Oil retailers extended previous day's losses, falling up to 3 percent in early trade on Thursday after further spike in crude oil prices yesterday on tensions in Middle East. In previous session, these stocks plunged around 7 percent each.

Brent crude futures were at USD 72.42 per barrel, up 0.50 percent from their last close, at the time of writing this article.

US WTI crude futures were at USD 67.20 a barrel, up 0.57 percent from previous close.

Both Brent and WTI crude hit 2014 highs of USD 73.09 and USD 67.45 per barrel on Wednesday, respectively, after Saudi Arabia said it intercepted missiles over Riyadh and US President Donald Trump warned Russia of imminent military action in Syria.

Higher crude oil price is always a concern for country like India which imports more than 80 percent of oil requirement. It is always good for oil exploration companies but bad for oil retailers as experts feel the chance of lowering excise duties on oil seems unlikely.

"With monthly GST collections still falling short of government's target (though the roll-out of e-way bill is expected to help check evasion to some extent), worries about not letting fiscal deficit widen any further than the budgeted estimate for FY18-19 and tough ask in achieving FY18-19's disinvestment target; the wiggle room that the government has in terms of lowering excise duties appear to be extremely slim," Ajay Bodke, CEO & Chief Portfolio Manager PMS, Prabhudas Lilladher said..

If crude continues to remain above USD 70 for a longish period then the likelihood of government asking oil marketing companies (OMCs) to absorb some losses due to under-recoveries on petrol & diesel looks very much likely, he feels.

"We have seen the sensitivities displayed by the Centre in the run-up to the Gujarat assembly polls when OMCs were not allowed to hike prices in line with increase in global crude prices. Why should it be any different in the run-up to Karnataka polls in May 18 followed by assembly polls in MP, Rajasthan & Chattisgarh in Oct 18 followed by General Elections in May 19. Government would be wary of trenchent criticism coming it's way from media & Opposition of being unconcerned about common man's woes in allowing a relentless rise in fuel prices at consumer's end. The mere overhang and fear of dreaded government diktat in the event of further flare-up in crude prices, in my view, would make investors wary of these stocks till General elections," Bodke said.

The research house remained cautious on these stocks ahead of any such decisions that can potentially impact its marketing margins. "Irrespective of whether the above decision gets officially implemented, one cannot rule out the possibility of OMCs not passing on the rise in fuel prices to customers, given the forthcoming election season."