Rajat Rajgarhia, Head-Research at Motilal Oswal Securities told CNBC-TV18, "In 10 years back, PSUs used to contribute 65 percent of total corporate India profits and today that number has come down to 35 percent. The share of market cap would have come down even further. These stocks because of some ad hoc policies have been seeing derating now over a long period of time."
He further added, "I would think that the key reason for us to be positive on oil PSUs today is because there is a period of adjustment in earnings that will come. When you see the subsidy and the gas price hikes coming in there will be a time when Oil and Natural Gas Corporation (ONGC) EPS from being in a band of Rs 29-30 for last many years will move up to maybe something closer to Rs 45 or around. That is one big period of adjustment for which the stock will also move up almost in that same magnitude, that is what all investors are also positioning themselves for."
"Besides that it is very important to see how market-friendly measures the business or the realisations of these companies are for any long-term rerating. So I would be a buyer into the oil PSUs, because I think that you are coming closer to a period of that earnings getting adjusted significantly higher," Rajgarhia said.
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