BPCL Weigh­tage in MSCI may Jump as FII Cap Set to go Up

Co likely to see for­eign funds buy­ing shares of around .₹ 1,008 crore

The Economic Times - - Markets: Beating Volatility - Rajesh.Mas­caren­has @times­group.com

Mum­bai: In­vestors are mount­ing bets on state-owned BPCL af­ter the com­pany ap­proved the in­crease in ceil­ing of in­vest­ment for for­eign in­sti­tu­tional in­vestors (FIIs) from 24% to 49%. This move, once ap­proved by the share­hold­ers and reg­u­la­tors, could re­sult in FII in­flow of over .₹ 1,000 crore into the stock, ac­cord­ing to an­a­lysts.

Cur­rently, BPCL has 0.41ba­sis points weigh­tage on the MSCI Emerg­ing Mar­ket In­dex. Af­ter the ceil­ing on FII in­vest­ment goes up to 49% from 24%, the weight of BPCL in MSCI in­dex is ex­pected to in­crease to 1.22%. This will re­sult in for­eign fund man­agers buy­ing around 11 crore shares worth .₹ 1,008 crore at Tues­day’s clos­ing price. Shares of BPCL have surged ne- arly 4.5% since April 1 and 15% in the past one month against gains of 1.4% and 3.3% by the Sen­sex in the re­spec­tive pe­ri­ods. The stock has seen sharp long po­si­tion build-up since be­gin­ning of April fol­low­ing its break­out above its


200-day mov­ing av­er­age, a key sen­ti­ment in­di­ca­tor.

“The stock con­tin­ues to see an up­trend with long build-up to the tune of 11% in fresh open in­ter­est seen from the start of the April se­ries. The stock has made strong gains with highs near the .₹ 942 zone, which is cru­cial spin­ning top seen in the De­cem­ber and Jan­uary se­ries at same lev­els,” said Navneet Daga, head of de­riv­a­tives, IIFL.

BPCL, which closed at .₹ 925.45 on Wed­nes­day, is one of the top picks of many bro­ker­ages.

“On­go­ing re­forms have the po­ten­tial to trans­form oil mar­ket­ing com­pa­nies into a struc­tural in­vest­ment play. BPCL stands out among OMCs for its su­pe­rior RoE of 23% in FY15,” said Raamdeo Agrawal, Joint MD, Moti­lal Oswal Fi­nan­cial Ser­vices.

For the nine month ended De­cem­ber 2015, com­pany re­ported an 11.9% jump in earn­ings per share to .₹ 67.5. An­a­lysts are fore­cast­ing an EPS of .₹ 82 per share in 2015-16.

“With mul­ti­ple earn­ings cat­a­lysts, BPCL is a ben­e­fi­ciary of re­forms/ lower oil prices, which is likely to see mar­gin ex­pan­sion,” said Niel Gupte, an­a­lyst, JP Mor­gan in a re­cent note.

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