Oil Marketing Companies' Shares Decline Despite Fuel Price Hike
Why have HPCL, BPCL, IOC dipped despite fuel price hike? Analyst explains
Business StandardImage: Business Standard
Shares of major Indian oil marketing companies, including Hindustan Petroleum Corporation (HPCL), Bharat Petroleum Corporation (BPCL), and Indian Oil Corporation (IOCL), fell sharply on May 15, even after petrol and diesel prices were raised by around ₹3 per litre. Analysts attribute this decline to ongoing losses faced by these companies due to high global crude prices and insufficient domestic price adjustments.
- 01Shares of HPCL, BPCL, and IOCL fell despite a fuel price hike.
- 02Current price increase of ₹3 per litre is insufficient to cover losses.
- 03OMCs have been losing ₹20 per litre on petrol and ₹100 per litre on diesel.
- 04Analysts suggest the price hike is a temporary relief measure.
- 05Global crude oil prices remain volatile, impacting OMC profitability.
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On May 15, shares of major Indian oil marketing companies—Hindustan Petroleum Corporation (HPCL), Bharat Petroleum Corporation (BPCL), and Indian Oil Corporation (IOCL)—experienced significant declines despite a recent hike in petrol and diesel prices by approximately ₹3 per litre. HPCL shares fell by 2.33% to ₹368.75, BPCL by 1.4% to ₹291, and IOCL by over 1% to ₹138.64. This price adjustment comes as petrol and diesel rates in major cities like New Delhi, Kolkata, and Chennai have increased, with petrol now costing ₹97.77 and ₹90.67 per litre, respectively. Analysts, including G Chokkalingam from Equinomics Research, argue that the increase is insufficient to offset the substantial losses OMCs have been incurring—approximately ₹20 per litre on petrol and nearly ₹100 per litre on diesel due to rising global crude prices. Deven Choksey from DRChoksey FinServ echoed this sentiment, suggesting that the current price hike is more of a temporary measure to mitigate losses rather than a long-term solution. The volatility of global oil prices, which recently surged above $120 per barrel, continues to pose challenges for these companies, with Brent crude currently priced around $107 per barrel. As India adjusts fuel prices, the government faces the challenge of balancing public sentiment with the financial health of these corporations.
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The decline in OMC shares and insufficient fuel price adjustments may lead to increased financial strain on these companies, potentially affecting fuel availability and pricing for consumers in India.
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