India’s largest oil refiner ONGC is having a bad time at the bourses as it has lost over 8% in less than 2 weeks!!

 

 

2023 began well for ONGC as its stock continued the uptrend that began in the last quarter of 2022. The stock did not register significant gains but overall sentiment seemed positive in the stock. However, the Maharatna’s stock fell when the Indian markets’ sentiment soured due to Hindenburg’s malicious report on the Adani Group.

Although the stock breached its trend line, buyers rushed to buy the stock when it breached its immediate support at Rs 142.30 per share as the uptrend resumed, fueled by the reduction in windfall tax, and the stock rose to breach its immediate resistance at Rs 156.65 per share. However, March brought about the US Banking crisis which marked the collapse of veterans like First Republic, Silvergate Bank, and Credit Suisse.

This spooked investors as global investors began dumping Indian equities and ONGC was caught in the crossfire. ONGC kept losing throughout March 2023 as it fell over 7% before buyers resumed buying in early April.

Although price faced significant resistance when challenging its resistance at Rs 156.65, buyers took charge as the price breached the resistance and reached a 13-month high of Rs 169 per share. However, the company’s Q4FY23 results reported a 53% decline in profits due to a legal provision.

ONGC’s stock lost over 6% in four trading sessions as price fell below its support at Rs 156.65. However, June 2023 brought about stability in the share price as it began climbing steadily. With the Nifty 50 rising up to almost reach 20,000, ONGC’s share made steady gains as it reached the price of Rs 174.15 per share by the end of August 2023, gaining 12.5% in 3 months!

By the end of August 2023, Nifty 50 had failed to touch 20,000 and fallen back to 19240. However, bulls took charge on 1st September as the index jumped almost 1% while ONGC recorded an intraday gain of over 4%. 

This time, buyers managed to push Nifty 50 beyond the 20,000 mark to make a lifetime high of 20,222.45 as ONGC benefitted from the bull run and passed the Rs 190 per share mark by the end of September.

However, when October began, bulls had lost all steam as bears took over once again. Nifty saw minor gains initially before it faced a meltdown and broke through the 19,000 mark! Although Nifty 50 reached a 4-month low of around 18,800 and was hovering around the 19,230 level, buyers managed to keep ONGC around the Rs 190 level throughout the month, registering no gains during the month of October.

With bears giving up and buyers taking charge once again, Nifty 50 began climbing again as ONGC finally breached its resistance at Rs 189.45 sustainably to continue climbing. As oil declined to $83 per barrel, the government slashed windfall taxes on oil companies which, coupled with the announcement of a dividend, helped ONGC surge to a 6-year high of Rs 203.60 per share!!

However, bears judged the price to be too high as selling took over the stock once again as it began declining once again. 

Although Nifty has been making small gains every day currently, ONGC has been losing value for 7 consecutive sessions! The stock turned ex-dividend recently as it recently tested its support and climbed back up.

What’s the future outlook??

Fundamentally, the company’s performance was fairly good. Its latest quarterly revenues fell 13% to Rs 146,873 crores despite oil prices being over the $80/bbl mark for most of the quarter in question. However, with lower purchase and raw material costs, the company’s bottom line surged a staggering 142% to Rs 16,553 crores!

However, production declined by 2% during the quarter as safety measures, a cyclone, and lower yield in some matured fields resulted in crude production of 5.249 MMT during the quarter.

 

 

Technically, the RSI is at 54.47, indicating that the stock could move either way. Moreover, the stock closed above its 5, 20, 50, 100, and 200-day averages. 

On a short-term basis, ONGC broke through its immediate support at Rs 189.45 after it failed to do so for two trading sessions but buyers came in and propped the stock up.

Should buyers enter the scrip, the stock would be range bound, but if sellers remain strong, the stock could decline to its next support at Rs 173.25 per share! Brent is currently below $80 per barrel despite severe production cuts by Russia and Saudi Arabia, the largest oil producers, and other OPEC+ members.

Brent Crude has lost over 16% in less than two months as a recent meeting between OPEC+ members had to be postponed because the members were unable to agree on output quotas. As such, oil prices are expected to remain between $77-83 for now.

In the long term, ONGC has plans to improve its production capacity. The company expects oil production at its KG-98/2 field to begin shortly while it is expected to reach a peak capacity of 45,000 bpd by FY25. Moreover, it will be spending Rs 1 lakh crore to set up two new petrochemical plants to improve its petrochemical production capacity to 9 million tonnes by 2030.

Thus, the stock of ONGC may see weakness in the near term and is expected to be range-bound, but has bright prospects in the longer term.