HPCL, BPCL Hit Hard Amid Trump Tariff Scare, Jefferies Cuts Target Price For OMCs

Oil shares took a significant hit on Monday, following US President Donald Trump's announcement of new tariffs, triggering concerns of a global trade war. Tariffs included a 25% levy on Canada and Mexico, and a 10% tariff on China, sparking fears of economic slowdown and a decline in oil demand. As a result, major oil stocks suffered sharp declines, with Hindustan Petroleum Corp. falling the most at 7.13%.

Bharat Petroleum Corp. followed with a 5.26% drop, and other stocks such as Chennai Petroleum, Indian Oil Corp., and Mangalore Refinery and Petrochemicals Ltd. also fell over 4%.

In addition to the tariff-induced slump, Jefferies revised its target prices for Indian OMCs. While maintaining a 'buy' rating for IOC and BPCL, Jefferies lowered their target prices to Rs 150 from Rs 170 and Rs 330 from Rs 370, respectively. For HPCL, Jefferies maintained an 'underperform' rating, lowering its target price to Rs 270 from Rs 295.

This negative sentiment is compounded by the Centre's decision to cap OMC profitability, by placing a larger burden on them for the LPG subsidy.

For the first time in nine years, OMCs are expected to absorb around 69% of the financial year 2025 LPG under-recoveries, amounting to approximately Rs 28,000 crore. This move, coupled with rising crude prices, introduces significant uncertainty for OMCs, particularly in their auto fuel margins, the brokerage said in its note on Monday.

HPCL stock fell the most with a 7.13% decline, touching a nearly eight-month low at Rs 320.05 per share. It pared gains to trade 5.45% lower at Rs 326 apiece, as of 10:45 a.m. This compares to a 0.72% decline in the NSE Nifty 50.

BPCL fell 5.26% to Rs 242.20, the lowest level since Jan. 29. While Chennai Petroleum fell 4.83%, IOC fell 4.30% to touch over one-month-low and MRPL was trading 4.73% lower.