Earning opportunity in these shares
Amidst the long-running tension in West Asia, now a relief news is emerging for stock market investors. The murmur of the complete reopening of the globally important trade route ‘Strait of Hormuz’ has intensified. Smooth supply through this route directly means that there may be a big fall in the prices of crude oil and LNG in the international market. This situation is extremely positive for the Indian economy, as we import a large part of our energy needs.
In such a situation, leading brokerage firm Nomura believes that due to softening of crude oil prices, Indian oil marketing companies and city gas distributors are going to make huge profits. To capitalize on this opportunity, the brokerage has prepared a list of some favorite stocks, which can give excellent returns to investors in the coming times.
Which companies’ fortunes will shine with cheap crude oil?
Whenever crude oil coming from abroad becomes cheaper, the profits of the companies that refine oil in India and deliver it to customers increase significantly. Nomura has expressed his confidence in Indian Oil (IOC) in this regard. The brokerage has given it a ‘Buy’ rating and has set a target of Rs 180, which shows an increase of about 25% from the current price. With the improvement in supply from the Strait of Hormuz, the cost of LPG import will reduce, due to which the company’s margin will become better than the old average.
Similarly, Bharat Petroleum (BPCL) is also included in the favorite list of brokerage. Nomura has set a target price of Rs 365 for this. This company is expected to get the first and biggest benefit from falling crude oil prices, due to which its shares may rise by up to 18%.
Fall in gas prices will bring rise in these stocks
Apart from petrol and diesel, this time is also going to be very beneficial for the companies involved in city gas distribution and LNG import. Nomura has advised to invest in these four companies:
- Gujarat Gas: Nomura looks most bullish on this stock. Brokerage has advised to buy it with a target of Rs 511. Due to gas becoming cheaper, its consumption in industries will increase rapidly, due to which investors can get huge profits of up to 28%.
- Mahanagar Gas: This company has exposure to cheap gas associated with ‘Henry Hub’. If the cost of imported gas decreases even slightly, the company’s profit will directly increase. Nomura has given it a target of Rs 1,430, which indicates a return of 26%.
- Petronet LNG: Due to normalization of supply from Qatar, the utilization of the company’s terminals will increase. The brokerage has given it a ‘Buy’ rating with a target of Rs 345 (expectation of 21% upside).
- GAIL: Increase in import of LNG will have a direct impact on its gas transmission volume. Nomura has given a target of Rs 195 for this, in which an increase of 11% can be seen.
Companies selling expensive oil will get a shock
Every global event in the stock market has two sides. On one hand, downstream companies (OMCs) will be in relief due to cheaper crude oil, while on the other hand, pressure will be clearly seen on the companies producing crude oil. According to Nomura, the earnings of upstream companies like ONGC and Oil India directly depend on high prices of oil and gas. In such a situation, if oil prices come down in the international market, the profits of these companies may be affected.
Disclaimer: This article is for information only and should not be considered as investment advice in any way. TV9 Bharatvarsha advises its readers and viewers to consult their financial advisors before taking any money-related decisions.
