ONGC and Oil India continue to be favourite picks from oil and gas space: Gaurav Mehta

In a chat with ET Now, Gaurav Mehta, VP, Institutional Equities, Ambit Capital shares his views on the oil and has space.

ET Now: What is your view on the oil and gas space as we approach the budget now?

Gaurav Mehta: If we indeed to go the diesel way for LPG and kerosene, it would be a significant positive. This will take care of one of the three key subsidy burdens that India has for fuel, fertiliser and food.

If fuel is taken care of, it will be a huge huge positive, not just for the fiscal position of the country but also for the CAD situation. Eventually, you are allowing those three market signals to dictate demand and supply rather than forcing that cushion of subsidy.

But for the sector, downstream companies are more or less factoring several positives in at the moment. We still see deep value in the upstream companies. ONGC and Oil India continue to be our two favourite picks from this sector.

This entire reform momentum around oil and gas space is hugely significant and should be very positive for oil and gas, especially ONGC and Oil India, the two upstream companies.

ET Now: Which is your favourite PSU stock?

Gaurav Mehta: At this point in time, thanks to all the reform momentum, ONGC will have to be our favourite PSU stock. This stands as a clear beneficiary amongst all the other stocks.

ET Now: Any reason why you like ONGC and not Oil India?

Gaurav Mehta: We are bias on both those names. We cover both those names. ONGC happens to be a relatively more liquid name, which is why getting in and getting out is relatively easier. We are bias on both with similar dynamics and we like both. Both the stocks should stand as a beneficiary of the reform thrust.