The BSE Oil & Gas Index is under significant selling pressure, falling for fifth consecutive day, tracking the broad-based market fall on February 28. The selloff is being attributed to stagnant crude prices, reducing refining margins, and high LPG subsidy burden, dragging down the index.
At 1:30 pm, the value on the index stood at 22,609 points which was reflective of a 2.53 percent decline.
Oil India shares are trading at a decline of over 6 percent. As of 1:50 pm, the shares stood at Rs 343.75 marking a 6.05 percent fall. ONGC, GAIL and Bharat Petroleum Corp are all trading at an approximate decline of 3 percent. As of 1:50 pm, ONGC shares were 2.88 percent down while GAIL shares stood 3.11 percent lower and BPCL was at a decline of 3.25 percent. On the contrary, Reliance Industries is trading marginally higher, at 0.19 percent.
All 13 major sectoral indices are trading deep in the red, with broader market indices sliding over 2 percent each. By midday, both Sensex and Nifty had fallen above 1 percent, reflecting broad-based selling amid global trade war threats and critical focus on the slowing U.S. economy.
A note by Motilal Oswal has said that in the last seven months, valuations of oil and gas shares have corrected sharply, with the average one-year forward P/E for (excluding RIL) at 7.7x, down 34 percent as compared to June 2024. However, the valuations of oil and gas stocks are still far from their 10-year lows, and are unlikely to test them, the note added.
MOSL note said crude oil prices, even under the most pessimistic forecasts for 2025 and 2026, are expected to stay above $60 per barrel, providing some stability. Additionally, the gross marketing margins on petrol and diesel are projected at Rs 3.3 per litre, but actual margins have remained resilient and could even exceed these estimates. Much of the negative impact from the government’s changes to domestic gas pricing for city gas distributors has already been absorbed, limiting further downside risks for the sector, says Motilal Oswal.
Trump administration’s reciprocal tariffs too are looming over the sector, with a Kotak Institutional Equities' note saying India may look to increase energy imports from the US to mitigate this impact, likely at higher prices. India’s LNG imports from the US have increased due to arbitrage against oil-linked prices, the Kotak report said. Hence, as US pushes for reciprocal tariffs, India is likely to buy more US crude oil.
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