Oil shares stole the show on Friday, as the Sensex closed above the psychological 20,000-mark, up 75 points over the previous close and a weekly gain of 2 percent.
Buyers scrambled for shares of state-owned oil companies even as analysts were divided on the implications of Thursday’s Cabinet decision allowing oil companies to hike diesel prices in small measures.
The Sensex closed at 20039.04, up 75.01 points and the Nifty at 6064.40, up 25.20 points.
OIL India, ONGC, BPCL and Indian Oil shares climbed 7-10 percent, as a few broking houses upgraded the stocks to a buy, betting on a improvement in their profitability.
But others like Nomura remained unconvinced.
"Even as fuel price hikes are positive and reduce under-recoveries, we highlight that these may not change the bottom lines of oil PSUs, which would continue to be determined via ad-hoc subsidy sharing mechanism,” said a note by the brokerage.
"OMCs are compensated for their entire under-recoveries, and thus reduction in under-recoveries does not impact OMC’s profitability. Also, we think given weak fiscal situation, GoI might usurp all the benefits of any price increases, by reducing cash compensation to OMCs. Thus, subsidies payouts by upstream companies to OMCs may also not be reduced,” the note added.
Other brokerages like Kotak Securities and Ambit were more hopeful about the prospects for state-owned oil companies.
Overall, market breadth was weak with losers outnumbering gainers 1305:954. The BSE Midcap and Smallcap indices closed slightly lower; an indication that the market may find it tough to sustain recent gains.
While the recent moves on hiking railway fares and fuel prices has enthused the market, valuations are already reflecting much of the positives, say brokers. Unless macro-indicators start showing a clear recovery, investors would be wary of buying at these levels, they said.
In major earnings today, ITC and HDFC Bank reported strong growth numbers. Wipro’s third quarter numbers were slightly ahead of analyst estimates, but the mute revenue guidance for the March quarter prompted investors to book profits. Wipro shares ended around 8 percent lower. Overall, IT shares underperformed as analysts feel they are fairly priced for the time being after the recent run up.
Other than oil & gas shares, the key gainers were from the power and realty sectors. Metal shares started off on a firm note, but gave up much of the gains.
At 2.32 PM, the Sensex was up 35.42 points or 0.18% at 19999.45, and the Nifty up 12.45 points at 6051.65. due to strong buying in oil and gas shares. Traders said buying sentiments got a boost on government virtually deregulating diesel prices in a key economic reform measure yesterday.
The BSE benchmark Sensex is trading over 100 points up at a fresh two-year high of 20,069 at mid-session on strong buying in fundamentally strong stocks, particularly oil and gas shares. The key index was trading 108.01 up, or 0.54 per cent, at 20,069.13 at 1245 hrs.
The BSE Sensex rose 112.01 points or 0.56% at 20076.04 in the earl;y afternoon trade. At 12 PM, the Nifty was trading up 33.95 points at 6073.15, helped by oil marketing companies.
The Sensex gains 0.6 percent, while the Nifty is up 0.5 percent. Shares in state-run oil companies such as ONGC surged for a second consecutive session on Friday after the government's diesel price hike was seen reducing their subsidy burden.
Key indices hit fresh two-year highs early Friday, led by powerful rallies in state-owned oil companies. The government’s decision to allow oil marketing companies to tweak diesel has raised hopes that all state-owned oil companies will see their under-recoveries decline in the coming months.
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