BPCL, HPCL, IOCL outperform Nifty 50 in a month on lower crude prices, improving refining outlook

Stock Market Today: Bharat Petroleum Corporation (BPCL), Hindustan Petroleum Corporation (HPCL), and Indian Oil Corporation (IOCL) remain in a sweet spot as declining crude prices, coupled with expected improvement in refining outlook, bode well for their earnings.

The same is being reflected in HPCL, BPCL, and IOCL share prices that have risen 1-4.5% during the last one month, outperforming the benchmark Nifty-50 index that has corrected 2.75% during the period.

Softer Brent Prices

Brent crude prices, after rising to the highs of $81-82 a barrel by mid-January, have cooled down lately to sub-$70/barrel level.

Softer crude prices bode well for the marketing margins outlook of oil marketing companies, thereby supporting BPCL, HPCL and IOCL share prices. Marketing margins are the profit margins that oil marketing companies (OMCs) make. It is basically the difference between the selling price of refined fuels (such as gasoline/ or petrol and diesel) and the cost of raw materials (crude oil) plus the refining expenses.

Since OMCs are dependent on imports for a majority of their crude oil supplies, the lower crude oil prices also mean that they will see a reduction in working capital requirements.

Analyst Views

Sustained weakness in crude oil is likely to help maintain healthy marketing margins, more than making up for any refining weakness in the near term, said analysts at Antique Stock Broking in their post-Q3 results review. The sharp correction post correction had left OMCs' valuations very attractive, they added. The brokerage revised the target prices for HPCL, BPCL, and IOCL to ₹555, ₹420, and ₹170 per share, respectively.

For FY26, OMCs should see earnings resilience, said analysts at Antique Stock Broking, as they expect crude to be around $75 a barrel, with auto-fuel margins expected to stay above ₹4.6 a litre, and Singapore complex GRM (gross refining margins) seen recovering to above $5 per barrel.

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before making any investment decisions.