ONGC, Oil India share price: Why CLSA believes both these stocks may surge up to 50% — know details

ONGC, Oil India share price: On the back of multiple triggers, global brokerage house CLSA believes that the oil exploration and production companies Oil and Natural Gas Corporation (ONGC) and Oil India shares have a potential to grow around 40-50 per cent with both the stocks being a top Buy from the Oil & Gas sector. 

The government on Friday cut the windfall profit tax on locally produced crude oil in line with a fall in international rates and reduced the levy on the export of diesel and jet fuel (ATF) with effect from September 17. It reduced tax to Rs 10,500 from Rs 13,300 per tonne at the fifth fortnightly review. 

According to CLSA, India will ensure a $70-75 per barrel realization, but ONGC’s and Oil India pricing is $ 50 per barrel.   

Besides, crude oil fell by more than 1 per cent on Monday, pressured by expectations of weaker global demand and by US dollar strength ahead of a possible large interest rate increase, though supply worries limited the decline, according to a Reuters report. 

Brent crude for November delivery fell $1.17, or 1.3%, to $90.18 by 0822 GMT. US West Texas Intermediate (WTI) for October dropped $1.14, or 1.3%, to $83.97. 

The crude oil had soared all-timer high in 2022, with Brent coming close to $147 per barrel in March after Russia's invasion of Ukraine exacerbated supply concerns. 

Maintain Buy rating on ONGC and Oil India with a target of Rs 205 and 265 per share, domestic brokerage firm JM Financial also said, “ONGC/Oil India is discounting only ~USD 50/bbl crude price, significantly below net realisation of ~USD 75/bbl that it might earn after adjusting for windfall tax.” 

OPEC+, at its 5th September 2022 meeting, announced a cut of 0.1mmbpd in output for October 22. This move is largely symbolic, as the quantum is small, and is meant to support oil prices given the recent weakness due to macro uncertainties, the brokerage added.