Investors may want to bottom fish in stocks of oil marketing companies

Macro conditions could improve and valuations are already low

Margins for the oil refining and retailing sector have moved off their peaks, and the average integrated margins (refining plus marketing) for oil marketing companies (OMCs) have normalised. The ascent in crude oil prices, combined with static retail prices, has depressed marketing margins for diesel and petrol. However, the fall in marketing margins has been offset by increased gross refining margins (GRMs).

The current integrated margin is estimated at about Rs 7.4 per litre, which exceeds the average margins of Rs 5 per litre in the 2020-21 financial year (FY21) and Rs 4.5 per litre in FY22. The rise in