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Why Are Markets Bullish On ONGC Despite Volatile Crude Oil Prices And Geopolitical Pressures?

23 April 20243 mins read by Angel One
An analysis of why ONGC, despite the geopolitical tensions in the Middle East, has seen a sharp 5.50% rise in its share price in the last month.
Why Are Markets Bullish On ONGC Despite Volatile Crude Oil Prices And Geopolitical Pressures?
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Oil and Natural Gas Corporation Ltd (ONGC) is the largest natural gas and crude oil company in India, contributing nearly 71% of India’s domestic production. Interestingly, despite the geo-political pressure, fluctuating crude oil prices, along with upcoming quarter results, general elections, and the Iran- Israel conflict the stock price has shown a good 5.50% rise in its share price which is not-so-common in such an environment.

Brokerage Reports

The brokerage reports of renowned investment banking firms like Jefferies and Morgan Stanley, are bullish on the ONGC stock. Indeed, rising geopolitical pressure in the Middle East along with supply concerns have driven the crude oil prices up, impacting the overall market sentiment. So, because the oil demand has shot up, so has the price of crude oil due to which, companies like ONGC stand to benefit and gain from this tight market.  ONGC is outperforming and is likely to rise ahead, coupled with stable regulation, improved capital allocation and a stable return on equity (ROE) of 18-20%, which can be viewed as positive factors driving investor confidence and market sentiment. ONGC has also been maintaining a good dividend yield of 4.10% and dividend payout of 32.2%. 


Another reason for this “buy” rating in these reports is because favourable gas and crude reforms like the exemption of the Special Additional Excise Duty (SAED) and the exclusion of windfall tax on new KG-basin output play significant roles in maintaining market optimism by reducing the tax burden.

Conclusion: In conclusion, despite the challenges posed by high volatility and geopolitical tension, markets remain bullish on ONGC and are expected to rally further as per the brokerage reports. Furthermore, its consistent dividend payments and attractive dividend yield appeal to investors. Overall, the combination of these factors, along with the positive market sentiment and expectations of stable regulatory support,  explains the market’s optimism regarding ONGC’s prospects, driving continued bullishness despite various external challenges.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.

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