Prefer ONGC over Reliance Industries, says Girish Pai

Girish Pai, independent market analyst told CNBC-TV18, "Reliance Industries is a heavyweight. The gas price increase has actually helped clear doubts whether the gas price hike is actually going to happen or not, so that is a positive. I do not see it materially impacting earnings for Reliance, either next year for instance, because the volumes of gas being produced by it is not material enough. It will have a much larger impact on a company like Oil and Natural Gas Corporation (ONGC)."

He further added, "From a 12-18 month perspective, I would prefer ONGC versus a Reliance right now, because the rupee has appreciated from 68-69 levels to 62-63 levels. So the impact of a weakened rupee on under-recoveries has kind of gone away. Crude prices have kind of settled down at USD 110 a barrel and the diesel prices being increased at least at 50 paise/month rate."

"Somewhere down the road, maybe 6-9 months from now the diesel under-recoveries are going to go completely away and then one has the gas price hike kicking in. So earnings outlook for ONGC looks far better going into FY15 vis-à-vis any other large cap oil and gas stock. Valuations are fairly cheap, dividend yield of something like 3-4 percent," Pai said.