Oil stocks soar as retailers allowed to hike diesel price

Shares in oil market companies - HPCL, IOC and BPCL - saw strong buying interest after petroleum minister M Veerappa Moily announced a go-ahead for oil marketing companies to raise diesel prices. State-run refiners currently sell diesel -- the most consumed fuel in India --  at a loss of Rs 9.28 per litre.

"For now, there's no revision in the prices of diesel. But the companies are authorized to make price revisions from time to time," Mr Moily said today.

A hike in diesel prices will bring down the government's fuel subsidy, which is estimated at an unprecedented Rs 1,60,000 crore in this fiscal year on account of selling diesel, cooking gas (LPG) and kerosene below their market price.

There was some confusion as the minister announced a partial de-control in diesel prices initially, but the oil secretary clarified that diesel prices were not being de-regulated. Shares in oil retailers, which had jumped as much as 7 per cent, pared gains after oil secretary's clarification.

"We should not assume deregulation of Rs 9 overnight... That will take the entire year," market analyst Sushil Choksey said.

HPCL shares were up 5 per cent at Rs 341.60 while IOC jumped 4 per cent to Rs 317.40 at 1.49 p.m. BPCL shares traded 3 per cent higher at Rs 392.25.

Upstream oil firms such as ONGC, that have to contribute partly to the subsidy bill, traded 3.6 per cent higher at Rs 314.30.

The BSE Sensex and Nifty also traded at the day's high post the announcement.