Whalesbook
Mixed Outlook for India's Oil and Gas Sector
India's oil and gas sector faces a mixed picture in the fourth quarter of fiscal year 2026, according to PL Capital. While overall sales are expected to rise about 7.0% from the previous quarter, profits are likely to fall. Aggregate EBITDA and net profit are forecast to drop by approximately 10.5% and 17.6% respectively. This split performance is driven by the impact of rising Middle East tensions on global energy prices and supply chains.
Upstream and Refiners Benefit from Higher Prices
Upstream exploration and production companies are benefiting most from sustained high crude oil prices, with expected EBITDA growth of nearly 20% quarter-on-quarter. Standalone refiners are also gaining from stronger crack spreads. Mangalore Refinery and Petrochemicals Ltd. (MRPL) is forecast to increase its EBITDA by about 13.6% QoQ. MRPL traded around ₹179.33 on April 7, 2026, with a P/E ratio of roughly 14.5x. However, some analysts express caution, with average price targets between ₹130 and ₹145 indicating potential downside.
Reliance Industries Faces Freight Costs, Digital Growth Continues
Reliance Industries Ltd. (RIL) faces mixed conditions. Its standalone EBITDA is predicted to fall about 5.0% QoQ due to higher freight costs, driven by elevated energy prices and logistics issues. However, RIL's growth sectors, Reliance Jio and its retail business, are still expanding, with expected QoQ growth of roughly 3.3% and 1.5%. RIL's market value is around ₹17.65 trillion, with a P/E ratio near 20-23x. Analysts largely rate it a 'Strong Buy' with an average 12-month price target around ₹1,720. S&P Global had upgraded RIL's rating to 'A-' in December 2025, noting its improving cash flow stability.
Downstream Operators Hit by Rising Costs, Regulated Tariffs
Oil marketing companies (OMCs), city gas distribution (CGD) providers, and other gas utilities are facing major pressure. OMC EBITDA and net profit are expected to drop sharply, by about 33.4% and 43.1% QoQ. CGD and gas utility EBITDA are also projected to fall around 13.0% and 19.0% QoQ. This is because they cannot fully pass on higher input costs due to regulated prices and caps, potentially reducing demand as consumers face higher prices.
Global Prices and India's Economic Risks
The Middle East conflict has pushed crude oil prices higher, with Brent averaging $103 per barrel in March 2026 and WTI between $90-100. As India imports about 86% of its crude oil, plus significant natural gas and LPG, it faces major economic risks. These include a widening Current Account Deficit, potential rupee depreciation, and rising inflation. Businesses heavily reliant on fuel and energy are seeing their profit margins shrink because they cannot pass on rising costs. Analysts are lowering earnings forecasts due to this economic climate. Motilal Oswal predicts Nifty 50 companies will see 6% YoY earnings growth for Q4 FY26, a significant slowdown, with more downgrades possible if tensions continue.
How Markets Reacted to Past Oil Shocks
Sharp oil price increases have historically caused initial market drops in India. For example, Brent crude hitting $119 in March 2026 led to a roughly 5% fall in Indian equities. However, data since 1995 shows the Nifty 50 usually recovers within a year, with a median 12-month return of +16.5% after such spikes. For the past two decades, Nifty and crude oil prices often moved together, especially within certain ranges, reflecting global growth. But when crude prices rise above $100 a barrel, this link often reverses, as the economy feels the full impact of inflation and squeezed profit margins.
What's Next for the Sector
The oil and gas sector's immediate future depends on geopolitical stability in the Middle East and its effect on energy prices. While upstream and refining segments may keep benefiting from higher prices, downstream companies' profitability is uncertain. Investors will watch crude price changes, government policy on fuel taxes and subsidies, and company statements during earnings calls to assess the sector's strength and outlook. The EIA expects Brent crude to fall below $90/bbl by Q4 2026, but still includes a premium for ongoing uncertainty.