IOC has rallied nearly 6% to Rs 413, while HPCL has surged 4% to Rs 771 and BPCL has gained 2% at Rs 907 on the Bombay Stock Exchange (BSE). BPCL and HPCL are quoting at their record highs on the BSE.

Thus far in 2015, these three stocks have outperformed the market by gaining 25%-40% each compared to a 2% rise in the S&P BSE Sensex.

According to analysts at Nomura, the financial year 2016 will be a defining year for Indian oil public sector undertakings (PSUs). They expect a sharp increase of 53-134% in earnings as the full impact of reforms in oil marketing (diesel de-regulation, liquefied petroleum gas or LPG direct benefit transfer, etc), and a sharp decline in oil prices will be visible.

“With a concomitant decline in subsidies, we expect the quality and predictability of earnings to improve. Importantly, we believe higher earnings are likely to be sustainable,” the analysts said in a report dated July 2, 2015.

"For OMCs, as several key reforms are in place, earnings should now be driven more by fundamentals (refining margins, oil price, marketing margins, volume growth, etc) and their focus will now be on issues like efficiency and market share gains," the report added.