Energy reforms: Here are the stocks that investors are betting on

The much-awaited energy reforms rolled out by the government has set the stock markets on fire. Investors see the move by Prime Minister Narendra Modi as a precursor to many more reforms to be set in.

Here are the stocks that investors betting big on:

Banks: Diesel deregulation would result in a sharp fall in diesel inflation to 4 percent from 13 percent by December 2014, says brokerage Motilal Oswal. This will pave the way for a sharper decline in inflation indicators, ahead of expectations.

The brokerage expects the RBI to cut rates 2-3 quarters ahead of the consensus expectations on the back of these developments.

It has also said the government would be able to limit the oil subsidy bill within the budgetary target of Rs 63,400 crore and renders the fiscal deficit target of 4.1 percent more credible.

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The expectation of a faster decline in inflation and an earlier-than-expected rate cut has pushed up share prices of banks. The BSE Bankex, which tracks 12 banks, was up about 1.6 percent.

The fall in inflation will fuel credit growth, which will ultimately benefit the banks.

Automobile: The sector is already witnessing an uptick in vehicle sales. The fall in inflation and a rate cut will boost the demand for vehicles further. Moreover, the removal of price controls on fuel is also likely to increase the demand for cars.

Maruti Suzuki India Ltd rose 1.8 percent, Mahindra & Mahindra 1.3 percent and Ashok Leyland 3.2 percent.

Power sector: Coal-based power generation companies are seen investor favourites as the increase in gas prices is likely to impact the gas-based companies negatively.

Power plants based on imported coal charge tariffs that are around 20 percent cheaper than gas plants, analysts estimate.

JSW Energy, whose shares are up 1.6 percent, is estimated to operate nearly half of its capacity on imported coal.

Oil companies: Last but not the least is the public sector oil marketing companies. They have been crying for diesel decontrol for long. Now that the government has rolled out the reform, they are in a position to reduce their under-recoveries from diesel.

Shares of BPCL rose 3.7 percent and those of HPCL 5.6 percent. Upstream major ONGC was up more than 5 percent, as the company is seen adding about Rs 1900 crore to profits this year itself on account of the gas price increase.

With inputs from Reuters