OMCs will not outperform hugely

CNBC-TV18s Executive Editor, Udayan Mukherjee –

You saw yesterday what was going on ONGC stood out and the fundamental analysis on ONGC will tell you that it is the biggest beneficiary. It’s not like everything is positive for ONGC. It’s just that the downside is now being capped at Rs 38,000 crore of subsidy sharing. That the downside offload has been put into place, ONGC now becomes a better proxy for crude. So it is not to say that ONGC will runaway to Rs 1,200 now. It’s only to say that ONGC now has a better chance of moving in sync with crude than it had earlier because the overwhelming fear has now been capped on the downside with the subsidy burden being finite.

So if crude comes down, ONGC might not outperform from here but if crude does recover after this cut, then you will find that ONGC and Cairn India will not have such divergences in performance like they had last time around.

In oil marketing companies you saw what happened yesterday, before event they went up and then they came down. But my guess is that OMCs will not fall too much more from here because a sort of floor is put into place for their performance unless crude goes to USD 150 per barrel, around these levels the lows will hold for IOC, HPCL and BPCL. They might give you small bounces but they will not outperform hugely. But I will be surprised if they fell off very substantially from these levels.