First of a few fuel price hikes; markets to remain rangebound, say analysts

The hike in petrol and diesel prices by ₹3 per litre for both fuels could be the first of a few more rounds of hikes by the oil marketing companies (OMCs), suggest analysts, who expect the markets to remain range-bound in the next few weeks in this backdrop.

The upward revision in prices for both fuels, said Jyotivardhan Jaipuria, founder and managing director at Valentis Advisors, was already expected though the quantum of ₹3 per litre seems too less. "There could be more such hikes in the weeks ahead in case the war in West Asia continues. We expect more policy measures from the government in this backdrop. The markets will remain range-bound with a positive bias amid intermittent bouts of selling," he said.

State-owned oil firms Hindustan Petroleum Corporation (HPCL), Bharat Petroleum Corporation (BPCL) and Indian Oil Corporation (IOC) had kept fuel prices unchanged for 11 weeks despite rising input costs amid surging global crude oil prices that had surpassed $125 a barrel (bbl), rising from around $60/bbl before the West Asia war began in February 2026-end.

OMCs, wrote Gagan Dixit of Elara Capital in a recent note, will be the hardest hit amid high-crude prices. At Brent crude oil price of $100/bbl, he said, OMC's earnings could drop sharply by around 90-190 per cent in the absence of retail price hike, tax cut, or higher LPG subsidy.

"Among OMCs, HPCL and BPCL are most exposed due to their higher retail volume relative to refining capacity. IOCL is better placed among OMCs due to higher refining share, but still vulnerable if crude stayed high and retail price unchanged," he said.

Stock watch

At the bourses, meanwhile, the Nifty Oil & Gas index has underperformed the Nifty 50 since the war began in February-end with a fall of 6.7 per cent (till May 14) as against a drop of 5.9 per cent in the Nifty 50 during the same period, ACE Equity data shows.

OMCs have been among the top losers with HPCL (down 14 per cent), BPCL (down 23 per cent) and IOC (down 25 per cent) in the Nifty Oil & Gas pack since then, data suggests. ONGC and Oil India, however, logged a gain of 8 per cent and 7 per cent, respectively as crude oil prices soared.

U R Bhat, co-founder & director, Alphaniti Fintech, too, believes that the ₹3 per litre hike in petrol and diesel prices is much less than what the markets had expected (around ₹15 per litre). Over the next few weeks, he expects the OMCs to resort to more hikes in case the Strait of Hormuz does not open for business.

"The quantum of hike suggests that it is a half-hearted measure by the government. They are likely to go for another round of fuel price hikes in case the stalemate continues in West Asia. That said, the government may give some time for everyone to absorb the latest round of hike. Plus, there is no immediate state election in sight. The Nifty is likely to remain range-bound in the short-term. At best, it can gain up to 5 per cent from current levels if things play out favourably over the next few months," Bhat said.

From a technical standpoint, the Nifty, said Ponmudi R, CEO of Enrich Money, is witnessing some resistance near 23,800 levels. A sustained move above this could strengthen near-term momentum and open the path toward the 23,900–24,000 resistance area, where he believes a stronger selling pressure is likely to emerge.

“On the downside, immediate support is placed around the 23,500–23,400 zone. Holding above these levels will remain important to maintain positive price momentum in the near-term. Nifty remains vulnerable to volatility at higher levels, and a sustained move above 24,000 is required to strengthen broader market sentiment,” he said.