RIL, ONGC, and Chennai Petrochem rally up to 11% after govt cuts windfall taxes on fuel exports

ABSTRACT: oil refiners such as Reliance Industries, Oil India, and ONGC will see a reduction in the overhang and equity valuations and should start pricing in high sustainable energy margins as government intent gets clear said foreign brokerage Morgan Stanley

Due to falling global prices, oil refineries’ shares soared in Wednesday’s trade after the Indian government lowered windfall taxes on fuel exports.

After less than three weeks of being imposed, India removed a levy on gasoline exports and cut windfall taxes on other fuels, providing relief to the nation’s fuel exporters and top oil explorers.

Following the update

Shares of Reliance Industries NSE 2.90 % (RIL NSE 2.90 %) gathered more than 4 percent to Rs 2545.05, topping Rs 17 lakh crore m-cap, before giving up partial gains. The scrip had settled at Rs 2,442.20 on Tuesday.

 

Oil and Natural Gas Corporation NSE 3.60 % (ONGC NSE 3.60 %) gushed more than 7 percent to Rs 136.40 before trading at Rs 134.65 at 9.20 am. The scrip was at Rs 127.45 on the previous close.

 

Chennai Petrochem zoomed more than 11 percent during the early minutes of trade, while Mangalore Refinery NSE 4.95 % & Petrochemical zoomed just 5 percent, its daily circuit limit.


Tamil Nadu Petrochem, Indian Oil (NSE 0.63 %), and Bharat Petroleum jumped up to 3 percent among other refining and petrochemical companies.


Morgan Stanley Statements

“We believe RIL should get priced at $13-15 a barrel sustainable refinery margins while ONGC gets priced at $75-80 per barrel oil and $6 per MMBtu commodity deck. The two should imply 25-40 percent upside to equities as energy markets are expected to remain tight despite the current volatility in oil and reduction in global fuel margins from peak levels,” Morgan Stanley said.

“Oil refiners such as Reliance Industries, Oil India, and ONGC will see a reduction in the overhang and equity valuations and should start pricing in high sustainable energy margins as government intent gets clear, “said foreign brokerage Morgan Stanley.