BPCL, HPCL, IOC stocks slump over 6% after Centre cuts petrol, diesel rates

Stocks of state-run oil marketing companies (OMCs) plunged by over 6% during intra-day trading, day after the central government announced a ₹2 per litre cut in the prices of petrol and diesel.

At 11:36 am, Bharat Petroleum Corporation Ltd (BPCL) was down 6.41% at ₹569.70 on the NSE, and Indian Oil Corporation (IOC) was trading at ₹157 on the exchange, lower by 7.84% as against the previous day’s close.

The fall was the sharpest for Hindustan Petroleum Corporation Ltd (HPCL), which was down 9% at ₹455.05 on the NSE at 11:36 AM.

The price cut, announced by the oil ministry on Thursday, March 14, is the first since April 2022. The new rates became effective post-midnight.

According to analysts, OMC stocks may react negatively to the price cuts in the near-term, as the market would also be weighing the increase in Brent crude prices to a five-month high of $85 per barrel.

The impact of the price cuts would be borne by the OMCs, as the government has so far not indicated that it would slash excise duties, analysts said.

The reduction in blended gross marketing margin will be viewed negatively by the Street, as a fuel rate cut was not anticipated in the backdrop of a fiscally prudent Union Budget, they added.

Notably, in the quarter ended December 2023, OMCs had reported steady financial results. BPCL’s net profit climbed by 82% year-on-year to ₹3,181.42 crore; IOC reported a net profit of ₹8,063.39 crore, exponentially higher as against ₹448.01 crore reported in the year-ago period; and HPCL’s profit after tax tripled year-on-year to ₹529 crore.