Refinery stocks flare up

The oil and gas stocks were back in the limelight on Wednesday after a brief lull as the BSE Oil and Gas Index emerged as the top gainer among the sectoral indices.

The index shot up by 3.45 per cent compared with the benchmark 30-share Sensex, which rose by 1.70 per cent on Wednesday.

Essar Oil was the top gainer among the private sector refinery stocks, registering a 7 per cent gain at Rs 301.30. Reliance Industries advanced by 3.90 per cent to Rs 2,896, while Reliance Petroleum moved up by 3.9 per cent to Rs 223.85.

Hindustan Petroleum, the top gainer among the PSU refineries, jumped by 6.78 per cent to Rs 340.10. Indian Oil Corporation gained 6.55 per cent to Rs 692 and Bharat Petroleum Corporation rose 5.46 per cent to Rs 475.45.

Analysts attributed Wednesday's rise in the oil stocks to the buzz that government would raise oil prices. The buzz, along with the fact that many of the state-run refinery stocks are undervalued, set the refinery stocks on fire.

Analysts are of the view that most of the state-run refineries are reeling under a severe pressure of the rising global oil prices. Crude oil prices are hovering above $90.

"The Congress-led UPA government was reluctant to increase petrol and diesel prices on account of the Gujarat elections as it was facing stiff opposition due to high food and other commodity prices," said a mutual fund manager.

"Expectation that the government will hike retail petrol and diesel prices in the next two weeks since the Gujarat elections are now behind us is driving up prices of these stocks. The impending Oil India IPO is also a factor to reckon with. The maximum upside in these stocks could be 5 to 6 per cent," said Ambareesh Baliga, vice-president, Karvy Stock broking.