Shares of state-run oil marketing companies, which surged nearly 3% in early trade after state-run oil firms raised petrol prices by Rs 3.14 per litre, pared morning gains post the Reserve Bank of India's 25-bps rate hike.
Petrol prices have been hiked due to weakness in the rupee as "Indian Brent hovering near $110 with no respite has made crude costlier by 7 per cent in one month due to weak rupee," said Anand Rathi in a research note.
Petrol prices were hiked for the 10th time since June 2010 from Friday as India's oil retailers sought to pass most of the burden of the falling value of the rupee and high crude prices on to consumers.
The rupee has weakened more than 8 per cent since its highest level (43.8550 against dollar) reached on July 27, 2011. It touched a low of 48.02 on Wednesday, a level last seen on September 29, 2009.
"One of the major reasons for the rupee's weakness is the withdrawal of foreign investment from India's stock market. FIIs were net sellers of Rs 9536.40 crore in the equity segment in the month of August 2011," said Sutapa Roy, Research Analyst at Microsec Capital Ltd.
According to Macquarie Economics Research, the rupee is likely to remain under pressure in the near term, as India runs a high current account deficit of 2.6 per cent of GDP and a high trade deficit of 7.6 per cent of GDP, as of FY11. Capital flows are critical for India, as it funds its current account deficit through these inflows.
At 01:56 p.m., Shares of Bharat Petroleum Corp, Hindustan Petroleum Corp and Indian Oil Corp were down 0.3%-3.1 per cent.
The latest petrol price hike effected by the oil marketing companies will marginally add to upward pressures on headline inflation, the Reserve Bank of India (RBI) said Friday in its mid-quarter review of the monetary policy.
Petrol price of Rs 63.70 per litre corresponds to crude oil price of about $103 per barrel. The Brent crude, which is trading around $113 while the US crude is hovering around $90 mark along with depreciation of rupee to 48 rupees per dollar, prompted OMCs to increase prices. Read More
for detailed price charts.
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