Hold Indian Oil, Gas Energy Companies

Indian Oil Gas CompaniesThe BJP Government led by Shri Narendra Modi has taken some bold decisions in the Oil & Gas and Energy sector. Retail diesel price deregulation, providing predictability to improved cash flows of oil marketing companies (OMCs), setting the sector up for better marketing margins and private-sector competition, 2) Two-tier natural gas pricing with 47% rise in price of current production to US$6.19/mmBtu (from 1 Nov 2014 with 6 monthly review) and other incentives for future gas discoveries from the more expensive types of projects and finally, direct cash subsidy transfer to retail LPG consumers by June 2015, further improving OMC cash flows and reducing diversion of subsidized LPG for commercial use.

These are big steps as the illiterate ministers in the Congress led UPA couldn’t take; and their high motive for Corruption had led to half a decade of policy paralysis.

In this backdrop all the Research Analysts have upgraded the Indian Oil, Gas and Energy sector to BUY. However, what this means to Retail Indian Investors ? If you have appetite for risk, only then venture into policy sensitive sectors or if you have already bought the following stocks, you can continue to HOLD. Or you can BUY the stock at discount as the Government is mulling disinvestment in ONGC at a discount to Retail Indian Investors.

Here are the Target prices of Various Stocks in the Indian Oil, gas and Energy Space
HPCL – Rs 650
BPCL – Rs 880
Reliance – Rs 1,200
Petronet LNG – Rs 230
ONGC – Rs 580
Oil India – Rs 710
IOC – Rs 435
GAIL – Rs 475

Amid global oversupply of refined products, having presence in profitable, incumbent oil marketing networks is a competitive edge, in our view. We see HPCL, BPCL as best placed, although private retailers like Reliance /Essar Oil should also benefit.