Last week, the Government of India decided to raise diesel, domestic liquefied petroleum gas, and kerosene prices while also reducing customs and excise duty in order to cut the revenue loss of fuel retailers and to help boost the finances of struggling state-run oil and gas companies.

During the first quarter of the fiscal year Indian Oil, Bharat Petroleum and Hindustan Petroleum actually lost on selling diesel, domestic LPG and kerosene below cost.

The decision to raise prices had been considered very politically sensitive because it risked lifting inflation higher while reducing the Centre’s revenue. As a result the government had been reluctant to act on the issue.

Once the United Progressive Alliance decided to act, the Bombay Stock Exchange began to trade over 160 points higher on buying by funds and retail investors in Oil & Gas, PSU, Auto and Capital Goods stocks. The fact that the United Progressive Alliance finally decided to act on the politically sensitive issue cheered investors and seemed to lift the mood in the stock market.

By 02:55 pm (IST) the BSE Sensex was up to 18,398, 157 higher than the last close. The day’s high stood at 18,494 and opened at a low of 18,123. Meanwhile, the NSE Nifty has surpassed the 5,550 mark with the day’s high of 5,552.