Oil and gas sector tumbles

Thu, 19 Jun Closing

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With the tension in Iraq showing no signs of abatement, the Indian benchmark indices dragged lower today and closed on a pessimistic note. Losses led by state-run oil companies pulled the markets down. Followed by oil and gas (down 3%), stocks under metal sector too closed the day in red. Both the BSE Mid Cap and the BSE Small Cap indices lost steam and were down by 0.5% and 0.4% respectively. The BSE-Sensex closed lower by 54 points. The NSE-Nifty too was seen down by 18 points.

On the global front, the Asian indices have closed the day on a mixed note. Whereas, the European indices have opened in the green. The rupee was trading at Rs 60.13 to the dollar at the time of writing.

Barring few stocks such as Mahindra & Mahindra (M&M), TVS Motor Company and Tata Motors, most of the stocks from the Automobile sector have traded in red and closed on a pessimistic note. Stocks of Maruti Suzuki and Force Motors have led the pack of losers today.

According to a leading daily, automobile giant Tata Motors -owned Jaguar Land Rover has announced an investment of 200 mn pounds at its Halewood plant in the UK. This is for the purpose of supporting introduction of its upcoming SUV Discovery Sport. This latest investment takes the total investment of the company in the Halewood plant to almost 500 mn pounds made in the last four years. Such new product launches are expected to maintain sales momentum at JLR. The capital spend is also expected to rise at the global subsidiary of Tata Motors. While domestic market for Tata Motors has remained subdued for quite some time now, the JLR-led volumes have driven the growth for the company since the past few quarters. Tata Motors expects recent product launches to drive growth and will be focusing on export potential and new product launches.

Barring Indraprastha Gas, all the other stocks from the Energy space have traded in red and closed on a pessimistic note. Stocks of Oil India Ltd and Oil and Natural Gas Corporation Ltd. (ONGC) have led the pack of losers today.

As per a leading daily, the stocks under oil and gas sector today came under pressure on account of the announcement of petroleum ministry to hike gas price only for incremental production over and above the current levels. The Ministry is of the opinion that higher prices on additional output will help protect the interests of the consuming industries like power and fertilizers. This is expected to benefit Reliance Industries as they plan to hike production. But ONGC and Oil India are expected to benefit only in the long-term when the unviable wells become operational. Also, the PSUs may not be able to increase their production dramatically in a short period of time. The government subsidy policy is another crucial policy awaited by the oil companies. Large producers like ONGC are expected to benefit in the long-run partly from the gas price hike and partially from the subsidy regime.

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