One question that has often come to the minds of investors is whether it is proper to invest at this time, when the Sensex is “so high”. That “so high” keeps changing. It was 4000 in 2004, 6000 in 2005, 12000 in 2006 and 19000 in 2007.

Since the current rally began in April 2003 from a level of 2904, the markets have been on a one-way ticket. Most investors have at best been reluctant brides in this rally.

Those who have watched closely the market developments of the past rallies in general and the ones that have been bitten by the tech bust in 2000 in particular are the ones, who have never come to terms with the Indian bull story. Similarly, those who were left nursing the likes of Mazda Industries in the Harshad Mehta era could never warm themselves to an idea of buying a software stock in the 1997-2000 period.

Are there opportunities for the investor even now? The oil services sector is one such that presents opportunity for a genuine long-term investor. Around 77% of the world’s oil reserves are controlled by governments that do not allow foreign investors to acquire equity positions.

As a result there is keen competition to get a pie of the residual 23%. This competition accompanied by increased consumption has meant that high crude oil prices are a reality.

In India, the seventh edition of the New Exploration Licensing Policy (NELP), likely to be unveiled this month, would throw up 60-70 exploration blocks for grabs.

What does all this mean for the oil services companies? It translates into a huge opportunity. Consider this. India has 26 identified sedimentary basins of which only seven are under production. Around 81% of the acreage with potential remains unexplored.

When you select a company from the sector, pay special attention to the safety record of the company. In case of a mishap or an accident, the expenses can be recouped from the insurance companies, but it may tarnish the image of the company and may get it blacklisted. Similarly avoid companies that buy rigs from sister concerns or unknown refurbishers.

With the likes of Punj Lloyd looking at this space, quality will improve. There are other services like diving, off-shore pipeline laying, platform building and supplying support vessels, which will continue to have good business opportunities in the next three years.

One may ask, if the sector is lucrative, why aren’t new players entering. A newcomer would have to either take over a company or buy new equipment. As the delivery date is at least three years away for off-shore rigs, the business prospects may look risky for someone who is not associated with the industry.

What can happen, off course is that oil producing companies themselves can look at building their fleet of rigs and other vessels. But here too, expect the big players to stick to their core strengths.

Investors can pick up a bouquet of companies in the seismic, off-shore drilling and oil producing companies to make a portfolio that should do well in the future.

VK Sharma, Director and Head of Research, Anagram Securities