Nature’s way

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a very short period. Pipeline companies would also be one of the beneficiaries for laying pipes for transportation purposes from the exploration place to the refinery.

In India there is huge demand supply gap for natural gas. Due to higher production of gas, distribution of gas entities will also gain. And considering the shortage of oil and gas globally, the price is expected not to decline.

Some of the state governments have awarded coal blocks for future raw material requirement in power, steel, and various other purposes. We could have a huge demand for coal as a source of raw material for power generation. There is also a shortage of power supply in the country and the government targets to build 78,000 MW capacity in the eleventh five year plan. This would benefit power companies, who are and will be awarded the building of the power plant and subsequently will sell power to power distribution companies.

Other than big oil companies, there are certain small and medium companies who have small oil blocks. These companies have not shown growth in their core business or have been stable. Due to this, the companies command a lower price-to-earnings and the scope for growth is much higher after the oil blocks awarded.

Oil and Gas index

Mutual fund companies ideally benchmark their funds with a specific index on the exchange. The performance of the energy funds could be best linked with the BSE oil and gas index. The index includes heavy weights like Reliance Industries (RIL), ONGC, Reliance petroleum, RNRL, Essar Oil, and Cairn India. The oil and gas sector has been the under-performer as compared to the benchmark index on the BSE. From 2004 till date the oil and gas index has delivered returns at a CAGR of 33%. The higher growth of 33% per year for a period of four years was due to the non-stop spurt seen post May 2006. The post-May 2006 run up was due to a rise in the prices of the Reliance pack, like RIL, RPL, and RNRL. In the oil and gas index, RIL has the highest weightage of 54.91%, followed by ONGC (14.22%) and Essar oil (6.96%).