Sensex, Nifty gains strength; Oil companies on buyer’s radar on petrol price hike

Benchmarks gained strength and moved up sharply after a positive start following fall into negative zone. Sensex up over 140 points, while Nifty gained by 0.80%. Oil companies have increased petrol prices by Rs 6.28 per liter (excluding taxes) from yesterday midnight, which supported local market to great extent. In currency markets, Indian rupee extended early looses and plunged to a fresh low against dollar on the back of renewed Greece worries. On sectoral front all sectors were trading in green. Stocks from oil, banking and PSU sectors were on buyer’s radar. Meanwhile, Oil marketing companies like BPCL, HPCL and IOC erased somewhat gains, but still up 1-2% on petrol price hike. On the global front, Asian shares were trading mixed. Back home, the market breadth favoring positive trend; there were 1,151 shares on the gaining side against 948 shares on the losing side while 104 shares remained unchanged.

The BSE Sensex is currently trading at 16,091.10, up by 143.00 points or 0.90%. The index has touched a high and low of 16,111.33 and 15,934.77 respectively. There were 22 stocks advancing against 8 declines on the index.

The broader indices were also following the benchmark; the BSE Mid cap and Small cap indices gained by 0.27% and 0.37% respectively.

The top gaining sectoral indices on the BSE were Oil and Gas up by 1.71%, Bankex up by 1.26%, Public Sector Undertaking (PSU) up by 0.88%, TECk up by 0.61% and Metal up by 0.55%. While, there was no loser on the index.

The top gainers on the Sensex were HDFC up by 3.55%, ONGC up by 3.35%, HDFC Bank up by 2.24%, Gail India up by 1.77% and Hindalco Industries up by 1.54%.

On the flip side, Maruti Suzuki down by 1.39%, Tata Power down by 0.96%, Bajaj Auto down by 0.67%, BHEL down by 0.55% and TCS down by 0.53% were the top losers on the Sensex.

Meanwhile, petrol prices have been raised by a whopping Rs 7.54 litre with effect from May 24, taking the prices of petrol to Rs 73.14 a litre in the national capital. Following the hike, a litre of petrol will now cost Rs 78.16 in Mumbai, Rs 77.53 in Kolkata and Rs 77.05 in Chennai. This is the first hike in the last six months and has been necessitated due to the increase in prices of global crude oil. Nonetheless it is the steepest price hike in petrol price ever.

As was expected, the hike in prices has seen sharp reactions from the common people and from other political parties. However, the markets have reacted positively to the increase and the rupee is also expected to appreciate. Most analysts are now expecting that this hike will be followed by an increase in the prices of diesel, LPG and kerosene as well.

Justifying the government’s move the Oil Minister, S Jaipal Reddy stated that the depreciation in rupee had necessitated the increase in fuel prices. This was because when the rupee falls by one against the dollar, oil companies suffer losses to the tune of Rs 8,000 crore annually. The rupee has seen a substantial fall in the last fortnight and has touched an all time low of Rs 55 against the dollar. Last year the rupee was around Rs 46 to a dollar. This has translated in to a loss of Rs 72,000 crore, this year for oil company’s just on account of rupee depreciation.

The losses on petrol are over and above Rs 512 crore per day that oil firms lose on selling diesel, domestic LPG and kerosene. Diesel is currently sold at a loss of Rs 15.35 a litre, kerosene at Rs 32.98 per litre loss and oil firms lose Rs 479 on sale of every 14.2-kg domestic LPG cylinder.

The price of petrol has been deregulated but continues to be under government supervision. Even though global prices had shot up, the government had kept the oil companies from raising prices because of political considerations. Since the three oil PSUs were suffering heavy losses they had threatened the government that they would go ahead and increase the prices of petrol if they were not compensated for the loss. As a result the government has announced subsidies to the tune of Rs 38,500 crore for the last fiscal of FY12.

The price is expected to have an inflationary impact on the economy and the Planning Commission is of the view that the impact will be a one time price adjustment and will not have a cascading effect. The retail inflation (CPI) for April was 10.36%, up from 9.38% in February. The inflation based on movement in wholesale prices (WPI) moved up to 7.23% in April from 6.89% in March.

 The S&P CNX Nifty is currently trading at 4,874.15, up by 38.50 points or 0.80%. The index has touched a high and low of 4,885.75 and 4,830.15 respectively.  There were 34 stocks advancing against 16 declines on the index.

The top gainers of the Nifty were HDFC up by 3.15%, ONGC up by 3.10%, HDFC Bank up by 2.27%, Bank of Baroda up by 2.12% and Axis Bank up by 1.93%.

On the flip side, JP Associate down by 1.58%, Tata Power down by 1.30%, Maruti Suzuki down by 1.12%, Sun Pharma down by 0.88% and BHEL down by 0.79% were the major losers on the index.

Most of the Asian markets were trading in the red; Shanghai Composite declined 0.13%, Hang Seng Index dipped 0.41%, Jakarta Composite down 0.23% and Taiwan Weighted inched lower by 0.32%. On the flipside, Nikkei 225 up by 0.21%, KOSPI Composite Index up by 0.13%. Straits Times up by 0.11% and KLSE Composite trading higher by 0.25%.