The Indian stock market closed lower on Tuesday, August 18, with the Sensex falling 493 points (0.63%) to 77,235.46 and the NSE Nifty 50 declining 133 points (0.55%) to 24,154.90. The Nifty extended its losing streak to six consecutive sessions amid unresolved tensions in West Asia and concerns that elevated crude oil prices could weigh on India's macroeconomic stability and corporate earnings. According to TradingView News, the Gift Nifty index signalled a negative opening at the 24,187.50 mark, down over 42.60 points from the previous close. Market sentiment remains subdued as weakening global risk sentiment and persistent geopolitical tensions continue to weigh on investor confidence.
Crude oil prices have surged from $70 per barrel to above $100/bbl following the end of ceasefire, with Brent crude oil expected to remain elevated above $80/bbl for the next 12 months due to restocking demand, higher freight costs and geopolitical risks. According to the International Energy Agency, global oil supply rose 2.4 million barrels per day month-on-month in July 2026, but remains 6.3 million barrels per day below July 2025 levels. The IEA expects the global oil market to see a deficit of 1.3 million barrels per day through CY26 and return to surplus in CY27, assuming Middle East normalisation. JM Financial analysts expect Brent to remain around $80 per barrel over the next 12 months despite the reopening of the Strait of Hormuz, citing restocking demand of 2-3 million barrels per day as countries replenish the 1,000-1,200 million barrels of inventory depleted during the crisis.
Oil India is positioned for stronger upside with estimated 15-20% earnings per share growth per annum for 3-5 years, compared to ONGC's estimated 1% production growth per annum over FY26-28. Oil India plans NRL refinery expansion from 3 million tonnes per annum to 9 million tonnes per annum by end-FY27 and crude output growth to a target of 4 million tonnes in FY27 (versus 3.45 million tonnes in FY26). The company is guiding for gas output growth to 4 billion cubic metres by FY28-29 (versus 3.2 billion cubic metres in FY26) and later to 5 billion cubic metres. JM Financial expects the company's NRL refinery capacity expansion to drive future output increases, with the company seeing robust crude output growth trend since Q4FY26. The brokerage also expects a possible reversal of excise cut on auto fuel, which could restore an excise benefit of around $16 per barrel for the NRL refinery.
Current stock prices are assuming $60/bbl of net crude realisations, whereas companies could be realising 35-50% higher prices. The supply situation could worsen if the Houthis block the Bab al-Mandab Strait in the Red Sea, through which 10-12% of global oil passes, with over 50% of India's oil imports coming from Russia in June, mostly via Bab al-Mandab. Oil India's crude production increased 11% year-on-year to 0.95 million tonnes in Q1FY27, with management expecting 1 million tonnes output each in Q2-Q4 and targets of 4.2 million tonnes per annum by FY29. JM Financial notes that every $1/bbl rise in crude oil price boosts ONGC's and Oil India's earnings per share by 1-2%. For Indian upstream producers, JM Financial pointed out that prevailing stock valuations for ONGC and Oil India are discounting net crude realisations of only $55 to $60 per barrel, positioning them as key beneficiaries of the current price environment.
JM Financial has retained Buy ratings on both Oil India and ONGC with target prices of ₹560 and ₹300 respectively, citing their upstream producer advantage. The brokerage has reaffirmed 'Reduce' ratings on oil marketing companies HPCL, BPCL and IOCL with target prices of ₹375, ₹290 and ₹135 respectively, citing unfavourable risk-reward profiles. At a landed Brent price of around $101 per barrel, OMCs' weighted average auto-fuel integrated gross margin is estimated at ₹9 per litre, which is ₹3.5 per litre below the historical average of ₹12.5 per litre. JM Financial estimates OMCs are making around ₹4.5 per litre in EBITDA from auto fuel, ₹3.5 per litre below the historical average of ₹8 per litre. The brokerage expects OMCs could earn a normalised auto-fuel integrated gross margin of ₹12.5 per litre at a landed Brent price of around $95 per barrel, aided by a ₹10 per litre excise duty cut and ₹7.5 per litre fuel price hike.
