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The election commission's deferment of the gas price hikes led the stock prices of OIL India ONGC and Reliance Industries correct sharply on Tuesday though they recovered some lost ground by the end of the day. Reliance industries and oil India lost 2.87 and 2.75 Percent on the bourses while ONGC lost slightly more than half a Percent .The stock prices of these companies had seen sharp run up in anticipation of Gas prices being hiked w.e.f 01.04.2014 The event holds significance for ONGC and Oil India as they will see will see their FY15 Earnings estimates being tweaked more with the deferment of Gas prices.

These earnings cut will lead to Target prices being also being tweaked. However since the stock prices of ONGC and OIL India were not factoring much rise in Gas prices looking at the uncertainty on Gas prices for Power and Fertiliser sector, hence may not see much downside from current levels.

As per analysts at Ambit the stock prices of ONGC and Oil India were factoring in gas prices of $4.5 per mmbtu (million British Thermal units) however Reliance stock prices were factoring in $8/mmbtu prices. In the backdrop the stock may see higher correction. Ambit analysts see deferment of decision leading to adverse impact of INR 35, INR  18 and INR 14 a share for Reliance Industries, ONGC and Oil India respectively.

The companies as ONGC and OIL India in the worst case can see their fair value cut by 25 Percent and 21 Percent while Reliance will see its fair value in the worst case being cut by 8 Percent only feel CLSA analysts. Thus despite lower correction ONGC and OIL India will see higher target price cuts.

OIL India and ONGC that had seen one year target price in the range of INR 575-600 and Rs 350 plus respectively. Analysts at Barclays estimate EPS impact of 6 Percent, which would be more pronounced for state-owned ONGC and Oil India they add. However they retain their Over-Weight ratings, as they expect gas prices to rise in 2Q FY15 and maybe oil realisations in FY16E too, as retail under-recoveries fall.

Valuations are also inexpensive at 6.5-7.5x FY15E P/E they add. Analysts at ICICI on the other hand while tweaking FY15 EPS for ONGC from INR 34.1 to INR 28 and for Oil India from INR 69.9 to INR 59.9 arrive at Target prices of INR 297 and INR 505 with HOLD ratings post the event.

However there are companies that may benefit too from deferment of this price hike. The Gas companies as GAIL Gujarat Gas and Indraprastha Gas would benefit from the development as their input costs will stay lower. Nevertheless volume benefits will only accrue when the Gas production increases for which Gas price hikes are crucial (to support and incentivise exploration and Production activities) feel analysts.

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