased production by 300,000 barrels a
day to help check soaring prices and the market is rife with talks
that it could further raise supplies by another 200,000 barrels per
day from July.

The kingdom nation has called a meeting of major petroleum producing
and consuming nations in Jeddah, on Jun 22, to discuss spiralling
crude prices.

Below are Friday's closing share prices, in rupees, of leading oil
companies on the National Stock Exchange, compared with a week
earlier:

Company Closing price Closing price %
Change
Jun 20 Jun 13

Oil and Natural Gas Corp 867.65 841.95
3.1
Indian Oil Corp 369.30 374.15 (-)
1.3
Bharat Petroleum Corp 264.65 266.90 (-)
0.8
Hindustan Petroleum Corp 195.65 187.00
4.6
Reliance Industries 2,099.20 2,270.40 (-)
7.5
Cairn India 268.20 285.10 (-)
5.9

Nifty 4347.55 4517.10 (-)
3.7
Sensex 14571.29 15189.62 (-)
4.1

N.Sukumar
Research Analyst