Prefer ONGC over Reliance Industries: Dr Tirthankar Patnaik, Religare Capital Markets

In a chat with ET Now, Dr Tirthankar Patnaik, Director, Strategist-Institutional Research, Religare Capital Markets Limited, shares his views on oil and gas space.

ET Now: What would be your best bet in this space?

Dr Tirthankar Patnaik: We have been pushing ONGC over Reliance Industries over the last couple of months. Reliance Industries has done well in the very near term after Essar Oil reported very good GRMs. Analyst are expecting the Q3 numbers for Reliance Industries also to be quite good.

We have a PAT estimate of Rs 49.7 billion and we have not changed that estimate because going forward GRMs are likely to taper down back to the levels of about $6.5 to $7 per barrel. So, we continue to push upstream oil. Therefore, ONGC is one stock that we definitely like here.

Amongst OMCs, in terms of valuations these stocks are at about 0.8-0.9 times book. In 2012, when we started talking about diesel price deregulation then the market was considerably better, but for OMCs they were trading at about 1.3-1.4 times book. Hence, the upside for these stocks is high.

In the near term, the market was expecting a Rs 4-Rs 5 hike again after September, but a repeat of that has not occurred. So, you might see a little bit of a muted response today. OMCs are definitely a place to be in and HPCL would be one stock that we like in that space.