Introduction:
Oil and Natural Gas Corporation (ONGC) is a public sector undertaking involved in the exploration and production of crude oil and natural gas. At the National Stock Exchange, it follows Reliance in terms of market capitalization. It is ranked 369 in the list of Fortune 500 Global companies.
Brief History:
Oil and Natural Gas Commission was formed in August 1956. Three years later, the Indian Parliament gave approval to convert ONGC into a statutory body so as to plan and promote programmes for development of petroleum resources and sale of petroleum products.
ONGC discovered huge oil fields in Assam, Cambay basin (Gujarat), Bombay High, etc. In 1993, it became a public limited company following the liberalized economic policy. Currently, Government of India holds 74% stake in the company. Two other PSU oil companies, Indian Oil Corporation (IOC) and GAIL (Gas Authority of India Limited) have cross holdings in each other’s stock. ONGC took over Mangalore Refinery and Petrochemicals Limited from Aditya Birla group and transformed it into a profit making company. It also has overseas investments in Vietnam, Qatar, Nigeria etc. through its subsidiary, ONGC Videsh Limited.
Business profile:
ONGC contributes to about 78% of the oil production in the country, along with about 10% of the total refining capacity. It owns and operates more than 15,000 kilometres of pipelines in India, including nearly 3,800 kilometres of sub-sea pipelines.
ONGC has 240 production installations onshore apart from 70 drilling rigs. It has 147 well-platforms, 32 well-cum-process platforms, 13 process platforms and 55 offshore supply vessels. ONGC’s crudes are sweet and most are light, with sulphur percentage ranging from 0.02 to 0.10, API gravity range 26° - 46° and hence attract a premium in the market.
ONGC’s Mumbai High production platform
ONGC has discovered 6 out of 7 oil producing basins with 6.42 billion tonnes of hydrocarbon reserves. ONGC's Hazira plant is the largest industrial gas processing complex in the country supplying natural gas to Reliance, Essar, NTPC, KRIBHCO etc. It also produces Naphtha, LPG, High Speed Diesel and Kerosene.
ONGC Videsh Limited has exploration and production projects in 15 countries. It has commenced oil production in Russia and Sudan; it has made new oil discoveries in Myanmar and Egypt.
ONGC is recognized as the most valuable Indian corporate by market capitalization, net worth and net profits by Economic Times, Business Today and Business Week.
Financial performance:
It can be seen that the net profits declined slightly in 2004 but otherwise it was always up each year. The EPS got reduced in 2006 – 07 due to bonus shares.
Stock market performance:
ONGC is an important constituent of both Sensex (Scrip Code: 500312, Group: A, free float market capitalization: Rs.50,456 crores, weightage: 4.04%) and also Nifty (Ticker: ONGC, FFMC: Rs.266,578 crores, weightage: 8.01%). It is also traded In the Futures and Options segment of NSE with a lot size of 225 shares.
Long term outlook:
In the monthly chart shown above, the stock had broken its resistance at 1009 during last month. Clearly the stock is in its fifth wave and the support trendline holds well. The stock has already doubled from its low of 613.3 in the fourth wave. The long term target for the stock works out to 1461; but the support at 1009 is critical. A monthly close below this will mean that the long term bull run has ended. Long term investors can hold the stock for the time being.
Medium term outlook:
The weekly chart indicates the formation of a bearish “Harami” candlestick pattern. Note that the entire red candle has been engulfed by a green candle. This formation is highly reliable. However, a confirmation this week in the form of a red candle and close below 1170 will be required to judge the medium term trend reversal. Sould this happen this Friday, the medium term investors may exit the stock at higher levels. Otherwise, they can hold the stock.
Short term outlook:
The short term outlook for the stock is bearish. It has completed the five waves as shown in the daily chart above. The short term support (previous resistance) at 1220 has been broken yesterday while closing below the support trendline. The trend reversal can be confirmed by increasing volumes when the stock broke the support. The next major support for the stock is at 1052. Short term investors may exit the stock at higher levels due to technical rallies.
Conclusion:
- Long term investors may hold the stock
- Medium term investors need to wait for confirmation this week
- Short term investors may exit.