MUMBAI: Despite a hike in retail fuel prices for petrol and diesel, stocks of oil marketing companies (OMCs) were deep in the red as market players said the price hike was not enough to offset daily losses these companies are incurring. Reports from Crisil and ICRA indicated that more price hikes are expected.
OMC Stocks Decline
Among the sector leaders, Indian Oil closed 4.1% down while BPCL was down 3.6%, HPCL lost 2.9% and Reliance Industries closed 1.9% lower. As a result, BSE's oil & gas index closed 1.8% lower.
Market Impact
The Sensex dropped 161 points to settle at 75,238, after swinging between gains and losses during the session.
Analyst Views
The decision to raise petrol and diesel prices marked a meaningful, if partial, step towards unwinding one of the more prolonged under-recovery cycles in recent memory, a report by Crisil Intelligence said. "At their peak (OMCs) were absorbing losses of Rs 23-30 per litre on petrol and diesel, translating to a combined daily loss of Rs 1,300-1,400 crore across petrol, diesel, and LPG."
Analysts believe that further price increases are necessary to fully cover the under-recoveries and restore profitability for OMCs. The current hike, while positive, is considered insufficient given the magnitude of losses incurred.
