The Oil and Gas sector is very important part among all the sectors. The Oil and Gas sector has to be developed in order to meet the demands. Government to focus on improving direct transfer of subsidy to poor sections thereby reduce the overall subsidy burden and there will be a ray of light of development in the poor sections and this will boost the whole sector as well. The government will also increase the share of natural gas in the domestic energy consumption and therefore it will develop the current gas pipeline capacity of 15000kms. In FY 15, subsidy allocation is of Rs. 634 bn with last year’s carry forward of Rs. 350 bn.
The Government will take measures to promote the coal bed methane (CBM) and use of modern technology in order to revive and develop the old closed files which will help the sector to boom as the government is taking measures to open up the blocks. The Government will also promote the usage of Piped Natural Gas and rapidly scale it up on a mission basis.
Currently, the Oil and Gas sector is trading at a PE of 13x compared to CNX NIFTY which is trading at around PE of 21x. So, currently the Oil and Gas sector is undervalued compared to Nifty. Hence we are positive on this sector. We are bullish on Reliance Industries on the back of likely increasing the gas prices by the government and ONGC on the back of de-regulated diesel prices by the government.