RIL, ONGC: Will windfall tax hike dampen upside in oil-linked stocks?

Shares of Oil companies extended decline Wednesday, after the central government hiked the windfall tax effective January 3. 

Oil & Natural Gas Corporation shares tumbled 2.25 per cent, while Reliance Industries, Bharat Petroleum Corporation and Indian Oil Corporation plunged 0.80 per cent, 0.30 per cent and 0.25 per cent, respectively. Hindustan Petroleum Corporation shares were the lone gainer among the pack, rising 1.45 per cent on Wednesday.

The Central Board of Indirect Taxes and Customs has raised windfall tax on petroleum, crude, and aviation turbine fuel effective from January 3. The windfall tax on crude oil has been increased to Rs 2,100 per tonne from the Rs 1,700, while diesel exports are now taxed at Rs 7.5 per litre, up from Rs 5. Similarly, aviation turbine fuel saw an increase to Rs 4.5 per litre from the previous Rs 1.5 per litre.

So far this new year, Brent crude has slipped nearly 5 per cent to  $82.12 post witnessing sluggish trades in December last year. The crude oil major has been trading in a narrow range of  $100 per barrel to $80 per barrel since the last four months. 

Windfall tax was introduced in July last year when the centre observed producers making unexpected profits due to high fluctuations in crude oil prices.

Amid Centre stepping up to raise the windfall tax, Here’s the technical outlook of related stocks:-

Nifty Oil and Gas Index (NIFTYOILAN) 

Outlook: Breakout over 8,600

The Oil and Gas index is perceiving selling pressure near 8,600 since last December, which it failed to overcome even after making two robust attempts. While the 200-day moving average (DMA) serves as a cushion for the medium-term set at Rs 7,978-mark, the underlying trend could see added strength once the index takes out the immediate barriers of 8,500 and 8,580 levels. CLICK HERE FOR THE CHART

Oil & Natural Gas Corporation Ltd (ONGC)  

Likely target: Rs 163

Upside potential: 12%

While there is a negative divergence of the Relative Strength Index (RSI) on the daily chart, the formation of “Golden Cross” pattern could propel stock from the weakness presented by the technical indicator. The support of Rs 138 should now act as a major determinant of the bullish bias. Only a decisive breach beneath the same may foster bearish sentiment. Overall, the trend suggests a move in the direction of Rs 163 levels. CLICK HERE FOR THE CHART

Reliance Industries Ltd (RELIANCE)

Outlook:  A new historic peak once key hurdles are taken out

On a broad perspective, until the support of Rs 2,380 is safeguarded, which is its 100-DMA, the upward bias is going to stay buoyant. The stock is presently facing hurdles at Rs 2,750 and Rs 2,650 levels and if it manages to break through these marks, the bullish bias could then see a new historic peak of Rs 2,900. CLICK HERE FOR THE CHART

Bharat Petroleum Corporation Ltd (BPCL)

Likely target: Rs 390 (once Rs 350 is surpassed)

Upside potential: 11%

A “Double Bottom” breakout could direct a steady upside for the shares of Bharat Petroleum Corporation. However, the stock needs to overcome the obstacle of Rs 350 on strong volumes. When this happens, the underlying trend could provide accumulation cushion  from a medium-term perspective. Currently, the lower end support is positioned at Rs 320 levels. Upon crossing Rs 350 levels, the stock may head in the direction of Rs 390- Rs 380 levels.  CLICK HERE FOR THE CHART

Hindustan Petroleum Corporation Ltd (HINDPETRO)

Outlook: Breakout over Rs 255

A breakout over Rs 255 will take Hindustan Petroleum Corporation shares to Rs 290 levels, which is the key hurdle since February, 2022.  The present chart structure denotes a positive bias, with the support of Rs 220. A rally over Rs 255 will turn the outlook to strong bullish, providing required supports on any healthy corrections.  CLICK HERE FOR THE CHART