Shares of state-run oil marketing companies (OMCs) rallied more than 3% in early trade on Wednesday, driven by positive global cues and expectations of stable retail fuel prices in the coming months.
Bharat Petroleum Corporation Limited (BPCL) led the gains, rising 3.8%, while Hindustan Petroleum Corporation Limited (HPCL) climbed 3.5% and Indian Oil Corporation Limited (IOCL) advanced 3.2% on the Bombay Stock Exchange.
What triggered the rally
The surge in OMC stocks came after international crude oil prices softened marginally overnight. Brent crude futures fell 1.2% to 82.40perbarrel,whileWestTexasIntermediate(WTI)tradedat78.15.
Lower crude prices reduce the under-recovery on petrol, diesel, and LPG for OMCs, improving their margins.
Additionally, market participants are hopeful that the government will not announce any further price cuts in the near term, allowing OMCs to maintain or improve their marketing margins.
Brokerage views
Several brokerages have turned positive on OMC stocks after the recent correction.
A report by Motilal Oswal Financial Services stated, “The risk-reward ratio for OMCs has improved significantly. With crude stabilising and demand remaining healthy, we see an upside of 12-15% from current levels.”
Nomura India upgraded HPCL to ‘buy’ with a target price of ₹520, citing improving gross refining margins (GRMs) and a strong marketing segment.
Recent performance of OMC stocks
OMC shares had been under pressure for most of April and early May due to volatile crude prices and concerns over government intervention in retail pricing.
However, in the last one week, BPCL has gained 7.2%, HPCL 6.8%, and IOCL 5.9%. The latest 3% rally extends this recovery.
What analysts are watching
Investors are keeping a close watch on three key factors:
- Crude oil trajectory – Any further dip in crude prices below $80 could trigger another round of re-rating for OMC stocks.
- Auto fuel demand – Petrol consumption grew 6.36% in April. Strong demand supports OMC volumes.
- Government policy – No fresh announcement on fuel price cuts or excise duty changes has been made since the May 16 hike.
Global cues support sentiment
Positive global cues also contributed to the rally. The US government reported a larger-than-expected drawdown in crude inventories, signalling strong demand ahead of the summer driving season.
China’s crude imports also rose 3.5% in April, indicating steady consumption from the world’s largest oil importer.
Other energy stocks gain
The rally was not limited to OMCs. Other energy stocks also saw buying interest:
- Reliance Industries rose 1.8%
- GAIL India gained 2.1%
- Oil India advanced 2.5%
The Nifty Energy index was trading 1.9% higher, outperforming the benchmark Nifty 50 which rose 0.6%.
What experts recommend
Market experts advise investors to adopt a selective approach.
“OMC stocks are cyclical and sensitive to crude prices. Long-term investors can accumulate on dips, but traders should book partial profits at current levels,” said V.K. Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
He added that the next trigger for OMC stocks will be the monthly sales volume data for May, expected in the first week of June.
Conclusion
The 3% rally in OMC shares reflects growing investor confidence in stable margins and healthy fuel demand. While risks from global crude volatility remain, the near-term outlook appears positive.
BPCL closed at ₹485, HPCL at ₹498, and IOCL at ₹142 on the BSE in morning trade.
