India's oil refiners ended with gains between 1.5-5.5 percent on Wednesday after brokerage firm Morgan Stanley projected better days for them over the next two months.

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HPCL outperformed peers, ending with gains of 5.3 percent, BPCL gained 3.3 percent, while Indian Oil ended with gains of 1.5 percent in mid-week trading.

Morgan Stanley said that India's fuel basket is priced at $110 per barrel and that the OMCs will recover more than their pre-Ukraine war book values over the next two months.

Despite multiple earnings tailwinds, the current multiples of these companies continue to imply below mid-cycle returns, according to the brokerage. It expects this recovery to continue even if the crude oil prices cross the $80 per barrel mark. In case of such a scenario, Morgan Stanley expects the requirement for budgetary support to reduce.

Among stock recommendations, Morgan Stanley prefers Indian Oil and BPCL. It believes that integrated margins are the highest ever for OMCs currently and this will enable the sector to recover past losses over the next few months.

The present crude oil prices provide a buffer for a fuel price cut of 2 to 5 percent, the note said.

Last month Nomura upgraded India’s oil refiners on the back of lower crude oil prices and improved refining outlook. It expects the marketing margins to remain above normative levels in the financial year 2023-24.