Buy ONGC and Reliance for long term: Manish Sonthalia

Manish Sonthalia, Senior Vice President - Fund Manager, Motilal Oswal Securities, in a chat with ET Now, gives his views on ONGC and Reliance Industries.

How sour could the sentiment get on ONGC today given that the FPO has been deferred yet again?

It is quite distressing to hear that. Lot of institutional investors who are also looking forward to buy at the current prices or maybe even at a discount, now it looks that the government is asking for a premium which may or may not be forthcoming. So it is a decent buy at current prices but maybe trading at less than 10 times. So one would have to wait a bit longer but this currency depreciation would have some sort of a negative impact on ONGC if we assume that 40% of subsidy burden is to be born by ONGC, but in case you have a 33%, then you have some sort of a positive currency impact on ONGC. So keeping all these things into perspective, if one was to take a look into the secondary markets and accumulate ONGC, it is not a bad bet.

So if the ONGC issue is priced at current market price of 260, would you like to fill in that application for the FPO?

100%. If the government goes to decide that it would come at around the current price, then also it would make a strong case for buying into ONGC.

Between Reliance and ONGC what will you prefer at current market levels?

There are uncertainties surrounding Reliance but purely from a medium to long term perspective, even Reliance is not bad and given the fact that this currency depreciation of INR has positive impact on Reliance to the extent of 3-3.5% of profits because GRM margins are pegged in dollars, petchem is pegged in dollars, even gas price is pegged in dollars. So that is leading for positive impact on Reliance from even a short term point of view to the extent of around 3-3.5% whereas that may not be so in the case of ONGC for the short term but in the long term both Reliance and ONGCs are buy for me.