Why are oil stocks IOC, HPCL, BPCL down today

Indian benchmark indices witnessed lackluster trade on Wednesday, with the Sensex and the Nifty swinging between gains and losses, in absence of any major trigger on the domestic or global front. Underperforming the benchmark indices, state-owned oil marketing companies (OMCs) witnessed sharp selling after Indian Oil Corporation (IOC), the country’s largest oil company, reported weak earnings for the March quarter (Q4FY22) due to lower-than-expected inventory gains and weaker marketing profitability. In line with sectoral leader IOC, peer companies Hindustan Petroleum Corporation (HPCL) and Bharat Petroleum Corporation (BPCL) were also reeling under pressure, falling up to 7%.

Shares of Indian Oil slipped as much as 5% to hit an intraday low of ₹118.25 apiece against previous closing price of ₹124.40 on the BSE. There was strong volume as 20.39 lakh shares worth ₹24.5 crore changed hands over the counter on the BSE, while market capiltalisation dropped to ₹1.11 lakh crore. The largcap stock traded lower than its 5-day, 20-day, 50-day, 100-day, and 200-day moving averages. The stock has fallen 1.7% in a week, 7.5% over a month, and 8.5% in the past six month. However, the stock has given positive returns of 6% on a year-to-date (YTD) basis and 12% during the last one year.

Similarly, HPCL shares declined as much as 6.7% to hit a 52-week low of 238.80 on the BSE, amid a surge in selling. BPCL share price also tumbled 2.44% to touch an intraday low of 334.1 apiece on the BSE during the session so far. At the time of reporting, the BSE benchmark Sensex was trading marginally lower by 29 points at 54,289 levels.

In the recent past, oil companies have vastly outperformed the benchmark indices due to rising costs and decline in margins amid record spike in crude oil prices in the backdrop of Russia-Ukraine crisis. The concerns about supply woes amid ban on Russian oil imports as well as bleak demand outlook due to coronavirus-led lockdown in China also pushed prices higher.

The fall in IOC shares can be attributed to its weak March quarter earnings, with its net profit declining 31% year-on-year to ₹6,021.88 crore, against ₹8,781.30 crore in the corresponding quarter last year. However, its revenue from operations increased 26% to ₹2,06,460.89 crore during Q4 FY22, compared with ₹1,63,732.98 crore in the year-ago period. Amid skyrocketing crude oil prices, material cost of the refiner rose to ₹90,401.52 crore during the March quarter, compared with only ₹55,099.13 crore in the same period last year. The board has also recommended a final dividend of ₹3.60 per equity share having face value of ₹10 each (pre-bonus), which translates into final dividend of ₹2.40 per equity share having face value of ₹10 each (post-bonus) for the financial year 2021-22.