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Marginal recovery in oil stocks

Aarati Krishnan

TECHNOLOGY stocks again appear to have borne the brunt of uncertainty wracking the markets over the past two weeks. Apart from a host of second-rung stocks, frontline infotech stocks such as Wipro and Infosys have shed substantial value over the fortnigh t.

JP Morgan's decision on Wednesday to effect yet another downward revision in the earnings estimates for IT firms for the 2001-02 fiscal is unlikely to help matters. On the other hand, the market appears to be more favourably disposed towards defensive se ctors such as FMCG and pharmaceuticals. The main beneficiaries of this appear to be Hindustan Lever, with a 20 per cent weight in the BSE Sensex and stocks such as Nestle India.

Oil sector stocks were probably among the first to react to the US decision to launch retaliatory action. The fear of disruption in crude supplies and a resultant upward spiral in oil prices led to a fairly sharp slide in valuations of petroleum and petr ochemical product manufacturers. However, after the initial surge, the crude oil market appears to have cooled off over the past couple of days, with crude prices once more falling below $23 a barrel.

On one hand, the absence of immediate retaliatory action from the US appears to have exerted a moderating influence on prices. Then, there has been the realisation that a recession in key economies of the world could further shrink offtake of crude oil; a fear which had in the first place led to softening of world prices.

With key OPEC countries pledging solidarity with the US and promising to ensure the stability of oil supplies, fears about a shortage of crude appear to have temporarily subsided, triggering a sharp fall in crude prices on Tuesday.

With crude prices retreating, the markets also appear to be doing a re-think on their initial response. Several oil sector stocks appear to have staged a cautious recovery in recent times. HPCL, which fell from Rs 124 at the opening of the fortnight to R s 96, has since gained some ground to trade at Rs 115.

Reliance Petroleum which fell from Rs 38 to Rs 24 has also gained some ground. So did Bharat Petroleum, which fell from Rs 164 to Rs 123, before moving higher to over Rs 150. Among petrochemical companies, Reliance Industries regained some ground after f alling from Rs 314 to Rs 206 levels, with IPCL also making marginal gains towards the end of the week.