India's oil refiners may cut fuel prices as financial health stabilises: Exclusive

However, one must note that despite the profits in the March quarter, HPCL still reported heavy losses of nearly Rs 9,000 crore in financial year 2023 on a standalone basis.

India's oil refiners were hammered in the first two quarters of financial year 2023 with cumulative losses running into thousands of crore. While oil prices were higher then, prices on retail pumps remained unchanged due to various factors. Brokerage firm Citi wrote in a note back in December last year that diesel is close to breakeven levels from OMCs from a retail marketing perspective and can even quicken the pace of normalisation for the refiners.

The tide does appear to be changing for the Oil Marketing Companies as the street is starting to view them in positive light. Last month, Nomura upgraded these companies citing them to be on-track to recover about Rs 23,500 crore and that they are likely to make good on the entire under-recovery in financial year 2025. It also raised price targets for all three firms.

The cut in fuel price narrative was echoed by Morgan Stanley in a note on Wednesday. The brokerage said that the current fuel prices offer a buffer for a 2-5 percent price cut. It also said that the OMCs can recover more than their pre-Ukraine book values in the next two months. Among stocks, it highlighted Indian Oil and BPCL as its preferred picks.