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HPCL, BPCL Downgraded

September 14, 2007

Kotak securities has downgraded HPCL and BPCL to In-Line from Outperform on the grounds of Political uncertainty and high crude oil prices.

The press has been reporting a possible price increase on auto fuels but the current difficult phase of the coalition politics precludes a price increase. Also, if the government were to fall or call for early elections, it may not be in a position to issue oil bonds to the downstream oil companies including BPCL and HPCL. It is still possible to make money in these stocks based on short-term trading opportunities but ratings and earnings estimates have largely lost meaning in the current environment, said the report.

Dalal Street Research Analyst recommends to stay away from PSU Oil Distribution and Marketing companies and the only stock he is optimistic in Oil and Gas is Reliance Industries Ltd. [We don’t recommend RNRL to value investors, however who have got it for FREE can switch to RIL]

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