Citi has maintained a constructive stance on India’s oil marketing companies (OMCs), noting that while the sector is facing conflicting market forces, the positives far outweigh the perceived negatives. The brokerage said that recent share price declines have created an attractive entry point for investors and reiterated its preference for HPCL, BPCL and IOCL over their upstream peers.
Citi highlighted several strong tailwinds for the sector. These include robust earnings momentum, with second-quarter performance expected to be materially stronger than the first quarter, sustained government support in the form of LPG compensation—albeit delayed but not denied—and attractive dividend yields, with interim announcements anticipated soon.
On the other hand, market sentiment has been clouded by concerns over potential disruptions in Russian crude imports and speculation around possible fuel price cuts or excise duty hikes. Citi downplayed these risks, arguing that even if Russian imports were to reduce to nil, the direct impact on Indian OMCs would be minimal. Similarly, the brokerage does not expect fuel price cuts or excise duty hikes in the near term, describing such measures as unlikely given the current context.
The brokerage said the current environment of investor hesitation, reflected in recent price corrections, offers an opportunity for accumulation. By staying in the bullish camp, Citi believes investors can benefit from the sector’s strong earnings trajectory, policy support, and healthy dividend outlook.
Disclaimer: The views and investment recommendations expressed above are those of Citi. They do not represent the views of this publication. This article is for informational purposes only and is not investment advice.
