INSUBCONTINENT EXCLUSIVE:
MUMBAI: The rally in Indian Oil Corporation (IOC), Bharat Petroleum Corporation (BPCL) and Hindustan Petroleum Corporation (HPCL), which are
IOC, BPCL and HPCL have rallied 19-25 per cent in the past one month on hopes of a stable government after elections and potential of a
strong fourth quarter result, thanks to record marketing margins.
The brokerage said expensive valuation, normalisation of marketing margins
sell rating on all the oil marketing companies and said the pre-election rally these stocks witnessed in 2014 election year may not play out
this time.
Indian Oil Corporation, Bharat Petroleum Corporation and Hindustan Petroleum Corporation had gained 60-90% in the six month
run-up to the 2014 general elections
These stocks had further gained 5-50% in the one year after the new government was formed.
Expectation of a stable government after election
outcome on May 23 has also helped these stocks rally in the recent period.
CLSA said the 2014 rally had begun when valuations of these
premium to the global peer average as well as history, the refining environment is expected to stay weak, and limited room for incremental
petrol and diesel in the quarter ending March 2019 due to slower-than-anticipated transmission of retail price cuts and strengthening of the
These companies may also see large inventory gains due to rise in crude oil prices by over $15 per barrel, said CLSA.
However, beyond
elections, CLSA sees low chance of supernormal marketing margins as tight fiscal conditions may push the central government to raise the
