Edelweiss Securities believes significant oil reforms would be low on agenda for the upcoming Union Budget 2014 in turn disappointing markets.
''To avert a concentrated and immediate impact on inflation of a high 331bps, we feel the government will stagger the sector reforms and unfurl them later in the following sequence ongoing diesel hikes are likely to continue and eliminate Rs 195 billion of subsidies over the next three-six months; gas prices will be hiked in the next three months and staggered kerosene and LPG price hikes will commence in 6-12 months,'' it said.
''We believe the sector reforms will materialize, but not immediately and several twists and turns shall show up in the interim. Similar reforms during 2001-04 yielded multi-bagger returns for oil PSU stocks - ONGC - 8x, HPCL - 3.7x and BPCL- 4.5x" said Edelweiss Securities.
''Thus, high gains are yet to materialize. We believe the sector is likely to take a breather in the near term though, what with the stocks having spurted 30-40% in the past three months. ONGC and BPCL are our preferred picks,'' it added.
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