Shares of oil companies rose sharply on Friday on expectations that the Government will shortly take a decision on gas pricing and also bring clarity to the subsidy mechanism for domestic LPG and kerosene.
Public sector hydrocarbons producer ONGC’s stocks rose 10.6 per cent to ₹464 on the BSE; according to Bloomberg data, this is the biggest gain in five years.
If the gas prices are revised, the biggest beneficiary will be ONGC because of the sheer volumes it produces. Besides, clarity on the subsidy will benefit the company, which has to shoulder some of the losses incurred by public sector oil retailers.
GAIL (India), which is the key player in gas transmission and marketing business, was also a big gainer in Sensex. The stock rose 7.5 per cent to ₹420.35.
The Petroleum & Natural Gas Ministry expects clarity on pricing and subsidy issues early next week after it makes a presentation to the PMO.
The Ministry had informed producers such as Reliance Industries (RIL) that the earliest possible date for hiking the gas price is July.
The Ministry is required to notify the price for the July quarter within the first fortnight of June. It had earlier deferred the price hike, which was to come into effect from April 1.
The RIL scrip touched a high of ₹1,132.8 intra-day, but gave up some of the gains to end at ₹1,119.85, which was still 2.97 per cent higher than Thursday’s close.
These three stocks were the top gainers on Friday in the BSE S&P Sensex, which rose 1.5 per cent (or 376.95 points) at 25,396.46.
Oil India, which is not part of the Sensex, closed at ₹595.85, after hitting an intra-day high of ₹611.70.
Vinod Nair, Head-Fundamental Research, Geojit BNP Paribas Financial Services, said the segment led the strong market rally on Friday. “But we are in a new unknown territory and given the momentum, it has no upper ceiling. Till the Budget outcome is clear or till we have a confirmation from the Government about the likely course of action, this ‘hope rally’ will continue,” Nair added.
A recent Barclays report said oil retailers have been relentless in raising diesel prices since January 2013 with the latest hike driving down under-recoveries to a near four-year low.