Sanjeev Prasad of Kotak Securities said that the surging oil prices is a very bad situation for the markets.There is a huge amount of uncertainity in the market, he said. He added that the oil sector right now is not a good sector to trade in.

Excerpts from CNBC-TV18's exclusive interview with Sanjeev Prasad

Q1: What are your thoughts on crude at USD 122/bbl, how do you translate into stock market action now and the energy sector particularly?

A: As far as the economy is concerned, clearly it has severe implications. We have done some calculations when crude was at USD 110/bbl and at that level we are looking at gross under recovery of about 1,75,000 crore which is about one lakh crore more than their total under recovery for fiscal 2008.

How is this money going to be recovered? What is the government’s stand om this? We have no idea at this point of time. Government may give more oil bonds and recover some portion from the upstream companies but printing oil bonds is not the solution as ultimately that will push our cost of borrowing. So hopes of people that interest rates coming down, is not the case. And with oil going up, above USD 120/bbl, we will have even bigger problem.

As far as the oil stocks are concerned probably this is not the sector to be in at this point of time unless and until you see some clarity as to how this issue will resolved by the government. In this election year, you can see if you rule out price increases. You can assume some amount of increase as far as oil bonds are concerned but what I fear is maybe the government could change the subsidy sharing mechanism to the detriment of upstream companies. And downstream companies is clearly not the place to be in given where crude prices are. So I guess it is not a very happy situation and I guess it is a very bad situation for the market.