With the Union Budget 2026‑27 only weeks away and Brent crude staying around $60 a barrel, investors are being told to choose their oil and gas stocks carefully.
Upstream stocks look attractive
JM Financial kept its buy rating on Oil India and ONGC, seeing good value at today’s prices. The broker raised the target price for Oil India to ₹500 and for ONGC to ₹290.
- Oil India could grow earnings about 15% a year for the next 2‑3 years, helped by a 20‑25% rise in oil and gas production and an expansion of its Numaligarh refinery.
- ONGC is also expected to benefit from steady production growth, even if Brent stays near $65 in the next two fiscal years.
Downstream marketers face tax and valuation risks
The brokerage warned that state‑run oil marketing companies (OMCs) like HPCL, IOCL and BPCL could see profit pressure.
- HPCL is trading at about a 15% premium to its historic levels, and its large Rajasthan refinery may only give modest returns.
- IOCL and BPCL have high valuation multiples and big spending plans, so the broker kept a “reduce” rating despite solid near‑term earnings.
- Potential increases in excise duty on petrol and diesel could cut the margin that OMCs earn from selling fuel.
Why the upcoming budget matters
The government may use the budget to raise excise duty to recover revenue from low crude prices. With an average fuel margin of about ₹8.2 per litre (vs. the historical ₹3.5), there is room for a ₹3‑₹4 per litre duty hike. Each ₹1 increase could add roughly ₹165 billion to central government revenue each year.
Global oversupply keeps crude cheap
International Energy Agency data shows a worldwide oil surplus of about 2.3 million barrels per day in 2025, rising to nearly 3.8 million bpd in 2026. OPEC+ output increases and more non‑OPEC supply are driving the surplus, and any easing of sanctions on Russia could add more oil to the market.
Overall, the analysis suggests that upstream producers like Oil India and ONGC may offer steadier medium‑term growth, while downstream marketers could face both valuation and policy headwinds.
Remember, this is just one perspective, not a prediction. Do your own research before making any investment decisions.