Amid the escalating conflict between Israel and Iran, oil stocks in India faced significant selling pressure over the weekend sessions. The rising crude oil prices also contributed to the sell-off in oil stocks, while the Indian National Rupee’s (INR) weaker trading levels are reducing the purchasing power of Indian oil-producing companies. Due to these factors, stock market experts predict a further dip in oil stocks listed on Dalal Street. However, they also believe that oil stocks could experience a quick recovery once tensions ease in the Middle East. Experts are advising medium- to long-term investors to consider buying oil stocks during this downturn.
Crude Oil Price Rise Weighs on Oil Stocks
Explaining how the Israel-Iran war is affecting Indian oil stocks, VLA Ambala, a SEBI-registered Research Analyst and Co-Founder of Stock Market Today, said, “The energy sector has significantly weakened in momentum, and a further correction is expected after witnessing a notable decline over the past week. On the other hand, crude oil prices surged, with CRUDEOIL OCT FUT rising by 13%. This volatility is driven by the escalating conflict in the Middle East, especially between Israel and Iran, which threatens the crucial Strait of Hormuz. Any further escalation could drive oil prices even higher, increasing India’s fiscal deficit and worsening its economic challenges. The weaker Rupee is also diminishing our purchasing power. Additionally, the market’s Relative Strength Index (RSI) is reading above 81, signaling the potential for further corrections. However, for investors, the ongoing conflict could also create opportunities in the energy sector, particularly in certain oil stocks.”
Oil Stocks to Buy on Monday
When it comes to oil stocks that investors should consider buying on Monday, VLA Ambala recommended the following five shares: Gandhar Oil Refinery, Oil India Ltd, Petronet LNG, BPCL, and ONGC.
1. Gandhar Oil Refinery:
VLA Ambala noted that Gandhar Oil Refinery’s current movement indicates a possible breakout. The stock is currently trading at ₹216 and has a price-to-earnings (PE) ratio of 16.04, which is lower than the sectoral PE ratio of 18.32, suggesting that it is undervalued. Ambala recommended investors explore buying this stock in the ₹210 to ₹215 range, with target prices set at ₹228, ₹235, and ₹250. Investors could hold this stock for 1–8 weeks while maintaining a stop loss of ₹200.
2. Oil India Limited:
Sugandha Sachdeva, Founder of SS WealthStreet, commented on Oil India shares, saying, “Oil India shares have gained around 135% year-to-date, even after a sharp correction from their peak of ₹767.90 in August. This correction was driven by a significant decline in crude oil prices during Q3 CY24, which led to a pullback in this upstream company’s stock. However, the stock is now showing signs of stabilization and has gained upward momentum again, thanks to the recent surge in crude oil prices caused by the escalating geopolitical tensions in the Middle East.”
Sachdeva noted that oil prices surged by around 10% following the outbreak of the Israel-Iran war, marking the biggest weekly gain in almost two years. With markets on edge over the potential for a wider conflict in the Middle East, global oil supplies could be disrupted, as the region contributes nearly a third of the world’s oil production. As oil prices rise, Oil India, a state-owned oil and gas explorer, could benefit from improved margins, supporting a rebound in its stock price.
“Investors may consider accumulating Oil India shares, keeping an eye on the ₹510 support level on a closing basis. The stock looks set to test higher targets of ₹665 to ₹680 from a medium-term perspective,” Sachdeva concluded.
3. Petronet LNG:
VLA Ambala mentioned that Petronet LNG’s current momentum appears favorable for investment. The stock is currently trading in the ₹340 to ₹350 range, with target prices between ₹370 and ₹430. Ambala cautioned that the stock’s PE ratio of 13.11 is slightly higher than the sector’s PE of 12.38, but she still recommended holding it for 1–10 weeks, with a stop loss at ₹310.
4. BPCL (Bharat Petroleum Corporation Limited):
Currently, BPCL is trading at ₹340, but Ambala suggested that the stock’s momentum indicates the possibility of further corrections. For those looking to invest, Ambala recommended buying in the ₹310 to ₹290 range, with target prices between ₹365 and ₹450. She advised investors to hold the stock for 2–8 months but to set a stop-loss order at ₹265 to manage risks effectively.
5. ONGC (Oil and Natural Gas Corporation):
According to VLA Ambala, ONGC looks promising for mid-term investments. After an anticipated correction of 10-15%, the stock’s PE ratio of 8.33, compared to the sectoral PE of 17.11, suggests it is attractively priced. Investors could explore buying this stock in the ₹276 to ₹255 range, with target prices set at ₹310 and ₹370. She recommended holding ONGC for 1–6 months, with a stop-loss order set at ₹240.
Overall, these stocks are expected to benefit from a recovery in the oil sector once geopolitical tensions subside, making them a good pick for medium- to long-term investors.
Disclaimer: The views and investment tips expressed by investment experts on Sharepriceindia.com are their own and not those of the website or its management. Sharepriceindia.com advises users to check with certified experts before taking any investment decisions.
