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Why CLSA Thinks PSU Oil Stocks Are Looking Attractive
Vikash Jain said policy will be the key driver for upstream oil companies, not so much crude oil prices.
18 Nov 2018, 07:34 PM IST 
An oil refinery stands in Golaghat, India (Photographer: Adeel Halim/Bloomberg)
The risk-reward ratio for state-owned oil stocks is looking highly attractive, according to CLSA.
The brokerage said investors have been nervously fixated about the rather low subsidy figure and ignored the fact that even the revenues by the oil companies have been under-budgeted. “The hole on the subsidy side—which we peg at around Rs 23,000 crore—could be offset by higher revenues,” Vikash Jain investment analyst at CLSA told BloombergQuint in an interview.
Jain said the government policy will be the key driver for upstream oil companies, not so much crude oil prices. "However, the worst of the subsidy overhang has been priced in for this fiscal."
Other Highlights:
Government Policies:
- Clarity on subsidy burden of oil explorers is expected to come in next three months and will be the key driver for their stock prices.
- Don’t see any change in policies and subsidies for oil-marketing companies.
On Natural-Gas Companies:
- If the discount of gas compared to fuel prices stay at high level then growth will continue for city gas distribution companies.
- Gas-transmission companies are better placed compared to city gas companies in terms of valuation.