Why is the ONGC Share Price Rising? Check Key Reasons Behindhttps://univest.in/blogs/why-ongc-share-price-rising

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ONGC share price: The share price of Oil & Natural Gas Corporation Ltd. is currently priced at ₹256.85, representing a 5.47% increase over the last month. The stock has outperformed the market by 7.65% over the past six months. ONCG gets international oil prices for the crude oil it produces domestically, and with global oil prices falling to about USD 60 per barrel from USD 81 over the past few years. Oil prices have been reducing at a CAGR of 5% over the last 5 years. Rates are likely to remain range-bound, given peaking demand and increasing supply of non-fossil energy, despite a high dividend yield of 5.65% and a low debt-to-equity ratio of 0.55%. The company has faced negative results in some past quarters. In the broader market, the Nifty Midcap 100 and Smallcap 100 indices also fell under pressure, declining by approximately 0.87% and 1.23%, respectively.  

The stock’s recent movements highlight its sensitivity to broader market sentiment and economic shifts, which lead to a closer examination of the underlying causes. This article examines the primary reasons behind these movements, offering a deep overview of the rise in the price of ONGC shares. Despite this, the company maintains strong long-term fundamentals, as evidenced by an average Return on Equity (ROE) of 10.55%, and healthy growth rates in net sales and operating profit.

Key Reasons for Rise in the Share Price of ONGC

There are several reasons behind ONGC share price surge, including the surge in crude oil prices, the situation at the oil well under control, policy reforms, strategic partnerships, expansion into green energy, and cost savings. 

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Below are the reasons for the rise in the ONGC share price 

• Policy Reforms: The government has introduced regulations and development in the Amendment Bill, which provides fiscal stability for exploration and other product companies.  
• Strategic Partnerships: A partnership has been established with BP to overcome the Mumbai High field, which offers the potential to increase crude oil production by nearly 44% and gas production by 90%.
• Expansion in Green Energy: ONGC is significantly expanding into the green energy sector and has set a high target of building a renewable energy portfolio of 10 gigawatts by 2030, which has driven substantial growth in the green energy sector and led to a rise in ONGC shares’ prices.
• Cost Savings: The ONGC aims to save approximately 15% annually on its operational and capital expenditures, creating the possibility of significant long-term annual savings. Due to this, the situation of rising ONGC prices. 
• Surge in Crude Oil Prices: Global crude oil prices have risen approximately 10% after Israel launched airstrikes against Iran. As crude prices increase globally, ONCG can sell its crude oil at higher prices, which will boost its revenue and profit margins.
• Situation at Oil Well Under Control: An ONGC has recently increased the amount of gas involved in Assam, and due to the detection, ONGC immediately activated standard and other safety measures, rules, and regulations.   

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ONGC: An Overview

The Oil and Natural Gas Corporation Limited (ONGC) is an Indian Central Public Sector Undertaking, which is the largest government-owned oil and gas explorer and producer in the country. It accounts for approximately 70% of India’s domestic crude oil production and around 84% of its natural gas production. ONCG is vertically integrated across the entire oil and gas industry. It is involved in exploring for and exploiting hydrocarbons in 26 sedimentary basins of India, and owns and operates over 11,000 km of pipelines in the country. 

The equity shares of ONGC are listed on the Bombay Stock Exchange, where it is a constituent of the BSE Sensex index, and the National Stock Exchange of India, where it is a constituent of the S&P CNX Nifty. As of March 31, 2013, the Government of India held approximately 69% of the equity shares in ONGC. Over 4,80,000 individual shareholders hold approximately 1.65% of its shares. 

ONGC: Performance Analysis

The market capitalisation of ONGC is ₹3,21,363 crore, with a P/B Ratio of 0.94 and a P/E Ratio of 8.02. In the broader market context, the stock’s recent performance contrasts sharply with the benchmark, as the Sensex has gained 1.86% over the past week and 5.39% over the past one month. The stock’s decline is attributed to adverse earnings reports and a significant drop in after-tax profit, which has led to a lack of investor confidence. While there has been a rise in investor participation, as indicated by a 60.94% increase in delivery volume, the overall sentiment has remained risky due to the company’s ongoing financial struggles and its inability to keep pace with market growth. 

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How have Shares of ONGC Performed Recently?

Over the last month, the share price of ONGC has increased by 5.53%, rising from ₹ 243.39 to ₹257.12. The company’s share price has declined by 3.70% over the last year. The stock hit a 52-week high of ₹258.50 and a 52-week low of 254.30, with a P/E ratio of 8.02 and a dividend yield of 4.80%. The growth over the past six months is approximately 7.08%, and over the last year, it is approximately -6.20%.

Is ONGC a Good Stock to Buy?

The current high valuations suggest that the price may be highly affected by the positive news. For short-term investors, the recent profit-booking and high valuation can hurt the ONGC share price. In contrast, for long-term investors, ONGC’s strategic importance and diversified portfolio may make it a strong option. In summary, it can be said that Oil & Natural Gas Corporation Ltd (ONGC) are continuously rising, making it a good investment opportunity.

