INSUBCONTINENT EXCLUSIVE:
Mumbai: The slump in oil prices on Monday precipitated by the price war between Saudi Arabia and Russia saw shares of Indian oil explorers
Oil and Natural Gas Corporation (ONGC) dropped 16% and Oil India declined 10.7% on Monday as lower crude prices will erode earnings
Shares of oil refiners-andmarketers Bharat Petroleum Corp
Ltd (BPCL), and Hindustan Petroleum Corp
Ltd (HPCL) jumped as falling crude prices mean lower procurement costs.
BPCL closed 4.2% higher while HPCL gained 4.4%
(IOC) ended 2.2% up, having risen 3% in trade.
"Oil marketing companies could do well in the medium term since the price of oil is expected
to remain at the lower end for some time," said G Chokkalingam, founder, Equinomics Research and Advisory
"Also, soft oil prices could postpone the transition to electrical vehicles by another couple of years."
Crude prices declined 21% on Monday
following the Saudi move to start a price war after Russia balked at making further steep output cuts proposed by the Organisation of the
Petroleum Exporting Countries (Opec) to stabilise oil markets hit by worries over the global spread of the coronavirus.
The Reliance decline
on Monday was its worst one-day loss in 12 years
below its IPO price on Monday for the first time ever
In the last two days, Aramco has lost $320 billion in market value
Sabharwal, a Mumbai-based independent market analyst
"At this stage what the markets are factoring in is that the deal may not happen and they will not be able to do the deleveraging as they
Its market value has slumped by more than Rs 3 lakh crore to Rs 7.06 lakh crore from a peak of Rs 10.14 lakh crore in December when the
share hit a record of Rs 1,617.80
Tata Consultancy Services overtook it as the company with the highest market value at Rs 7.4 lakh crore
some market participants said.
"Oil prices do not matter for Reliance Industries as it is not a producer but some in the market have a
concern that Saudi Aramco deal may not happen because of the fall in crude oil prices," said Sanjeev Prasad, co-head, Kotak Institutional
I don't think these concerns are material." Kotak has a buy rating on Reliance Industries.
Goldman Sachs cut the target price on the stock
by 5% to Rs 1,750, saying that the macro environment for the hydrocarbon business is challenging due to the negative shock to oil demand
from the coronavirus outbreak, partly offset by lower crude premiums for Asian refiners
However, it has retained a buy rating for Reliance as it believes the correction is overdone.
Morgan Stanley has also cut the target price
The brokerage has moved the stock up in its preference order to a top pick.
"Reliance is down to levels reached last year when it stated its
plan to lower debt; concern about energy cashflow is rising
The stock is pricing in cash cost industry margins on energy, and limited upside from de-gearing despite reduced capital intensity, higher
ARPUs (average revenue per user), and improved ROCE (return on capital employed)," said Morgan Stanley.
