Sharma also says one can consider buying into oil marketing companies like HPCL, BPCL, and even GAIL because considering where oil prices are, they will keep posting good results for the next few quarters.
Where are you finding value if at all you have exposure to the energy and energy transition theme?
Rajat Sharma: This is a very interesting segment and it will do well going forward. But when it comes to value, I bet no one can find any stock with any value whether it is renewable, solar, or thermal, or the old names. Look at some of these stocks. Tata Power used to be Rs 28 some four years back. It is today trading at Rs 430-440. The same happened with a lot of the PSU companies which were getting into hydro and solar and SJVN and NHPC. I have had this in my portfolio since it was Rs 24, 25 and I had it only because they used to pay about Rs 2 dividend which is around 10% dividend yield.
Look at the way they have moved up, Rs 100, 120 plus. In the market, from time to time, there are certain sectors and themes that become flavour of the month and somehow everybody starts buying this. Fundamentally, I do not think anything has changed so much for power companies. I, in fact, at one point tried to look at what is going for the power sector because of which these stocks are running up so much.
Today also, the problem remains, whatever problems they had back in the day. So, I really do not know, the only thing I kept reading about was everything would become EV, electric vehicles, so that is actually dumb to my mind. So, look at the valuations, the way they have moved up for this sector. I can almost bet that a lot of these stocks will trade 30%, 40%, maybe 50% lower to where they are.
It is just a matter of time when some correction happens in the market. This is an extremely overheated sector, and I would stay away from this. I like the power sector. I like energy and power in an emerging economy like India. It should do very well, keep an eye on these. You should buy these. You should have these in your portfolio, but not right now.
What is the view as far as these oil marketing companies and the entire energy basket is concerned? ONGC, GAIL, HPCL, have all shot up massively. Do you expect a further re-rating there?
Rajat Sharma: No, ONGC corrected recently because of falling oil prices. For oil marketing companies, it is great news if oil prices fall. So, yes, those are companies that one can continue to hold. If you have ONGC in your portfolio, it is a good time to sell some of this. Again, this has been one of my favourites. I have been recommending it from about Rs 126, 128 levels. My reason for buying this was the very high dividend yield. It still has a high dividend yield, but the way it has run up, ONGC is a stock which remains range-bound. So, for oil exploration companies, ONGC in Chennai, Petro, and all these companies, right now is not the best time to get into. If you had to, one can consider buying into oil marketing companies like HPCL, BPCL, and even GAIL because considering where oil prices are, they will keep posting good results for the next few quarters.