Shares in Oil Marketing Company stocks, including those of Indian Oil, BPCL and HPCL fell sharply, following a hike in petrol and diesel prices.
Shares in BPCL fell nearly 8 per cent, while HPCL was locked at the lower end of the circuit filter with a drop of 10 per cent. Indian Oil Company saw its shares fall by 5 per cent.
The central government had hiked the excise duty by Rs 10 per litre on petrol and Rs 13 per litre on diesel, late Tuesday night.
This is largely to mop-up revenue at a time when economic activity has slumped completely. The government in the past has been doing the same, especially when international prices of crude oil are low.
However, it is likely that oil marketing companies like Indian Oil, BPCL and HPCL will not hike retail petrol prices, given that crude oil prices had fallen and they had not reduced rates. So, it is likely that these companies would absorb the hike in rates.
There has also been complete demand destruction for the oil marketing companies, given the lockdown across the country. This is likely to have an impact on demand for diesel and petrol and the results for some of the OMCs for the quarter ending June 30, 2020 is likely to be bad.