Shares of state-run oil marketing companies traded positively on Wednesday, tracking improved sentiment amid geopolitical tensions.
Indian Oil Corporation (IOC) rose 1 per cent to ₹148.70 on the National Stock Exchange compared with its previous close of ₹146.68. Bharat Petroleum Corporation (BPCL) advanced 2.4 per cent to ₹307.45 from ₹300.05, while Hindustan Petroleum Corporation (HPCL) climbed 2.6 per cent to ₹355.45 against its previous close of ₹346.20.
Global brokerage JPMorgan said oil marketing company stocks are likely to rebound further following the announcement of a ceasefire, as easing tensions could stabilise crude supply dynamics and improve investor sentiment toward the sector.
Kotak reiterates sell on OMCs
However, Kotak Institutional Equities maintained a cautious stance, reiterating its sell rating on all major OMCs, warning that gains accumulated during the low crude price cycle could erode quickly.
The brokerage said OMCs face multiple cost pressures, including firmer global crude benchmarks, elevated crude premiums, higher freight rates and the impact of a weak rupee. It noted that even strong product cracks may not fully offset pressures as retail fuel prices remain frozen. Emergency LPG imports are also expected to be costly, while government compensation tends to be partial and delayed.
Kotak added that public sensitivity around LPG availability makes near-term petrol and diesel price hikes difficult. Since OMCs did not reduce retail prices during the low oil price phase, they built earnings buffers over the past few years. With crude prices now firming up, this cushion could diminish rapidly.
Reflecting the challenging outlook, the brokerage sharply cut its FY2027 earnings estimates, reducing EBITDA projections by 45–47 per cent for BPCL and HPCL; and by 28 per cent for IOC. It also lowered FY2028 EBITDA estimates and warned that any further surge in crude prices could push OMCs into losses. Kotak maintained sell ratings on IOC, BPCL and HPCL with revised fair values of ₹100, ₹240 and ₹235, respectively.
JPMorgan sees volatility in oil & gas earnings
JPMorgan said sharp swings in crude prices and disruptions in physical commodity markets could trigger near-term earnings volatility across the oil and gas space, making it difficult for investors to take large directional bets.
The brokerage expects FY27 oil prices to remain higher than earlier forecasts under most geopolitical scenarios. It added that sustained strength in crude prices could lead to positive earnings revisions for upstream and gas-focused companies such as ONGC, GAIL and Reliance Industries over the medium term. It also noted that GAIL has underperformed the broader Nifty 50 since the start of the conflict, while ONGC and Reliance have outperformed the market.
Oil & gas index flat
Reflecting the mixed trend, the Nifty Oil & Gas index traded flat at 11,177.20 around 12.29 pm after rising about 1 per cent earlier in the session from its previous close of 11,127.25. Gains were led by GAIL, Petronet LNG, Indraprastha Gas, BPCL and IOC.