Bullish on Oil Marketing Companies: Dhiraj Sachdev, HSBC AM India

In an interview with ET Now, Dhiraj Sachdev, Senior VP & Fund Manager-Equities, HSBC AM India, shares his view on OMCs. Excerpts:

ET Now: Last Diwali to now if there is one stock which has given the most returns when it comes to the Nifty names, that has been BPCL almost an 89% surge is what we have seen from last Diwali to now, what is the sense that you are getting now that the oil sector reforms are in place we have seen the oil and gas sector actually lagged the rest of the market, is all the good news already in the price or should investors look at these declines again as buying opportunities and add more positions?

Dhiraj Sachdev: It is largely in the price. There may be still some room left but the fact is that after many years or decades the diesel deregulation has happened, so energy sector reforms have been initiated including the gas price hike. Oil marketing companies incur losses on diesel and for the first time after many quarters or many years they have started over recovery.

So, obviously there is positive on the marketing margins front on the diesel side and as the numbers play out over the next couple of years the markets will respond and rerate these stocks which have been lying low and they are very attractive on price to book basis. Largely it is discounted and there may be near term corrections or profit taking but our sense is that it is a space being in favour for their earnings.