HPCL, BPCL, Indian Oil shares set for their worst week in at least two years

Shares of Hindustan Petroleum (HPCL), Bharat Petroleum (BPCL) and Indian Oil (IOC) are trading with losses of over 6% each after the price cut of ₹2 per litre on petrol and diesel took effect earlier on Friday.

HPCL shares are down over 8% for the week so far and are poised to report their worst weekly performance since April 2022.

BPCL’s shares have also declined over 8% this week and are also set for their worst weekly performance since June 2022.

Indian Oil’s shares have declined in five out of the last six trading sessions. For the week, it is down over 10%, making it the worst week the stock has had since June 2022.

Indian Oil Chairman SM Vaidya, in response to a question from CNBC-TV18 said that the fuel price cut will not have much have an impact on the company’s bottom line. “To a very large extent, we do not see price cuts having a bottom line impact,” he said.

“OMC’s have been on a declining trend for almost a month now with IOC, BPCL, HPCL down by almost 20% from their respective life high level. The most recent incidence of a weekly closing below the 5-WEMA support levels was on October 27, 2023,” said Sacchitanand Uttekar of Tradebulls.

“Since their trend strength indicators are supporting additional weakness & fresh short build up has been piling up. It is best to hold off on building any anticipatory long positions on a decline until they form a base back around their 20 WEMA support base, which is further lower by 10-12% from the current juncture,” he added.

Morgan Stanley believes that this much-anticipated fuel price cut will finally remove a key overhang on these stocks.

HPCL, BPCL and Indian Oil were recently downgraded by CLSA, who has reiterated its “sell” recommendation on all the three companies.

While the cut would hurt near-term sentiment, according to Citi, it views any meaningful pullback as a buying opportunity in these stocks for the medium-term.

‘From an earnings standpoint the impact is not as material as one would think, which is, I think, a positive in the sense that the price cut is way more reasonable. One should expect a little bit of negative reaction without a doubt, specifically on companies with dominance of marketing sales like, HPCL. But I would look at this opportunity to sort of enter the stock and build positions because we believe that the business case doesn’t get hampered as a result of these price cuts,” said Probal Sen of ICICI Securities.