Here's how to play ONGC, OIL, GAIL post gas price hike

Brokerages recommend trading calls on oil and gas stocks after the government hiked gas pricing to USD 8.4/unit on Thrusday.

Here are the calls:

ONGC, Oil India
Brokerage: Bank Of America Merrill Lynch
Rating: BUY
Target: Rs 406
Rationale: The brokerage feels ONGC and Oil India will be much bigger gainers from the gas price hike than Reliance. They expect a 9 to 11% upside to ONGC and Oil India's FY15 EPS estimates, if gas price does rise to over 8 dollars.

GAIL
Brokerage: Nomura
Rating: NEUTRAL
Rationale: GAIL as a user of gas would be the worst impacted by the gas price hike. The pricing of both LPG and Petchem is based on import parity, thus GAIL may not be able to pass on costs. GAIL's gas cost could increase by USD 180 million.

JSW Energy
Brokerage: Nomura
Rating: BUY
Target: Rs 54
Rationale: The recent rupee depreciation does dent earnings, but the hit is mitigated by weaker thermal prices. At current levels, multiples appear sufficiently attractive to accumulate the stock.

NMDC
Brokerage: Citi
Rating: BUY
Target: Rs 120
Rationale: The brokerage believes NMDC should trade at a global average of 8 times. High margins, rich ore, domestic exposure and cash rich balance sheet warrant a premium, however, pricing uncertainty offsets the benefits.