Shares of oil marketing companies (OMCs) — Hindustan Petroleum Corporation, Bharat Petroleum Corporation and Indian Oil Corporation — surged up to 4% on Friday after the government reduced the special
additional excise duty on petrol to Rs 3 per litre and scrapped it entirely on diesel, according to an official order issued on Thursday.
Volatile crude backdrop
The rally comes amid heightened volatility in fuel prices, driven by a sharp spike in global crude oil amid escalating tensions in the Middle East. Oil prices have remained elevated above the crucial $100 per barrel mark, raising concerns over inflation and marketing margins for OMCs.
Nayara price hike adds to pressure
The government’s move follows a recent price hike by Nayara Energy, which increased petrol prices by Rs 5 per litre and diesel by Rs 3 per litre. The company, majority-owned by Rosneft, operates over 7,000 fuel stations across India.
Dealers have expressed concerns over the hike, warning of potential demand disruption and even signalling protests. Some have also indicated that fuel supplies were curtailed in recent days, adding to market unease.
Oil prices ease, offering relief
Global crude prices cooled slightly in early Friday trade, offering some respite to OMC stocks that have been under pressure. Brent crude fell over 1% to around $106.7 per barrel, while WTI crude also declined more than 1% to about $93 per barrel.
This easing in oil prices, combined with the excise duty cut, is seen as a near-term positive for the sector.
Margin concerns still linger
Despite Friday’s rally, OMC stocks have seen sharp corrections in recent sessions as rising crude prices sparked concerns over marketing margins. Brokerages have turned cautious, factoring in sustained cost pressures.
Ambit Institutional Equities recently downgraded HPCL, BPCL and IOC to ‘sell’, slashing target prices by 45% to 57%. The brokerage expects Brent crude to stabilise around $80 per barrel over the medium term, citing infrastructure damage, geopolitical risk premiums and inventory restocking.
Limited policy support ahead
Ambit also flagged constraints on government support, pointing to fiscal pressures and political realities following the 2024 Lok Sabha elections. It suggested that the government may have limited room to extend significant relief to state-run OMCs.
The brokerage, which had earlier maintained a bullish stance during the strong rally between mid-2022 and early-2026, now expects a reversal in trend over FY26–FY28.
It added that any short-term correction in crude prices or modest retail price hikes of Rs 1–Rs 2 per litre could act as exit opportunities for investors in OMC stocks.
