ONGC Shares Fail to Gain Amid Brent Crude's Prolonged Rally Above $100

Oil and Natural Gas Corporation (ONGC) Shares Decline for Third Consecutive Trading Session

Key Points:

• ONGC shares declined approximately 4% on Monday, extending their fall for the third straight trading session.
• The stock has declined in seven out of the 10 trading sessions in March, despite global crude benchmark Brent crude staying above $100 per barrel.
• ONGC shares have declined nearly 8% in the last 15 days, while crude oil prices have surged by more than 40% in the same period.

Market Analysis:

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• Typically, upstream oil producers such as ONGC benefit from higher crude prices as they sell crude oil and oil-linked gas.
• However, analysts attribute the recent fall in ONGC shares to policy-related factors and broader market sentiment, rather than the elevated oil prices.
• Santosh Meena, Head of Research at Swastika Investmart, notes that the Indian government's windfall tax (SAED) and natural gas price caps on legacy fields have prevented the company from fully realizing the global price surge.

Industry Impact:

• The ongoing West Asia conflict has disrupted global energy supply chains, leading to the closure of the Strait of Hormuz, production cuts at oil fields in Iraq, Saudi Arabia, and Kuwait, and the shutdown of the Ras Laffan LNG liquefaction plant in Qatar and the Ras Tanura refinery operated by Saudi Aramco.
• These disruptions have pushed global crude prices higher.

Brokerage Views:

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• HDFC Securities believes that elevated crude prices support higher realisations for the upstream segment, provided the government does not impose additional taxes.
• The brokerage prefers Oil India over ONGC due to stronger production growth compared with ONGC's declining output.

Financial Performance:

• On a year-to-date basis, ONGC shares have risen approximately 9.46%, according to data from BSE Analytics.
• Over the past one year, the stock has gained around 15.5%.