Oil India & ONGC Dive Upto 10% on Wednesday: What’s Fuelling the Rout?

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Oil India & ONGC Dive Upto 10% on Wednesday: What’s Fuelling the Rout?
Credit: © Reuters.

By Malvika Gurung

Investing.com -- Shares of the oil exploration and producing giants ONGC (NS: ONGC ) and Oil India (NS: OILI ) sank up to 10% in the session, ending 5.06% and 8.6% lower, respectively on Wednesday.

Oil companies have been witnessing a rough ride over the past few days and today’s rout was a result of crude oil price plummeting nearly 9% in the previous session, recording its steepest slide since March and tumbling under the $100/barrel level for the first time since early May, on growing concerns of global recession triggering fears of curtailed fuel demand.

The stock rout has worsened in the week after the Centre special additional export taxes on petrol, ATF and diesel, along with a windfall tax on the gains made by domestic refineries.

Read Also: Centre Hikes Export Taxes on Fuel, Windfall Tax on Crude; Which OMCs Exempted?

Shares of Oil India have plunged 33% so far this month (since July 1), while ONGC’s scrip has corrected 21% in the period.

Citi foresees crude oil prices to wind down as low as $65/barrel due to recession fears, which accentuates the scenario for oil companies, in light of tax imposition on windfall gains, which has dented the earnings outlook of Oil India and ONGC in the medium term.

Read Also: ONGC FreeFall Extends: Tanks 4.4% As Brokerages Cut Estimates & Downgrade Rating

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