- Oil India shares fell 2.7% in intraday trade amid a sharp downgrade by Morgan Stanley
- Morgan Stanley cut Oil India to Underweight and lowered its 12-month target to Rs 404
- The downgrade cites delayed gas price hikes and compressed refinery margins as key risks
Oil India shares extended their decline on Wednesday, falling 2.7% in intraday trade and adding to a 5.4% loss over the past five sessions, after Morgan Stanley sharply downgraded the stock and slashed its price target by nearly 29%.
The Wall Street brokerage cut Oil India to Underweight from Overweight and lowered its 12-month target to Rs 404 from Rs 566, citing a combination of structural headwinds it believes the market has not fully priced in.
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Central to the bearish view is a delayed increase in natural gas average selling prices and compressed refinery margins, which Morgan Stanley says will remain under pressure until fuel retailers recover their current losses. The brokerage also flagged that India's diesel market is on course for a surplus by the second half of 2027, driven by a threefold rise in domestic refinery capacity — a shift that could force Oil India to offer discounts on diesel sales and further weigh on realisations.
Oil India shares have been under pressure in the past five trading sessions.
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On production, Morgan Stanley warned that a slow ramp-up in domestic output should "surprise the Street negatively in coming years", a pointed assessment given the brokerage has already trimmed its 2027 EPS estimates for the company by 50% year-to-date.
The note added a further 6-7% downside risk to consensus earnings forecasts if oil prices normalise once risk premiums tied to the Middle East conflict ease.
The downgrade marks a sharp reversal from Morgan Stanley's earlier stance, when it held Oil India as a preferred pick. With the revised target implying further downside from current levels, the call adds to a difficult run for the stock, which has been among the weaker performers in the state-owned energy pack this month.
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