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Sep 19, 2006, 12.05 PM IST | Source: Moneycontrol.com

Slippery no more: How to play the oil stocks now?

Oil stocks are back in the reckoning. Contrary to popular perception that the BSE Oil index has been an underperformer, this sectoral index has given the best returns over the week. It ranked as the fourth best performer on the monthly charts while emerging as a runner-up over the one-year period.

Oil stocks are back in the reckoning. Contrary to popular perception that the BSE Oil index has been an underperformer, this sectoral index has given the best returns over the week. It ranked as the fourth best performer on the monthly charts while emerging as a runner-up over the one-year period.

 

With a weekly gain of 4.28% the BSE Oil index has emerged as the best performer. Expectations of cooling crude prices, better refining and marketing margins coupled with a host of them being under owned by the investor community has helped this sectoral index move ahead of others, believe analysts.

 

While the oil prices have cooled down from USD 78 per barrel levels to around USD 70 thereby decreasing the burden of under recoveries, market is also expecting that the finance ministry would issue oil bonds worth Rs 14,150 crore to the oil companies to help stem their losses from under recoveries.

 

On cue, the finance minister recently tabled a paper on supplementary grants providing for issue of Rs 14,150 crore of oil bonds to oil PSUs. This could perhaps help them post profits or at least minimize their losses during the second quarter of this fiscal.

 

Index

1-Week Gain/Loss (%)

1-Month

Gain

(%)

1-Year

Gain

(%)

BSE Oil

4.28

12.28

59.71

BSE PSU

3.15

11.75

20.04

BSE Metal

2.35

7.73

35.30

BSE Tech

2.09

11.24

44.35

BSE Sensex

1.78

9.61

53.34

BSE IT Sector

1.53

10.31

49.37

BSE Cap Goods

1.40

13.01

78.37

BSE Cons Dur

1.22

15.10

28.73

BSE FMCG

1.02

5.51

47.95

BSE Auto

0.41

12.47

56.85

BSE Healthcare

-0.01

9.46

18.47

Sectoral performance over a week, month & a year

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

However, the environment of under recoveries due to sale of oil at prices lower than the market due to the government interference seem to have bogged down the PSU oil stocks like BPCL and HPCL over the past week. While BPCL gained only a meager 0.10% over the last week, HPCL was also an under performer with a gain of a mere 2%.

 

The performance chart comparing the returns from individual companies over the past year clearly shows that PSU oil stocks were major underperformers and oil and allied companies in the private sector like Aban Loyd Chiles , Essar Oil , and Reliance were the major gainers.

 

This shall no more be the case if one believes in what Sumeet Rohra of Antique Stock broking has to say. He believes that the triad of BPCL, HPCL and IOC will see its share price double from current levels in the next 12 months. The downside to these stocks, on the other hand, is a mere 8-10% is his contention. Rohra and his company hold long positions in all the three oil majors.

 

Continued on page 2

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