BPCL, IOC, HPCL shares extend rally as crude oil cools off; Brent crude under $70/bbl

Mumbai, June 26, 2025: Shares of state-run oil marketing companies (OMCs) Bharat Petroleum Corporation Ltd (BPCL), Indian Oil Corporation Ltd (IOC), and Hindustan Petroleum Corporation Ltd (HPCL) extended their winning streak on Wednesday as global crude oil prices continued their downward spiral. Brent crude futures fell below the critical $70 per barrel mark for the first time since January 2022, sparking optimism for margin expansion across the oil refining and marketing space.

Crude Retreats Amid Global Demand Concerns

Brent crude prices dropped to $69.45 per barrel, weighed down by persistent worries around global economic slowdown, weak manufacturing data from China, and sustained production levels from non-OPEC countries like the U.S. and Brazil. Meanwhile, West Texas Intermediate (WTI) crude also saw a decline to $64.82 per barrel.

“The recent slump in crude oil prices is largely driven by slowing demand, particularly from major economies like China and the Eurozone. Add to that the resilient U.S. shale output, and the market is well-supplied,” said Arun Mahadevan, Energy Analyst at Axis Securities. “This is good news for downstream companies that benefit from lower input costs.”

OMC Stocks Climb: BPCL, IOC, HPCL in Focus

On the Bombay Stock Exchange (BSE), BPCL rose 4.2% to ₹518, IOC gained 3.8% to ₹165.60, and HPCL surged 5.1% to ₹326.20 by mid-day trade. This marks the third straight session of gains for these counters, cumulatively adding nearly ₹21,000 crore in market capitalization over the past week.

“Cooling crude prices translate into better refining margins and lower subsidy burden. OMCs become natural beneficiaries of this macro trend,” said Ruchir Shah, Senior Research Associate at HDFC Securities.

Investors are also encouraged by expectations of stable auto fuel prices domestically, which could help in maintaining retail margins.

Gross Refining Margins (GRMs) in Sweet Spot

The fall in crude oil prices is expected to have a positive impact on the Gross Refining Margins (GRMs) of Indian refiners. According to analysts, Singapore GRMs, a benchmark for Asian refiners, have seen a modest uptick to $7.80 per barrel—a favorable zone for companies like BPCL and HPCL.

“Lower crude coupled with healthy demand for diesel and petrol ahead of monsoon has strengthened GRM outlook. We believe Indian OMCs may post improved profitability in Q1 FY26,” said Priya Kaul, Vice President – Oil & Gas Research, ICICI Direct.

Government Policy Outlook: No Price Interference Likely

Unlike past episodes where OMCs bore the brunt of populist fuel pricing policies, the current scenario appears relatively benign. With general elections concluded and a stable policy environment expected, analysts believe the government is unlikely to interfere with the pricing freedom of OMCs.

“The absence of fuel price caps and the government's commitment to market-linked pricing augur well for oil marketing companies,” said Sandeep Arora, Director of Public Policy at Centrum.

Institutional Buying Returns

Foreign institutional investors (FIIs) and domestic mutual funds have shown renewed interest in OMC stocks. As per NSE bulk deal data, mutual funds have increased their holdings in BPCL and HPCL by 0.5–0.8% each in June, reflecting long-term confidence in the sector.

Additionally, BPCL’s upcoming divestment roadmap, set to be unveiled in the second half of FY26, is expected to bring further investor attention to the stock.

Sector Valuation Still Attractive

Despite the rally, sector experts suggest OMC valuations remain undemanding. BPCL is trading at a forward P/E of 7.8x, IOC at 6.5x, and HPCL at 7.2x, compared to their five-year averages of 9x–10x.

“While headline numbers may look stretched after the recent surge, forward-looking metrics and balance sheet deleveraging point to more upside potential,” remarked Avinash Gorakshakar, Head of Research at Profitmart Securities.

Investor Outlook: Medium-Term Positivity

Market participants are cautiously optimistic about the medium-term trajectory of oil marketing companies. Factors such as healthy product demand, favorable refining spreads, and robust marketing margins are expected to sustain earnings growth.

However, risks from geopolitical flare-ups or sudden reversals in oil prices remain.

“OMCs are in a comfortable zone, but not without risks. Any escalation in the Middle East or a surprise OPEC+ cut could reverse the crude price trend,” warned Kavita Deshmukh, Fund Manager at Taurus Mutual Fund.

The cool-off in global crude oil prices has come as a relief to India's oil marketing companies, lifting their stock prices and improving the sector's profitability outlook. With supportive macro trends and a policy environment that allows pricing flexibility, investors are likely to continue favoring BPCL, IOC, and HPCL in the coming quarters—especially if crude stays under control.