Why this sudden rise of oil stocks?

Oil marketing cos on a roll as FIIs stock up

Shares of oil marketing companies resumed their uptrend on Wednesday, after having paused for a breather in the previous session. Dealers said fresh purchases by foreign funds triggered the action in these stocks. The Rar(e)ing Bull and Old Fox are said to have been among the big buyers of oil marketing companies over the last few sessions. The steep rise in share prices have caught quite a few players - local traders and hedge funds - on the wrong foot. These players had short sold oil marketing companies in the derivatives segment on Friday in the belief that the government would have to partially roll back the prices in the face of stiff resistance from the opposition parties. With the price hikes here to stay, the short sellers have been forced to square up their positions, driving stock prices even higher. IOC shares rose 2.3%, BPCL shares gained 4% and HPCL shares, 8%. Many funds which have been underweight on the sector till now too have turned buyers of oil marketing shares over the past few sessions. That has given the Big Daddy of insurance companies a good opportunity to cash in on the sudden mania for these stocks. Dealers at institutional brokerages say Big Daddy has been a steady seller in Hindustan Petroleum (HPCL), Bharat Petroleum (BPCL) and IndianOil (IOC) over the past few sessions. Meanwhile, there is also buzz that a few operators were able to build positions in oil marketing shares on the basis of some 'privileged information' ahead of the fuel price hike announcement on Friday. This talk may appear credible looking at the surge in trading volumes in HPCL, BPCL and IOC shares in the run-up to the announcement. Brokers said such leakages of policy decisions to market participants, ahead of the announcements, was seen in 2002-03, when disinvestment was a hot theme.

The Economic Times, Mumbai, July 01, 2010