The Indian government’s decisive initiatives have helped oil marketing companies (OMCs) thrive in a volatile global environment, a report said on Tuesday.
In the last six months, Indian oil marketing companies have witnessed volatility in refining margins, potential risk on the US urging India to reduce its intake of Russian oil and depreciation of the Indian currency against the US dollar.
“The Indian government has been backing OMCs by supporting decisions (even in August 2025, India imported 1.3 million barrels per day), which are in the best commercial interests of these companies and also promising to pay LPG under-recovery incurred in FY24,” HSBC Global Investment Research said in a report.
All this resulted in OMC stocks surging by 14-23 per cent as compared to the NIFTY50 (up 12 per cent) in the last six months.
Combined refining and marketing (R&M) margins have been the hallmark of this steady performance.
While refining margins expanded in the interim and then contracted, and Indian currency depreciation ate away some of the marketing margins, combined margins have stood steady at $22-25/ barrel, which are much higher than our and the street’s full-year estimates, the report mentioned.
This leaves a comfortable margin of safety for these companies, which historically have been associated with highly volatile earnings.
“Our HSBC global team forecasts a big surplus in oil from Q4 CY25 onward, with a downside risk to HSBC’s Brent oil forecast of $65 per barrel for 2026. This provides further cushioning to estimates,” the report noted.
Moreover, auto fuel demand continues to maintain momentum despite weakness in ATF. In August 2025, auto fuel demand maintained momentum, growing 2.6 per cent year-on-year (YoY).
Gasoline demand grew a strong 5.5 per cent YoY. while diesel demand grew 1.2 per cent YoY. ATF demand is negative for a second consecutive month at -2.9 per cent (after -2.3 per cent in July).
“With recent trends in air traffic improving, we expect the decline also to reverse,” the global investment firm said.
OMCs will continue to add new outlets, which grew 8 per cent YoY in July 2025. At the same time, they have added EV outlets, which now account for 30 per cent of their total outlets.
According to the report, OMCs have to fund large capital expenditure plans, which gives us comfort that the government is unlikely to take away a large part of their margins by tweaking duties.
Also, a downside risk in oil prices provides further support to earnings, said the report.
