Shares of Hindustan Petroleum, Bharat Petroleum and Indian Oil plummeted 20-25 percent in initial trade on Friday. Stocks extended Thursday's losses as brokerage firms turned bearish on them following the Narendra Modi government's directive to shift Rs 1 per litre excise duty cut in retail fuel prices on them to lower burden on consumers.

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IOC's market cap has declined by Rs 13.80 percent, shedding Rs 18,983.05 crore, while BPCL's market cap went down by 17.70 percent, or Rs 12,677.805 crore. HPCL's market cap has fallen Rs 6,944.88 crores, or by 21 percent at 11.31 am. Together, these companies lost more than Rs 38,605 crore in market cap on Friday.

Since Thursday, the total loss in market cap came to approximately Rs 64,560.

Brokerages have changed their stance on these stocks, sharply slashing their earnings estimates to factor in reduced profit margins following the government directive. Not just that, most of them fear over the status of deregulation of fuel prices.

While retaining its buy rating on BPCL, IOC and HPCL, HSBC said the "risks to the near-term earnings have increased."

Goldman Sachs said that "the announcement of the excise cut has confirmed the reversal of deregulation of the fuel retail market." The firm has downgraded HPCL and BPCL to sell from buy.

CLSA says the "fuel price cut will bring down EPS of the OMCs between 23 and 46 percent." CLSA has retained sell rating on the three PSU oil refiners. Citi has cut the target of the three oil marketing companies between 42 and 57 percent and downgraded them from buy to sell.

Meanwhile, equity market extended losses after a tepid start. The BSE Sensex traded at 34,830, down by 339 points, or nearly a percent at 10.23 am. The Nifty50 fell more sharply by 1.23 percent, lower by 131 points, to trade at 10,469.

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First Published:Oct 5, 2018 11:27 AM IST