IOC, BPCL to Oil India: Which PSU oil stock to buy after Israel-Iran ceasefire? EXPLAINED
Israel-Iran war: Shares of India's state-owned oil marketing companies (OMCs) have experienced a significant rally in recent trading sessions. The rally picked up significant pace on June 24 as IOC, BPCL, and HPCL all opened with a gap-up.
This surge followed a steep overnight decline of over 7 per cent in global crude oil prices, driven by the announcement of a formal ceasefire between Israel and Iran. Brent crude, which had been trading above $75 per barrel amid heightened tensions, fell below $70, sparking optimism among oil-importing countries like India.
Indian Oil Corporation (IOC) share price has gained nearly 5.2 percent, moving from around ₹ 140 to ₹ 147. Bharat Petroleum Corporation Ltd (BPCL) has risen by about 6.6 percent, now trading close to ₹ 330, while Hindustan Petroleum Corporation Ltd (HPCL) has jumped around 11.5 percent, surging levels of ₹ 435 to ₹ 440.
According to market experts, the ceasefire brought some much-needed stability, leading to a decline in crude oil prices, which proved advantageous for downstream oil companies. These companies buy crude, process it into products like petrol and diesel, and sell them. When crude prices fall but retail fuel rates stay the same, their profit margins per litre increase.
' The drop in crude oil prices directly impacted their cost structure and earnings outlook. Falling crude also eases pressure on the Indian rupee and reduces the working capital burden on these companies, which often borrow heavily to finance oil imports. With their input costs lower and profit margins improving, investors responded swiftly, pushing these stocks higher in anticipation of better quarterly performance,' said Gaurav Goel, Founder & Director at Fynocrat Technologies.
Goel further said that with crude now trading below $70, the market expects stronger margins and profitability for these companies, and that optimism is being reflected in their rising share prices.
Meanwhile, Seema Srivastava Senior Research Analyst at SMC Global Securities, believes that companies like ONGC, Oil India, and BPCL have benefited from high crude oil prices and stable refining margins, driven by rising global energy demand and tight supply conditions.
' Robust Q4 FY25 results with double-digit profit growth and improved return ratios have further boosted investor confidence. Government reforms, including disinvestment plans and the National Monetization Pipeline, have enhanced sentiment. Oil PSUs now offer attractive valuations, strong free cash flows, and high dividend yields (5-7%), providing a safety cushion in volatile markets,' Srivasatava said.
Talking about oil companies stock, she recommended investors to 'buy' Oil India stock for long-term investment. ' Oil India stands out with strong upstream operations, zero net debt, and its Q4 FY25 PAT grew over 20% YoY, and the company offers a dividend yield of 7%+. With improving EPS, robust cash reserves, and government backing for exploration capex, Oil India would be good for long term investment perspective,' she added.
Disclaimer: This story is for educational purposes only. The views and recommendations above are those of individual analysts or broking companies, not Mint. We advise investors to check with certified experts before making any investment decisions.
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