Stocks of oil marketing companies (OMCs) witnessed up to 8% decline on Friday following a Rs 2 per litre cut in prices of petrol and diesel, the first in nearly two years. The decision came ahead of the model code of conduct that is likely to kick in shortly.

The top loser was Hindustan Petroleum Corporation (HPCL) whose shares fell nearly 8% to the day’s low of Rs 461.10 on the NSE. It was followed by Bharat Petroleum Corporation (BPCL) which fell 5.4% to the day’s low of Rs 576. Indian Oil Corporation (IOC) plunged 5% to hit its intraday low of Rs 161.

The price cut comes into effect from today and margins of OMCs are likely to take a hit following the decision.

The decline had a rub-off impact on the Nifty Oil & Gas index and other stocks as well. The 15-stock index fell by 2% or 224 points and traded at 11,057.50 around 10:10 am. Thirteen stocks were trading in the red around this time. Other leading stocks like Reliance Industries (RIL), Oil and Natural Gas Commission, and Castrol India fell up to 2%.

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In a note published today, Motilal Oswal said that there is no indication of any excise duty relief from the central government and the price cut will likely be borne wholly by OMCs.The blended gross marketing margin based on today’s prices was Rs 3.4 per litre which will now be slightly and below Rs 2 per litre, this report said. For the quarter (4QFY24TD), the blended margin was Rs 5.4 per litre which will now decline to marginally below Rs 3.8 per litre, this report added.However, Motilal Oswal has maintained its earnings assumptions for now based on a marketing margin of Rs 3.3 per litre.

“We expect a negative stock price reaction for OMCs near term given the retail price cut and recent elevated Brent crude prices of $85/bbl,” Motilal said even as it reiterated its buy rating on HPCL and IOCL while remaining ‘Neutral’ on BPCL.

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