Oil India, ONGC top bets in oil and gas sector: Gaurav Mehta

In a chat with ET Now, Gaurav Mehta, VP-Institutional Equities, Ambit Capital, shares his views on the OMCs. Edited Excerpts:



ET Now: Despite the price cut over the weekend, the marketing margins for the OMCs are higher.Are you bullish on OMCs?

Gaurav Mehta: Six to nine months ago, we were very constructive on OMCs. After the recent up move, most of these positives are already priced in. It may be because of the FPO overhang or for other reasons that the upstream oil companies have not really moved. There is a lot of delta in terms of these reforms picking up versus the valuations catching up. That delta still stays with upstream oil companies. Added to it, a small risk for these oil marketing PSUs would be because of the entire deregulation and other reforms.

You might see a bit of incremental competition coming from private players. We think that risks are to the downside. The valuation nowhere is much higher in upstream oil companies, Oil India and ONGC in particular.