OMC, tyre, paint, among other stocks in focus on March 15 after govt lifts 2-year long freeze on petrol, diesel prices

With effect from Friday, March 15, prices of petrol and diesel will be reduced by ₹2 per litre across all states. The fuel price reduction comes one week after cooking gas or LPG (liquified petroleum gas) prices were cut by ₹100 per cylinder and for the free connection cylinders under the Ujjwala scheme.

Also Read: India’s demand for diesel, petrol to increase further this year: S&P Global

Stocks to watch on March 15 after fuel price reduction

State-run oil refiners such as Indian Oil Corp (IOC), Bharat Petroleum Corp Ltd (BPCL), and Hindustan Petroleum Corp Ltd (HPCL) and oil explorers such as Oil and Natural Gas Corp (ONGC), Oil India, and others may witness a slide in their respective stocks as the reduction in retail rates passed on to consumers may hurt the refining margins and inventories of the companies.

Moreover, international crude oil prices rose to a five-month high-mark on Thursday as the International Energy Agency (IEA) raised its view on oil demand growth this year, predicting a tighter market in 2024.

Brent crude oil futures for May rose $1.21, or 1.4 per cent, to $85.26 per barrel, after touching an intra-day high of $85.53, its highest since early November. This could further result in selling pressure on OMC stocks as high crude oil prices is a negative for OMCs as they purchase raw crude.

Similarly, aviation stocks such as SpiceJet, InterGlobe Aviation, and others may respond to a cut in jet fuel prices, if a further reduction is announced. Lower crude oil prices can help in higher load factor for airlines, which may boost their stock prices. 

Tyre, logistics, fast-moving consumer goods (FMCG) and paint stocks such as Castrol India, Dabur, MRF, Hindustan Unilever Ltd (HUL), Berger Paints, JK Tyre & Industries, Asian Paints, CEAT, among others may also respond to the reduction in fuel prices. Crude oil derivate is used as inputs for manufacturing paints, lubricants, and rubber.

Petrol, diesel rates from March 15

In the national capital Delhi, the retail price of a litre of petrol and diesel will both fall by ₹2 to ₹94.72 and ₹87.62 respectively, the oil and petroleum ministry said in a post on social media platform X.

In Mumbai, petrol will cost ₹104.21 per litre from Friday, ₹103.94 in Kolkata and ₹100.75 in Chennai. A litre of diesel will be priced at ₹92.15 in Mumbai, ₹90.76 in Kolkata and ₹92.34 in Chennai. The price reductions will vary from state to state due to value-added tax (VAT).

The new prices will be effective from 6 am on Friday, the ministry said, adding the lower prices would also help control inflation. “Reduction in petrol and diesel prices will boost consumer spending and reduce operating costs for over 5.8 million heavy goods vehicles running on diesel, 60 million cars and 270 million two-wheelers,” the ministry said.

Also Read: OMC stocks shed 4-6% as markets crash 1%; brokerage suggests ‘sell’ on IOC, HPCL: Why are prices discounting?

The petroleum ministry added that apart from the above two, lower petrol and diesel prices will benefit the citizens through the following:
-More disposable income
-Boost for tourism and travel industries
-Reduced expenses for businesses dependent on transportation
-Enhanced profitability for logistics, manufacturing, and retail sectors
-Reduced outgo for farmers on tractor operations and pump sets.

Petrol, diesel price trend

The government had passed on the responsibility of revising the retail prices of petrol and diesel to the three state-run OMCs almost a decade ago. Up until today, the OMCs froze petrol and diesel prices for the longest duration in the last two decades. Typically, these companies revise the fuel prices by taking into account the international crude oil prices and the rupee-dollar exchange rates.

Crude oil prices soared to record high levels in 2022, climbing to a 14-year peak of nearly $140 per barrel in March 2022 after Russia invaded Ukraine, before sliding on weaker demand from top importer China and worries of an economic contraction. 

Also Read: From high inflation to import bill – the domino effect of rising crude oil prices on Indian economy

India is a net importer of crude oil which fulfills as much as 85 per cent of its energy needs through imports. So, the spike in crude prices meant adding to already elevated levels of inflation and derailing the economic recovery from the pandemic.

OMCs had stopped the daily price revision in early November 2021 when rates across the country hit an all-time high, prompting the government to roll back a part of the excise duty hike it had implemented during the pandemic to take advantage of low oil prices.

A record 137-day freeze on fuel prices continued in 2022 until the Russia-Ukraine war-led spike in crude oil prices prompted a ₹10 per litre hike in petrol and diesel prices from mid-March 2022. That followed the current price freeze, which began on April 7, 2022, and will end with a revision in rates effective Friday. 

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Published: 14 Mar 2024, 10:31 PM IST