3 reasons why IOC surged 15% in 2 days despite Q1 profit falling to half

By: |
Published: August 4, 2017 5:13:50 PM

Shares of Indian Oil Corporation today rose as much as 15% from the last two trading sessions after most of the oil marketing companies gained after the strong earnings of HPCL and Bharat-22 ETF launch.

Today, IOC surpassed ICICI Bank and Kotak Mahindra Bank in terms of market cap. (Image: BSE)

Shares of Indian Oil Corporation today rose as much as 15% from the last two trading sessions after most of the oil marketing companies gained after the strong earnings of HPCL and Bharat-22 ETF launch. On Thursday, IOC also reported a better-than-expected first-quarter profit. The benchmark indices for central public sector enterprise, energy and public sector enterprise also gained led by the upsurge in Indian Oil Corporation (IOC) and Hindustan Petroleum Corporation Ltd (HPCL) shares.

Nifty PSE rose 2.96% to 4,116.6 points, Nifty CPSE advanced 2.46% to 2,458.1 points and Nifty Energy gained 0.94% to 13,203.65 points. Shares of HPCL today spiked 11.39% to a 52-week high of Rs 442 while IOC gained 10.26% to the day’s high of Rs 426.8. Indian Oil Company is now the 11th most valuable company listed on Indian bourses. Today, IOC surpassed ICICI Bank and Kotak Mahindra Bank in terms of market cap. It has crossed Rs 2,00,000 crore mark, now stood at Rs 2,02,879.71 crore. Shares of IOC were up for 3 out of last 4 trading sessions.

Bharat-22 ETF launch:

Finance Minister Arun Jaitley today announced the creation of a new exchange-traded fund (ETF) — Bharat-22 — that will comprise shares of 22 central public sector enterprises, state-owned banks and some holding in SUUTI. Bharat-22 will cover six sectors featuring four banking stocks — SBI, Axis Bank, Bank of Baroda and Indian Bank — other than CPSEs such as NALCO, ONGC, IOC, BPCL and Coal India. Besides, there will be nine other PSUs as well as REC and PFC. SUUTI’s holding in ITC has also been included. 90% of the equities included are traded in futures.

India’s divestment Secretary, Neeraj  Kumar Gupta today said that he expects Bharat-22 ETF which is well-diversified to perform better than earlier ETFs. ICICI Prudential is the fund manager. The shares of IOC, BPCL, NALCO to have 4.4% weight each in the Bharat-22 Index. While the highest weight has been assigned to ITC at 15.2%. Other shares included in Bharat-22 ETF are SBI (8.6%), Power Grid (7.9%), Axis Bank (7.7%), NTPC (6.7%), ONGC (5.3%), BEL (3.3%), Coal India (3.3%), EIL (1.5%), Bank of Baroda (1.4%), REC (1.3%), NHPC (1.2%), Power Finance (1%), NBCC (0.6%), SJVN (0.2%), NLC India (0.3%), Indian Bank (0.2%).

Jaitley also said that past experiments with CPSE-ETF have proven to be successful and we have raised ₹9,300 crore from divestment in FY 2018 so far. And the government have fairly stiff divestment target of Rs 72,500 crore for the FY 2018, globally the ETF assets have shown a significant increase, he added.

Hindustan Petroleum Q1 earnings:

Shares of HPCL today rose as much as 11.39% to a 52-week high of Rs 442 after State-owned oil refiner on Friday posted better-than-expected Q1 earnings. However, the oil marketing company reported a decline of 56% in the net profit for the April-June of FY 2018. The net profit for the quarter ended 30 June stood at Rs 9.25 billion, from Rs 20.98 billion a year earlier in the same period. Gross refining margins, or profit earned on each barrel of crude processed, dropped to $5.86 per barrel, compared with $6.83 per barrel in the same period last year. The total income for the June quarter came st Rs 60,545.25 crore as compared to Rs 51,936.3 crore last year in the same quarter.

Subsidy withdrawal:

Shares of oil marketing companies are also gaining traction after the government has asked all the state oil companies to keep increasing prices of subsidised kerosene by 25 paise every fortnight. However, facing ire from opposition parties, the government has held its decision to authorise oil marketing companies (OMCs) to increase the effective price of liquefied petroleum gas (LPG) cylinders by Rs 4 per month in order to reduce and finally eliminate the subsidy burden.

Meanwhile, OMCs will continue to increase the price of kerosene by 25 paise per month to completely do away with the subsidy on the fuel. According to a source close to the development, OMCs will continue the same course of action for LPG as was followed till now — increase or decrease the price depending on international prices.

Get live Stock Prices from BSE and NSE and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Switch to Hindi Edition