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Roundup 2019: Gains in only three stocks help Nifty Energy rise 11% in 2019

Roundup 2019: Gains in only three stocks help Nifty Energy rise 11% in 2019

Roundup 2019: Gains in only three stocks help Nifty Energy rise 11% in 2019
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By Pranati Deva  Dec 17, 2019 12:52:20 PM IST (Published)

Despite 7 of 10 stocks of the Nifty Energy index giving negative returns, the index rose over 11 percent in 2019. The rise in the index was only led by gains in 3 stocks - Reliance Industries (RIL), BPCL, and HPCL.

The Nifty Energy index rose more than 11 percent in 2019 despite seven of 10 stocks in the index giving negative returns. The rise was led by gains in only three stocks - Reliance Industries (RIL), BPCL, and HPCL.

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While RIL and BPCL surged over 35 percent in 2019, HPCL added 5 percent on a year-to-date basis.
Losers included Reliance Infra (down 92 percent), GAIL (down 34 percent), Tata Power (down 27 percent), ONGC (down 17 percent), IOC (down 8 percent), NTPC (down 7 percent), and PowerGrid (down 5 percent).
While major oil stocks from the index rose, power stocks have been under pressure for the year due to negative newsflow such as of PPA renegotiations, demand reduction and mounting dues from discoms to the generating companies.
RIL was the top gainer in the index, rising over 35 percent for the year on the back of the increase in target prices by various brokerages after Reliance Jio announced tariff hikes and the company signed a deal with Aramco. The company in August had announced plans to cut its net debt to zero in 18 months through various measures, including a stake sale in its oil-to-chemicals business to Saudi Aramco.
BPCL was another major gainer in the index on the government's privatisation plans for the company. Most analysts believe these changes will be positive for the company.
"We believe BPCL is a strategic fit for sovereign crude exporters to secure their future crude markets as BPCL enjoys a sizeable 20-27 percent share in the growing domestic fuel market, with a strong moat due to their infrastructure and low-cost depreciated asset base," said SBICAP Securities in a report.
However, the earnings of the stocks haven't been at par with estimates this year. Post the Q2 earnings results, Motilal Oswal cut earnings of OMCs by 17-21 percent for FY20, taking into account the poor performance in the quarter, the weak near-term outlook on refining and the higher-than-expected tax rate. The brokerage has also cut their FY21 estimates by 5-8 percent, primarily due to the tax rate.
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