Here's why oil marketing companies declined in trade on Wednesday

In Wednesday's trading session, shares of prominent oil marketing companies—Hindustan Petroleum Corporation Ltd (HPCL), Bharat Petroleum Corporation Ltd (BPCL), and Indian Oil Corporation (IOC)—witnessed a significant downturn of 3–4%. The bearish trend was attributed to a discouraging analysis by Spark Institutional Equities.

Spark Institutional Equities pointed out that global disruptions have led to spikes in diesel prices and Gross Refining Margins (GRMs), but this surge may not be sustainable. The institution argued that various data sets suggest a gradual easing of diesel supply, potentially causing GRM to revert to the $20 per barrel mark.

Furthermore, Spark emphasised that the maximum impact of the Red Sea disruption on cracks has already been factored in, and as a result, cracks could recede further.

The bearish sentiment was further fuelled by Spark's belief that the current stock prices are factoring in a Gross Refining Margin (GRM) of $9–10 per barrel for the fiscal year 2026. According to Spark, this pricing leaves little room for a favourable risk-reward ratio. The institution went on to assign a 'reduce' rating on BPCL and 'sell' ratings on both HPCL and IOC.

In a related development, the SBI Energy Opportunities Fund recently successfully raised over ₹6,000 crore in its New Fund Offer (NFO). The fund's primary objective is to invest in various segments of the oil value chain, new energy power, and power infrastructure.

Over the last six months, all oil marketing companies have delivered stock returns in excess of 80%.