Cairn India soars 2% on CLSA says buy

Cairn India , a subsidiary of Vedanta Resources and one of the biggest private exploration & production companies, went up 2 percent on Friday as the foreign research house CLSA recommended a buy rating on the stock with a target price of Rs 425.

"The stock price highlights a disbelief in its ability to deliver on its guidance and hence the stock is undervalued," CLSA reasoned.

Shares fell more than 5 percent in last one month and 15 percent in one year whereas BSE Oil & Gas Index surged over 9 percent in one year.

In February, Cairn India had started drilling its first exploration well in four years on the prolific Rajasthan block that would help boost output to 215,000 barrels per day by March 2014.

A block oversight committee, headed by the Directorate General of Hydrocarbons (DGH), had on February 14 allowed the company to drill its three wells to explore new oil pools on Rajasthan block this fiscal.

The company currently produces 170,000-175,000 bpd from the Rajasthan block and plans to finish 2013-14 with a production of 200,000-215,000 bpd from the block. Cairn plans to drill 30 exploration wells by March 2014 and a similar number in the year thereafter.

At 10:02 hours IST, shares gained 1.93 percent to Rs 303.60 on Bombay Stock Exchange.