Crude Oil price at 11 year low: Grab opportunity for India

The crude oil prices movement scenario is trending downwards. During the current year the prices of the oil declined almost half to USD 34.53 from its price at USD 70 before a year time period. The prices of the crude touched at its 11 year low on December 14, 2015.The US brent crude oil is trading around at USD 38 per barrel on commodity exchange.

Global markets are worried about the lower crude oil prices. The Organisation of the Petroleum Exporting Countries (OPEC) lost its monopoly over the production of crude oil.

Though, the impact on the Indian equity market is indirect still macroeconomic factors would get impacted. The majority of those macroeconomic factors are in favour in Indian context as the country imports oil one third of its total import basket. The fiscal deficit, current account deficit (CAD)and inflation will be lower in near term future. Lowering CAD would thus strengthen rupee.

The oil marketing companies (OMCs) such as Bharat Petroleum Corporation (BPCL), Hindustan Petroleum Corporation (HPCL) and Indian Oil Corporation (IOCL) are expected to have neutral impact as the diesel prices are market related. However, the refinery companies may witness better refining margins. These companies witnessed a good financial numbers because of higher refining margins, inventory gains during the year. The gross refining margin (GRM) is a major factor while deciding the position of these companies. The GRM of those companies remained steady despite of downstream of crude prices.

On the other hand, from the oil exploration companies' point of view, the lower crude oil prices will reduce their margins as the minimum cost to explore remains constant. The industry majors like Reliance Industries (RIL), Cairn India, Oil and Natural Gas Corporation (ONGC) and Oil India may impact in near term future. The share prices of the exploring companies are hovering towards their 52 week low. Meanwhile, RIL is conglomerate of exploration and refinery business, therefore the share price has witnessed pressure over the year.

Coming to Essar Oil, the company has majority of its business of refining oil in its Vadinar facility. Essar Oil already announced its intention to be delisted from bourses so as to sell its 49 per cent stake to Rosneft, a Russian oil company. Recently its stock has been moving upwards so as to gather the open offer situation of the company.

The usage of the crude oil companies would be focused in the coming months. The aviation sector is the most fascinating sector nowadays as an effect of lowering crude oil prices. The overall cost of fuel constitutes 50 to 60 per cent in the Indian aviation companies. The sector is showing positive bottom line since last 2 to 3 quarters even as oil was trailing at an average USD 50 per barrel. Further, if crude oil is trailing lower than its 11 year low, the industry will shine in near term future. Jet Airways scrip witnessed a boost of more than double during one year time period on the bourses. SpiceJet stock prices are trading more than 5 times to Rs 69 during one year. Stocks of Interglobe Aviation, the newly listed entity on the markets  is also increased by 66 per cent to Rs 1227 from its listing price. Interglobe was listed in the stock markets in November only and the company operates airliner under the brand Indigo.