Mumbai: Led by Indian Oil, oil stocks Thursday surged up to 6.6 percent after the government virtually deregulated diesel prices allowing "small" hikes over a period of time.
Shares of Indian Oil Corporation jumped 6.60 percent to settle at Rs 315.90 on the BSE.
Similarly, Hindustan Petroleum's scrip zoomed 6.06 percent to close at Rs 345.60, while BPCL rose by 3.75 percent to Rs 395.90.
ONGC rose the most among Sensex stocks by 3.66 percent. Reliance Industries climbed 3.40 percent.
Following gains in these stocks, the BSE oil and gas index shot-up by 3.11 percent to 9,283.79 and was the top gainer among the 13 sectoral indices.
"This is a step in right direction as it will help the government in reducing the pressure on fiscal deficit. Both upstream and downstream companies will stand to gain as it will reduce their subsidy sharing burden and improve overall cash flows of the companies. Quantum of hike and periodicity would be the key things to watch out for," Motilal Oswal Securities said in a report.
Diesel prices in all probability may be hiked by Rs 1.50-2 per litre in the first instance that can be as early as tonight following the decision taken by the Cabinet Committee on Political Affairs (CCPA) headed by Prime Minister Manmohan Singh.
"As far as diesel is concerned, oil marketing companies have been authorised to make price correction from time to time," Oil Minister M Veerappa Moily said here. "It (price correction) can commence even from today."
Price of diesel was last revised on September 14 when it was hiked by a steep Rs 5.63 per litre. At present, diesel costs Rs 47.15 per litre in Delhi.