NEW DELHI: The domestic stock market may see volatility in the near term if the government decides to postpone its plan of BPCL’s privatisation to the next fiscal.
A media report citing sources claimed that divestment in the company may be pushed beyond March 31, 2020. The shares of BPCL slipped 3.12 per cent to Rs 477.40.
Ajay Bodke, CEO – PMS at Prabhudas Lilladher said the deferral of BPCL privatisation to FY21 may trigger correction in Indian equities, as it would further hit the fiscal math of the government.
“This could well be the start of correction in Indian equities. Severe shortfall in overall tax revenues (both direct and indirect taxes) will be compounded by large shortfall in divestment proceeds. Deferral of spectrum-related payments by two years to provide relief to beleaguered telecom companies is already weighing heavily on fiscal finances,” he added.
The country’s fiscal deficit has already hit 102.4 per cent of 2019-20 Budget Estimate at Rs 7.2 lakh crore at the end of October. The gap between expenditure and revenue was at Rs 7,20,445 crore as on October 31, 2019, according to the data released by the Controller General of Accounts.
Sale of BPCL was one of the key components of divestment this year for the government, as it sought to raise Rs 1.05 lakh crore by selling its stake in state-run companies.
Shares of BPCL have surged 31.61 per cent year-to date thanks to government’s plan to sell stake in the downstream oil major. In contrast, 30-share benchmark index Sensex is up 15 per cent in the Calendar 2019.
Deepak Jasani, Head – Retail Research at HDFC Securities said if the reports of delay are true then there would be some concerns on fiscal deficit and how the divestment target will be managed.
“This could be one of the negative triggers for the market. Dalal Street keeps moving up on few positive and despite some negative triggers. Now the negative triggers would come to the fore. So, may be, in the next one or two days we can see some minor downmove,” Jasani added.
HDFC Securities is bearish on BPCL, as it does not see any massive value unlocking even if the divestment go as planned. It has a ‘sell’ rating on the stock with target at Rs 451.
Sanjeev Hota, Vice President – Head of Research at Sharekhan, said the delay is not likely to have much impact on the stock, but it could see some weakness in the near term.
“This delay is not going to have any structural impact on BPCL because somewhere down the line, it is going to be privatise. In the near term, there could be sentimental impact,” Hota said.
He suggested the investors to take the opportunity to accumulate the stock on any weakness for long term.
Source: Economic Times
