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Oil stocks are back in the reckoning. Contrary to popular perception that the BSE Oil index has been an underperformer, this sectoral index has given the best returns over the week. It ranked as the fourth best performer on the monthly charts while emerging as a runner-up over the one-year period.
“Buy, buy, buy,” is what he reiterates when asked how should one play the oil sector stocks now. “Oil bonds, pricing power and cooling crude oil prices, not in this particular order, will be the primary triggers of the PSU oil stocks,” he feels.
He also believes that if one has to look at the theory of replacement value these three oil majors are currently available at half their replacement cost. In simple words, if one were to set up a business model similar to these three companies in strength and scale it would require double the amount for what this PSU triad is available. In other words they are available at half their real net worth.
Amit Dalal of Amit Nalin Securities offers the other side of the same coin. Speaking to CNBC-TV18 today morning he said that the PSU oil companies have given a fair share of appreciation considering the uncertainties that still remain.
“Even if oil prices fall we do not know what will happen to the full losses that have accumulated or the bond, which have been issued how long, will they be on the books of these companies. So for the time being these companies are fairly well valued,” he said. Having said that he is still very optimistic on IOC and feels this Fortune 500 Company, irrespective of change in price of oil, provides tremendous value and can remains a good buy at every fall. As part of his disclosure he said that he owns IOC. By Prasanna Zore
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