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Fuel price hike may be big drag on Dalal Street

28 Jun 10 10:49 AM
ET
MUMBAI: Domestic shares may be under pressure early this week on fears that the government’s decision to hike fuel prices will boost inflation. Investors are concerned that a further rise in prices could prompt the Reserve Bank of India (RBI) to take stronger steps in monetary policy to combat inflation.

Shares of automakers are likely to be subdued on concerns that higher fuel prices could dent demand for vehicles. Shares of oil marketing companies (OMCs) such as HPCL, BPCL and IOC and explorers, including ONGC, could rise.

“We may see these stocks (oil) going higher in the next few days because they had been lacklustre for a very long time,” said Ambareesh Baliga, vice-president, Karvy Stock Broking. He added that auto stocks should be avoided, as they will see some profit-booking, after a good rally in the past few weeks. Though the move to raise oil and gas prices is expected to improve the government’s finances in the long run, a section of the market is concerned about the timing of the increase, as inflation is still high.