Oil & gas stocks fuel markets

Tue, 21 Jun 11:30 am

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Indian stock market continued to trade firm on the back of buying interest in heavy weights over the last two hours of trade. Stocks from the oil and gas and banking space are trading firm, while stocks from the realty and consumer durables space are trading weak.

The BSE-Sensex is trading up by 167 points while NSE-Nifty is trading 45 points above the dotted line. BSE Midcap index is up by 0.6% while the BSE Small cap index is trading 0.6% above yesterday's closing. The rupee is trading at 44.91 to the US dollar.

Energy stocks are trading firm led by Reliance Industries and Indraprastha Gas. As per a leading financial daily, Oil and Natural Gas Corporation (ONGC) plans to develop its gas field in the KG basin to produce upto 30 m cubic meters a day in five years. To achieve this, the company plans to drill eight additional wells in the block. ONGC plans to invest US$ 7.7 bn to develop the gas fields and has sought approval for drilling from the directorate general of hydrocarbons and the petroleum ministry. The company, in its proposal for Declaration of Commerciality (DoC) to the DGH, has submitted that in-place gas reserves of 3.42 trillion cubic feet (tcf) have been established in the KGDWN-98/2 block. Of this 1.904 tcf is recoverable. ONGC has also invited global majors for a possible tie-up in the integrated appraisal and development process of this and adjoining nomination blocks.

Auto stocks are trading mixed with Ashok Leyland and Force Motors trading firm while Tube Investments and Maruti Suzuki are trading weak. As per a leading financial daily, fall in sales of passenger cars has forced auto companies to revisit their marketing strategies. The companies are now increasing marketing spends and doling out discounts to attract customers. While Maruti Suzuki India Limited (MSIL) has increased its marketing budget by 20% over the last two months, companies like Honda Siel Cars India, Hyundai Motor India and Volkswagen are offering incentives to accelerate sales. As per industry experts, rise in interest rates has affected consumer sentiments. This has resulted in conversion rate at the showrooms falling from 20% to 15-16%. It may be interesting to note that the inventories for petrol cars are piling up as a result of consumers switching to diesel cars as a result of high petrol prices. For example, for MSIL, almost 65% of sales used to come from the diesel variant for cars in which they had the fuel option. However, after the latest hike in petrol prices, the proportion of sales coming from the diesel variant has increased to 80-85%.