New Delhi, Jan 10: Oil stocks on Thursday rose by as much as 4 per cent following the Oil Ministry's proposal to hike diesel rates by Rs.3-4.50 per litre.
Shares of IOC gained 3.59 per cent at Rs.297.95 -- 52- week high. Similarly, HPCL gained 2.38 per cent at Rs.345.30, while BPCL's scrip moved up by 2.97 per cent to Rs.395.85.
ONGC, too, surged 2.06 per cent.
Led by the gains in these stocks, the BSE oil and gas index was trading 0.62 per cent up at 8,950.51 in the late morning trade.
Analysts said stocks of oil companies were in demand on hopes of a hike in fuel prices that would reduce their subsidy burden and improve revenues.
On diesel, the ministry has proposed a 3-4.50 per litre hike in one go or in monthly instalments of Re 1 or Rs.1.50 per litre. From April, it wanted Re 1 a litre increase every month till such time that the current loss of Rs.10.16 is wiped out.
Rally in these stocks was contrary to an overall sluggish equity market, where the BSE benchmark Sensex was trading flat at 19,671.79 at 1130 hrs.
The government will have to take action to correct the prices of diesel as its consumption is on the rise, Chairman of Prime Minister's Economic Advisory Council C Rangarajan today said.
"Domestic diesel prices are not in tune with the international prices of crude. Action will have to be taken to correct the prices of diesel for attaining fiscal consolidation," he said at a seminar by Indian Institute of Foreign Trade here.
Asked when the next diesel price hike was expected, he said that it depended on the government.
"It is necessary to raise the diesel prices which may also help in bringing down the headline inflation," Rangarajan observed.
Hike in railway passenger fares, which was announced yesterday, would also help the government in achieving fiscal consolidation, he added.
Stating that high inflation, high fiscal deficit and high current account deficit (CAD) were major areas of concern, Rangarajan, a former RBI governor, said the government was working towards bringing them under control.
High gold imports had contributed to high CAD which stood at 5.4 per cent in the second half of 2012-13 and was creating pressure on the rupee.
Other financial assets would have to be made more attractive, he said, adding that high inflation rates had made gold more attractive as a hedging instrument for which the yellow metal's imports had risen.
Rangarajan said inflation was expected to be in the region of 7 per cent by the end of March.
