Cautious even at current levels on OMCs: ING Investment Management

In a chat with ET Now, Ramanathan K, CIO, ING Investment Management India, shares his views on oil marketing companies.

ET Now: What about oil marketing companies that probably one of the boldest steps that the government has taken and assuming that it goes through in totality without any kind of major opposition and well that is a hope that some of the investors will have, but Rs 5 uptake in diesel, possibly some more to come in some other petrol products as well. Do you think this could be the beginning of something new and therefore get into these stocks because they are seeing some correction today because of informed investors making some profit booking here and there, but what is the broad call?

Ramanathan K: It is a very difficult call to take because the subsidy allocation between OMCs upstream as well as GAIL is ad hoc. Last year, these companies were lucky. They did not have to bear anything. This year if you see, despite the increase in prices of diesel as well as the LPG re-allocation, the overall expected deficit is still 1,60,000 crores which is at least 30,000 crores more that what were the actual numbers last year. We need to see how the government allocates this subsidy among upstream and downstream, possibly given the size of the deficit as well as the overall fiscal deficit, there could be allocation in terms of subsidy bearing to OMCs. So I would be cautious even at current levels on the OMCs.