HPCL, BPCL, IOCL Shares Rally Up To 4%; Here’s Why OMC Stocks Are In Demand Today | Markets News

Oil (Representative/News18 Tamil)

Shares of state-owned oil marketing companies (OMCs) witnessed strong buying interest on Monday, with Hindustan Petroleum Corporation (HPCL), Bharat Petroleum Corporation (BPCL), and Indian Oil Corporation (IOCL) rallying up to 4 per cent on the BSE amid heavy trading volumes.

Among individual counters, BPCL and HPCL surged 4 per cent each, trading at ₹337.95 and ₹440.5, respectively, while IOCL gained 3 per cent to ₹149.60 in intra-day trade. By comparison, the BSE Sensex was up 0.46 per cent at 80,797 at 10:28 AM.

Why OMC shares are in demand today

Lower crude oil prices are supporting stronger auto fuel marketing margins, which bodes well for FY26 earnings. Additionally, global LPG prices have declined, reducing LPG losses per cylinder by 30-40 per cent compared to Q1FY26. This is expected to lower under-recoveries for FY26. While details are awaited regarding the ₹30,000 crore government provision to compensate OMCs for LPG losses, these trends present potential upside risks to earnings forecasts, according to HSBC Global Investment Research.

The Q1 earnings miss for OMCs was mainly due to higher-than-expected inventory losses, as companies held larger inventories amid geopolitical tensions. With lower crude prices, HSBC has raised marketing margin estimates, reflecting higher expected earnings. Analysts note that OMCs now have a significant margin of safety, supported by low oil prices and ongoing large capex plans, which help maintain normative earnings levels.

HSBC has revised target prices based on FY27 estimated book values and rolled forward the valuation period from June 2025 to September 2025. As a result, HPCL’s target price increased to ₹520 from ₹490, and IOCL’s to ₹190 from ₹180.

According to Emkay Global Financial Services, the outlook for OMCs in Q2FY26 (July–September) remains steady despite global uncertainties, including the volatile Russian crude scenario. Q1 saw a miss in core gross refining margins (GRMs) and higher inventory losses. However, refining margins are improving sequentially, with diesel-kerosene cracks offsetting declines in petrol. The impact of Russian crude discounts on overall GRMs is expected to be minimal compared to Q1.

While Q2 earnings may be lower than Q1, they are expected to remain in line with projections. The ₹30,000 crore LPG subsidy payout is anticipated in 12 tranches, and with Cabinet approval, the risk is considered low. OMCs currently have comfortable working capital positions.

Although retail price cuts in H2FY26 could be a concern, elections in major states like West Bengal and Tamil Nadu are scheduled for May 2026, with Bihar being the only state holding elections in November. Analysts continue to maintain Buy ratings on HPCL, BPCL, and IOCL, with target prices of ₹500, ₹400, and ₹170, respectively.

Expansion and growth outlook

IOCL’s refining capacity is set to increase from 81 million metric tonnes (mmt) to 98 mmt by the end of CY26, supported by a ₹90,000 crore ongoing capex. The company holds roughly 45 per cent of India’s LPG market, delivering 3 million cylinders daily across 150 million connections. With full penetration under the Pradhan Mantri Ujjwala Yojana (PMUY), growth will depend on higher refill frequency per user (from 4.5x to 8x annually) and rising industrial demand, according to Motilal Oswal Financial Services.

Despite this, the brokerage recently downgraded IOCL to Neutral, citing highly volatile earnings due to inventory swings, limited visibility, ongoing petrochemical losses, and muted spreads amid upcoming capacity additions in China.