ONGC: Share Price Target

Oil & Natural Gas Corporation Ltd. has an average share price target of 289.60. The consensus estimate represents an upside of 12.66% from the last price of 257.05. View 10 reports from 5 analysts offering long-term price targets for Oil and Natural Gas Corporation Ltd. The ONGC Book Value is 273.00, with the dividend yield of 4.80%, and the P/E Ratio is 8.02. The 29 analysts offering 1-year price forecasts have a maximum estimate of 274.35 and a minimum estimate of 205.00. The broker has maintained the previous recommendation but increased the share price target, and has also upgraded this stock since its last report. 

ONGC: Future Predictions By Analysts

The surge in the share price of ONGC comes as the company updates its profit by about USD 1 billion from a new trading company it plans to set up for buying and selling crude oil and refined fuels of its group companies, a top official told Press Trust of India (PTI). The ONGC has performed well due to rising crude oil prices and increased crude oil production.   

ONGC’s stock price had been flat, underperforming the benchmark Nifty Index (which was up 8%), due to a downtrend in oil prices (which offset emerging visibility on growth in oil & gas production in the next three years. Hence, any rise in crude prices raises investor optimism about the earnings growth of companies. To be sure, the crude prices need to sustain the higher levels.   

ONGC: Analysts Rating

• The average 12-month price target is ₹289.60, and the consensus rating is Hold (mix of Buy, Hold, & Sell). 
• The analyst’s target range is observed between a high of ₹258.50 and a low of ₹254.30. 
• According to some analysts, some concerns remain with a ‘Reduce’ call of ₹224.56. 
• The analyst’s sentiment is mixed; there have been recent bullish calls (ICICI, JM), but also cautious ones (Motilal Oswal, Nuvama).  

What is the Right Time to Buy ONGC’s Shares?

According to analysts, ONGC’s share price is determined by market factors. The share price has decreased due to internal company factors, as discussed above. Therefore, investors must review all relevant factors before investing in ONGC. There are some factors to consider before investing in ONGC Company shares.

• Strong Fundamentals: Investors should review ONGC Company’s fundamentals before investing. If a company has strong fundamentals, high profitability, and effective management, then investors should consider investing in it.    
• Financing Partnerships: Financing partnerships bridge the gap between customers and financial institutions, facilitating the distribution of a wide range of products and generating positive sales revenue for many consumers.   
• Growth in the Technical Sector: The company is well-positioned in the electronic demat sector to deliver benefits to ONGC. This dominant sector increases demand and prices for ONGC.
• Highly Volatile: Prices are highly volatile, resulting in significant price changes that have a substantial impact on ONGC Company stock prices. Investors must review the market structure before investing in ONGC Company shares. 

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Conclusion 

An ONGC’s past track record on output growth and opex efficiency has not been impressive; the execution of this strategy will be key for the market to gain confidence in the future earnings growth trajectory and hence attribute a higher multiple, the brokerage firm said. Analysts believe ONGC’s integrated refining cum marketing margin will normalise around historical levels as the government may retain the benefit of any sustained fall in crude price. The company has faced negative results in some past quarters. In the broader market, the Nifty Midcap 100 and Smallcap 100 indices also fell under pressure, declining by approximately 0.87% and 1.23%, respectively. The market capitalisation of ONGC is ₹3,21,363 crore, with a P/B Ratio of 0.94 and a P/E Ratio of 8.02. In the broader market context, the stock’s recent performance contrasts sharply with the benchmark, as the Sensex has gained 1.86% over the past week and 5.39% over the past one month. 

FAQs

What are the key reasons for the rise in the share price of ONGC?

Ans. There are several reasons why the share price of ONGC has been rising, including the surge in crude oil prices, the situation at the oil well under control, policy reforms, strategic partnerships, expansion in green energy, and savings in costs. The government has introduced regulations and development in the Amendment Bill, which provides fiscal stability for exploration and other product companies.  

What are the factors that affect the share price of ONGC?

Ans. According to analysts, ONGC’s share price is determined by market factors. The share price has decreased due to internal company factors, as discussed above. Therefore, investors must review all relevant factors before investing in ONGC. There are some factors to consider before investing in ONGC Company shares.

What is the share price target of the ONGC?

Ans. Oil & Natural Gas Corporation Ltd. has an average share price target of 289.60. The consensus estimate represents an upside of 12.66% from the last price of 257.05. View 10 reports from 5 analysts offering long-term price targets for Oil and Natural Gas Corporation Ltd. The broker has maintained the previous recommendation but increased the share price target, and has also upgraded this stock since its last report. 

Should investors buy ONGC’s stock or not? 

Ans. The current high valuations suggest that the price may be highly affected by the positive news. For short-term investors, the recent profit-booking and high valuation can hurt the ONGC share price. In contrast, for long-term investors, ONGC’s strategic importance and diversified portfolio may make it a strong option. The ONGC Book Value is 273.00, with the dividend yield of 4.80%, and the P/E Ratio is 8.02. The 29 analysts offering 1-year price forecasts have a maximum estimate of 274.35 and a minimum estimate of 205.00.

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