State-run oil companies ONGC and BPCL have broken out of multi-year price range and are poised for strong gains, says Laurence Balanco, technical analyst with CLSA.
May's breakout is a major bullish event for ONGC, which has ended the stock's three-year ranging price action, Mr Balanco says. CLSA has a price target of Rs 500-511 on ONGC.
According to Mr Balanco, BPCL chart set-up is similar to ONGC and the stock has broken out of a multi-month consolidation pattern. The breakout supports ultimate upside target of Rs 700-708, CLSA says.
Fundamentally too, analysts are bullish on state-run explorers and some refiners. According to Nomura, a strong, stable and reformist new government has brightened the outlook for oil PSUs, which have done remarkably well over the last six months.
Oil marketing companies are up 67-102 per cent as against a 17 per cent rise in the Sensex as of May 22, Nomura says.
The Narendra Modi-led government's decision to continue with diesel price hikes has given a boost to these stocks.
Diesel losses are less than Rs 4/litre and will likely vanish by end by this fiscal.
As of 12.12 p.m., ONGC traded flat at Rs 416.70, while BPCL was up 0.3 per cent at Rs 575.95.