Buy BPCL, ONGC and GAIL stocks in the current market: Deven Choksey

In a chat with ET Now, Deven Choksey, MD, KR Choksey Securities, shares his views on oil marketing companies.

ET Now: For a trader, is it time to lock some gains in oil marketing stocks? The entire thesis for oil marketing stocks have done well of late is a strong rupee and a weak crude. Now it is the reverse, rupee is stable and crude is up.

Deven Choksey: This kind of phase would continue but to my mind, the oil marketing companies and the upstream oil companies have moved up in the recent times largely.

The movement is based on the expectations of the NDA led government coming into power and the systematically working on the subsidy part of the business, which is troubling most of these companies.

The companies are not growing and on that assumption, larger amount of money got allotted to some of these oil marketing and the upstream companies. To my mind, that part of the story has not changed at this point of time and probably one will have to wait and see once the government takes the position and takes the policy actions thereafter.

Market would have done a run-up little ahead of time. I think that some correction is justified given the kind of rally that they have had. In this correction, you might once again see the long-only funds contributing to the process and add into the portfolio of some of these companies.

So I would rather remain opportunistic to buy in this particular scenario in a falling market or corrective market in some of the companies like BPCL or ONGC and GAIL.

ET Now: Reliance is coming out with its earnings over the long weekend what is it that you are expecting this time?

Deven Choksey: In case of Reliance, the earnings estimates are likely to be more on the positive side. Also from the fact that last quarter you are likely to see the contribution of Shale gas getting reported and more importantly in the retail space the company has already started making profits.

So these two portfolios are likely to contribute smartly to the bottom line of the earnings of the company. All along we have also been seeing the traction on the distillation side in the refining business and that is where you are likely to see the higher amount of refining margin in this particular quarter.

So all in all put together the company would end up with the year somewhere around 67 to 68 to earnings per share as we calculate in this particular times.

May be we will have to wait and see as to how exactly they give the commentary pertaining to the petrochemical segment of the business, which is likely to start some of its capacities in financial year 2014-2015 in the second half and that is the trigger because that is where the company would probably start recording the volume led margin growth in the petrochemical segment.

So overall it is more of a commentary as far as the future or the 2014-2015 financial year is concerned, most of it is priced in though as I would call it but growth would be seen largely from the Shale gas. So these are the few areas which one would like to look at in case of Reliance’s results.

ET Now: Do you like Jubilant Foodworks after the recent correction that the stock has gone through and of course now that the FII limit being hiked does it seem like in the near term it may have bottomed out?

Deven Choksey: I really do not know whether in the near term it has bottomed out at this point of time but what I am more concerned about is the kind of a growth that this company is likely to achieve.

To my mind they are facing the headwinds on the growth side and probably that is where the company is on a some amount of a corrective downside as far as the price is concerned. Till the point of time, we see the growth returning back with some better strategies from their side I do not think that people would be in very much hurry to buy into this company.

Of course increase in the FII limit would mean that some amount of allocation of fund would start ending up into this particular stock and that could stabilise the price but to really get the premium prices, which they use to command earlier.

I do not know whether that could come easily till the time they bring the growth back into the business so really watch the growth coming out and that is where one could allot money into this company.