Oil: stocks that can win or lose as crude oil hits multi-year highs

Oil prices recently strengthened with Brent at $ 84 a barrel – near its highest level in three years – as a rebound in global demand has contributed to energy shortages in various major countries like China. While the rise in oil is bad news for India – a net importer of crude – some oil explorers such as and have taken advantage of it. Companies in the paints and aviation industries, among others, which use crude as a key input, have been affected. ET take a look at some of the winners and losers and what’s in store for the short term.

WINNERS

CGSB
CMP (Rs): 163.65

Last year-on-year change (%): 136.8

ONGC is considered to be one of the main beneficiaries of rising energy prices, as it occupies a dominant position in the price market for crude oil and natural gas production activities. Analysts said the stock, which is at its two-year high, is trading above all major technical moving averages. Rajesh Palviya, Technical and Derivatives Manager at Axis Securities, said: “Rs 152 is the stop loss for going long on the stock for a target of Rs 175. If it goes over Rs 175, it can reach 195 levels. Rs to Rs 200. ”

OIL INDIA
CMP (Rs): 234.95

Last one-year change (%): 167.6

Indian oil, another big beneficiary of the rise in crude, has seen a breakthrough after the recent rally and could rise as much as 27%. “Looking at the setup, one can buy at current levels with a stop loss of Rs 220 for a target of Rs 260,” Palviya said. If it exceeds Rs 260, it can further increase to Rs 300, he said.

DEPENDENCY INDUSTRIES
CMP (Rs): 2,668.55

Last year-on-year change (%): 19.3

Shares of the oil-telecoms conglomerate could gain as much as 12% from current levels if crude oil prices remain high. “They have more inventory control and GRMs will thrive on rising crude oil prices. I do not exclude Rs 2,850 to Rs 3,000 on Reliance Industries ”, said Sanjiv Bhasin

LOSERS


CMP (Rs): 3,322.75

Latest change over one year (%): 60

Asian Paints shares could come under pressure as crude oil and its derivatives account for about half of paint companies’ costs. “Paint companies are exposed to crude prices, but over the past two years exposure to water-based paint categories has increased. In addition, they suffered three rounds of price increases. Still, there will be some pressure, ”said Abneesh Roy, vice president of institutional equities at Edelweiss. He expects the impact of rising crude prices to be felt on margins over the next two quarters.


CMP (Rs): 2,039.85

Last year-on-year change (%): 47.8

For airlines, oil is the main input and rising prices affect profitability the most. Analysts said the government restoring domestic operations slated for Oct. 18 will help airlines mitigate the impact of rising crude prices. “If demand increases, it’s easier to impact cost increases,” said Jyotivardhan Jaipuria, founder of Valentis Advisors.


CMP (Rs): 821.25

Last year-on-year change (%): 34.9

Berger’s rise could be capped as investors could question wealthy valuations due to pressure on margins. Chandan Taparia, derivatives analyst at Motilal Oswal, said the stock could still touch Rs 872 on technical strength if it stays above Rs 785 support.


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Felix J. Dixon

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