ONGC shares jump on Q1 show, along with Oil India

The shares of state-owned oil exploration companies, Oil and Natural Gas Corporation (ONGC) and Oil India, have witnessed a significant surge of almost 8 per cent each following ONGC’s better-than-expected first-quarter operating profits. Investors are now eagerly anticipating the release of Oil India’s June quarter results, scheduled for Thursday, hoping for similarly strong earnings.

ONGC’s shares gained 7.5 per cent, closing at INR 328.9 on Wednesday, while Oil India’s stock rose 7.7 per cent, closing at INR 615.5. The broader Nifty Oil & Gas index advanced by 3.1 per cent, outperforming the Nifty 50, which gained 1.27 per cent.

Analysts attribute the rise in these shares to the likelihood of oil prices gaining momentum due to the tensions between Israel and Iran. Aamar Deo Singh, senior VP of research at Angel One, stated that the market has high expectations for a positive result from Oil India, as ONGC has already reported strong operating profits.

Several brokerages, including Motilal Oswal Financial Services, Emkay Global, and Elara Capital, have maintained “buy” ratings on ONGC, with target prices ranging from INR 360 to INR 373, implying an upside potential of 9.4 per cent to 13.4 per cent. The positive sentiment is driven not only by the company’s financial performance but also by the management’s guidance of a 12-27 per cent growth in crude oil and gas production over the next three years.

Hemang Jani, director at Finazenn, suggests that the share price gains are not solely attributed to the results but also the high dividend yield nature of these stocks (4 to 6 per cent) and the possibility of rate cuts in the United States.

While the long-term trend for both ONGC and Oil India looks positive, analysts caution that investors may see some profit-taking in the near term due to the significant run-up in the stock prices. The recommendation is for investors to wait for a potential market correction before considering buying these shares, rather than purchasing them at the current elevated levels.

It is worth noting that ONGC shares have already returned 60 per cent so far in 2024, while Oil India has gained an impressive 144 per cent. The Nifty’s Oil & Gas index has also performed strongly, increasing by 36.6 per cent during the same period.