RIL fuels oil and gas index

Reliance Industries (RIL) and the BSE oil and gas index continued to sizzle on hopes of higher gross refining margins (GRMs) and better industry prospects.

The Singapore gross refining margins (GRMs) have been improving over the past few months and the ongoing maintenance shut-down in US refineries has further triggered the growth.

Good expectations from the upcoming Reliance Petroleum (RPL) stock, on listing, also fuelled the rally, which took the sectoral index up by 3.04 per cent to 6235.61 (it had touched a high of 6280.91 during the day) compared with 0.83 per cent growth in the benchmark Sensex.

Over the past one month, the oil and gas index and the Sensex have appreciated by 24.25 per cent and 7.53 per cent, respectively.

Motilal Oswal Securities VP-equity strategy, Manish Sonthalia said, "The Singapore GRMs have touched a high of $ 9.7 per barrel from $8.5 a barrel in April and $6.2 a barrel in March this year. Although they may see some correction after the US refineries start functioning again, we are positive on refining margins for another 24-36 months."

RIL has been a major beneficiary of high refining margins. Unlike state-run companies such as Hindustan Petroleum (HPCL) and Bharat Petroleum (BPCL), which depend a lot on marketing margins, for RIL, refining margins are more important as it still does not have a major presence in marketing petroleum products, according to Sonthalia. Other standalone refineries such as MRPL, Chennai Petroleum and Bongaigaon Refinery have also benefited for the same reasons.