Shipping Corporation of India stock jumps another 16.5%, up 40% in 3 sessions. Here’s what triggered the rally

Shipping stocks continued their impressive rally for the second consecutive session on Friday, with Shipping Corporation of India (SCI), leading the charge with a 16.40% surge to hit a record high of ₹384.20 per share. In the previous trading day, the stock had hit the 20% upper circuit limit on positive developments. This recent rally in stock has propelled it to gain 40% in the 3 sessions and 113% in the current year so far. 

Mint had earlier reported, citing sources familiar with the matter, that the Union Ministry of Shipping has proposed a joint venture between the state-run Shipping Corporation of India (SCI) and a public sector oil marketing company to manufacture very large oil tankers.

Indian Oil Corporation Ltd. (IOCL), the country's largest oil marketing company and refiner, is being considered as the preferred partner for this joint initiative with SCI.

India currently holds less than 1% of the global shipbuilding market, dominated by China, South Korea, and Japan, and has never produced an oil tanker before.

This proposal aligns with the government's 'Atmanirbhar Bharat' initiative, aimed at boosting India's manufacturing sector and ensuring energy security. The development of indigenous very large crude carriers (VLCCs) or oil tankers would reduce reliance on foreign vessels and insurers, thereby mitigating risks from geopolitical tensions affecting oil supply chains.

As the world's third-largest importer of crude oil after the US and China, India faces persistent supply concerns during conflicts, leading to volatility in global energy markets.

KPMG's recent report estimates India's potential commercial shipbuilding market value up to 2047 at $62 billion.

Meanwhile, contributing to the surge in shipping stocks, reports from CNBC Awaaz indicate that the Maritime Development Fund is poised to receive an allocation ranging from ₹15,000 crore to ₹20,000 crore in the upcoming Union Budget on July 23. Additionally, there are expectations for the announcement of the Harit Nauka scheme.

Comparable to established sectoral financial institutions like the Power Finance Corporation, REC, and IRFC, the Maritime Development Fund holds promise for significant sectoral growth.

The potential allocation of funds could mark a pivotal moment for the shipping sector, which currently faces challenges in accessing adequate financial resources such as bank credit and foreign investment. Despite its crucial role in bolstering projected trade and economic expansion, these limitations have persisted.

Industry analysts foresee the fund addressing the maritime sector's substantial funding requirements, facilitating targeted initiatives such as shipbuilding, decarbonisation, adoption of green energy technologies, innovation in technology, and workforce training and development.

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.