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Oil, gas stocks hit roof on positive policy expectations

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Atul Sathe Mumbai
Oil and gas stocks seem to have finally joined the rally on the bourses. After lagging behind for a while, these stocks have caught fire over the past few days with most stocks ending 5-10 per cent higher on Tuesday.
 
Fund buying at higher price levels triggered a rally in these stocks, dealers said. Leading broking firm CLSA had come out with a buy report on oil stocks last month, which partly helped lift the sentiment in these stocks. Over one month, while the Sensex gained by 9.84 per cent, BSE Oil & Gas index firmed up by 14.01 per cent.
 
The prominent gainers on Tuesday included refining companies like MRPL (up 10.7 per cent), Hindustan Petroleum (up 7.57 per cent) Kochi Refineries (up 5.77 per cent) and Bharat Petroleum (up 5.08 per cent).
 
Indian Oil inched up by 0.87 per cent, while ONGC declined by 1.96 per cent. Most of these stocks have appreciated considerably over the past one week to one month period.
 
Amitabh Chakraborty, head-research Brics PCG said, "Post elections, the recommendations of the Rangarajan committee may get accepted. This would benefit the oil marketing companies. Thus, one can see value picking happening among the stocks in this sector at the moment."
 
Dealers felt that although there are no immediate positive triggers for the oil sector, especially with crude prices showing no signs of retracing (about $ 66 at present), the sector holds potential to outperform over a two year time horizon. Moreover, the valuations of most stocks in the sector are cheaper as compared to those in other sectors.
 
Analysts feel that the Rangarajan committee report, if accepted, would set a roadmap to tackle the under-recovery of oil subsidies and augurs well for the downstream oil companies.
 
The stock prices are expected to remain firm, provided the report is accepted soon after the elections.
 
Chakravarty added, "The oil & gas sector had underperformed the market and at such levels, anything that had underperformed comes into favour. However, the firm trend in the sector may continue till the outcome of the committee recommendations."
 
Dealers observe that refinery scrips had underpeformed the market in the past three years due to restrictions on selling price.
 
Other major gainers in the sector on Tuesday were Shiv Vani Oil (up 16.11 per cent), BOC India (up 11.27 per cent), Dolphin Offshore (up 9.93 per cent) and Hindustan Oil Exploration (up 6.51 per cent).
 
The recent surge in BOC India is attributed to the open offer for the company's parent - BOC Group PLC - from Linde AG, Germany. Dolphin Offshore moved up on the back of a deal with Ukrainian firm - Nafto Gaz - to jointly bid for projects in India and the Gulf.

 
 

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First Published: Apr 05 2006 | 12:00 AM IST

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