Why OMC stocks are falling despite fuel price hike
What's the story
Shares of state-run oil marketing companies (OMCs) such as Hindustan Petroleum Corporation (HPCL), Bharat Petroleum Corporation (BPCL), and Indian Oil Corporation (IOCL) have witnessed a decline of up to 3% today. The drop comes after the government announced an increase in petrol and diesel prices for the first time in four years. In Delhi, both petrol and diesel prices were hiked by ₹3 per liter each.
Market impact
BPCL, HPCL shares fall
The recent fuel price hike has had a direct impact on the shares of OMCs. BPCL's share price fell by 2% to ₹289 on the NSE, while HPCL's share price fell by 3% to its day's low of ₹376. City gas distribution companies such as Mahanagar Gas, Indraprashta Gas and Gujarat also witnessed a marginal decline in their stock prices amid hike in CNG prices by ₹2.
Regional differences
Fuel price hike varies across India
The fuel price hike is not uniform across India. It varies from state to state depending on local VAT rates. For instance, in Kolkata, petrol prices increased by ₹3.29 to ₹108.74 per liter, the highest among four metro cities. In Mumbai and Chennai too, petrol prices rose by ₹3.14 and ₹2.83, respectively, after the hike was implemented.
Financial strain
OMCs under financial pressure amid global energy crisis
The ongoing global energy crisis has put immense financial pressure on OMCs. The price hike is expected to provide some relief as global crude oil prices continue to remain high due to the West Asia conflict and the closure of the Strait of Hormuz. Earlier this month, oil prices crossed the $100-per-barrel mark after conflict erupted in West Asia.