India oil and gas - Prefer IOCL among OMCs; CGDs’ valuation cheap

Research evidence excerpt

India oil and gas - Prefer IOCL among OMCs; CGDs’ valuation cheap

Global Markets Research

10 June 2026India oil and gas

EQUITY: OIL & GAS/CHEMICALS

Prefer IOCL among OMCs; CGDs’ valuation cheap Research Analysts

India Oil & Gas/Chemicals

OMCs’ integrated margins tracking in positive after price Bineet Banka, CFA - NFASL

bineet.banka@nomura.comhikes, excise duty cuts, oil price fall

+91(22)4037 4044

We prefer refiners in O&G value chain; CGDs trading at attractive valuations

Diesel and ATF cracks have remained healthy since the start of the West Asia conflict,

currently tracking at USD50/bbl/USD54/bbl, vs a USD15-20/bbl pre-war run rate. This has

been mainly driven by refinery rundowns following crude shortages and damages owing

to drone/missile attacks, and refineries in Asia processing lighter crude grades (which

produce less diesel/ATF) due to a shortage of medium-heavy grades from the Middle

East. There have also been supply shortages from countries such as China, Russia which

have been cutting down the exports of petroleum products. We prefer refiners like IOCL

(IOCL IN, Buy) among the oil and gas stocks in our coverage, as we expect its robust

refining margins to continue, and we expect IOCL to be the least impacted by marketing

under-recoveries among our covered OMCs (Fig.6). We expect Reliance’s Oil to

Chemicals (O2C) earnings in 2QFY26F to be impacted by the 3-4 weeks maintenance

shutdown of its domestic refinery, though refining and petchem margins are tracking

stronger, q-q.

We believe that our covered city gas distributors (CGDs) are attractively valued and, post

the recent price hikes, risk to margins has declined significantly. We expect 1Q could be

the bottom in terms of CGD margins, while volume growth may surprise positively due to: