Morgan Stanley said as transport fuel is implying $80 a barrel oil, the subsidy risk is diminished but not vanished.
Share prices of oil marketing companies (OMC) corrected 1.5-4 percent intraday on Monday after global brokerage house slashed target price on rising crude oil prices.
Bharat Petroleum Corporation fell 3 percent, Hindustan Petroleum Corporation lost 4 percent and Indian Oil Corporation declined 1.5 percent.
Crude oil is the raw material for oil marketing companies as any rise in oil prices is always have major impact on their margin.
Government allowed these companies to pass on cost to consumers after deregulation of petrol & disel prices but if Brent crude futures, the international benchmark for oil prices, rise sharply then there could be some restriction for these companies from government for not raising retail prices.
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Brent crude oil prices rose to $83.27 a barrel, the highest levels seen since November 2014 ahead of US sanctions against Iran, the third-largest producer in the Organization of the Petroleum Exporting Countries (OPEC), that kick in next month.
Morgan Stanley said as transport fuel is implying $80 a barrel oil, the subsidy risk is diminished but not vanished.
The research house has Overweight call on all three oil retailers IOC, BPCL and HPCL but slashed target price to Rs 219 from Rs 260, to Rs 450 from Rs 574 and to Rs 309 from Rs 451 per share respectively.
Refining upcycle is the key upside risk, it feels.
At 11:56 hours IST, the stock price of Bharat Petroleum Corporation was quoting at Rs 362, down Rs 11.70, or 3.13 percent while Indian Oil Corporation was down 1.44 percent at Rs 151 and Hindustan Petroleum Corporation was down 4.09 percent at Rs 240.50 on the BSE.