Indian Oil, BPCL, HPCL stocks get price target upgrades from Morgan Stanley; global, domestic tailwinds eyed

HPCL stock is Morgan Stanley’s top pick as the company exits an investment cycle.

Trade

• Watchlist
• Portfolio
• Message
• Set Alert

 

 

Choose Stock Exchange: BSE LIVE NSE LIVE

26 Aug, 2025 12:21

Volume

Todays L/H

More

×

Morgan Stanley has raised its target prices on India's PSU oil marketing companies (OMCs) -- Indian Oil Corporation (IOC), Bharat Petroleum Corporation Ltd (BPCL) and Hindustan Petroleum Corporation Ltd (HPCL) -- driven by expectations of global and domestic tailwinds. The brokerage has an ‘Overweight’ rating on all three PSU OMC stocks, citing factors including an oversupplied global oil market, rising gas market share in China, and strong domestic fuel demand.

Morgan Stanley has raised Indian Oil Corp share price to Rs 205 per share; this implies an upside of 16 percent from the stock’s previous close. The brokerage has raised BPCL share price target to Rs 410 per share (15 percent upside); and that for HPCL stock to Rs 506 per share (22 percent upside).

Further, HPCL share is Morgan Stanley’s top pick as the company exits an investment cycle; this is followed by BPCL. The brokerage expects the next leg of outperformance to come from a combination of global factors, such as the oversupplied oil markets and gas taking market share from diesel in China, along with domestic tailwinds like strong fuel demand and improving free cash flow (FCF).

Also read | India's energy stocks deliver in 2024 as investors seek earnings growth

Recent rally in oil stocks

Shares of downstream oil refiners, including OMCs, have gained significant investor interest in 2024, benefitting from a range of global cues such as geopolitical tensions in the Middle East and expectations of a rate cut by the US Federal Reserve. The Nifty Energy Index has risen by 31 percent this year.

All three PSU OMC stocks have doubled in the last one year -- Indian Oil Corp is up 95 percent; BPCL is up 103 percent; and HPCL is up 142 percent -- outperforming the BSE Sensex, which has risen by 26 percent during the same period.

Driving factors for outperformance

Morgan Stanley's optimism comes amid recent market trends, as oil and gas stocks have been buoyed by expectations of US interest rate cuts, which could drive higher business activity and fuel demand. Concerns over a broader Middle East conflict, triggered by military clashes between Israel and Hezbollah in Lebanon, and potential supply disruptions due to production shutdowns in Libya, have also driven investor interest. Furthermore, Indian energy stocks have attracted global investors due to their attractive dividend yields.

Other brokerages bullish too

Morgan Stanley's view follows similar bullish sentiments from other brokerages. A month ago, UBS upgraded Indian Oil to a 'buy' rating, increasing its price target to Rs 210. UBS also raised its target for HPCL to Rs 445, and for BPCL to Rs 400. UBS analysts expect the oil market to soften after Q3 2024, which could shift OMCs' profit focus from refining to marketing.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.