MS on Oil & Gas

We downgrade our Industry View to Cautious due to
1) negative outlook for Refining and Petrochemical margins, and
2) higher subsidy burden due to a weaker rupee.

-- Our top pick is Cairn India for its production growth and free cash flow

-- Avoid OMCs, Reliance and Essar due to their refining exposure

MS cuts RIL's rating to 'underweight' from 'equalweight'; Cuts price target to Rs 650 from Rs 921

MS downgrades HPCL to 'underweight' from 'equalweight'; Cuts price target to Rs 205 from Rs 407

MS downgrades Essar to 'underweight' from 'equalweight'; Cuts price target to Rs 50 from Rs 97

MS downgrades BPCL to 'underweight' from 'equalweight'; Cuts price target to Rs 418 from Rs 683

MS cuts OIL price target to Rs 1,286 from Rs 1,600; Keeps 'overweight' rating

MS raises Cairn India's price target to Rs 413 from Rs 359; Keeps 'overweight' rating

MS_Oil & Gas_Jan 13.pdf