OMCs recover after two-day sell-off; HPCL jumps 6%, IOCL, Gail gain 4% each

Shares of oil & gas and state-run oil marketing companies (OMCs) rose in the early morning deals on Monday, after witnessing heavy sell-off in the last two trading sessions.

At 09:52 am, Hindustan Petroleum Corporation (HPCL) was trading nearly six and a half per cent higher at Rs 176 a piece on BSE while Bharat Petroleum Corporation (BPCL) was trading at Rs 274, up 3.32 per cent. Shares of IndianOil was trading over 4 per cent higher at Rs 123.05.

Investor confidence in public sector oil and gas companies and OMCs took a massive hit last week after the government announced cut in excise duties in petrol and diesel prices by Rs 2.50 per litre and asked the refiners to absorb a Re 1 per litre cut in excise duty on petrol and diesel.

After the announcement, global brokerages such as Goldman Sachs and Citigroup Global Markets downgraded the stocks saying the imposition of price controls was an 'unequivocal negative' that underscores 'high political risk' associated with state-owned enterprises.

Top technical calls by Religare Broking for today: Buy Tech Mahindra

Top trading ideas by Religare Broking for today:

Tech Mahindra
Rec: BUY
Last Close: Rs 763.90
Initiation range: Rs 755-760
Target: Rs 800
Stop loss: Rs 720
Tech Mahindra is one of the strongest counters in IT space and it’s trading closer to its record high. It has recently witnessed a breakout from a prolonged consolidation phase of late and looks upbeat for fresh up move. Traders are advised to initiate fresh long positions in the given range.

Adani Ports and Special Economic Zone
Rec: SELL FUTURES
Last Close: Rs 375.70
Initiation range: Rs 378-382
Target: Rs 366
Stop loss: Rs 384
Adani Ports has been consolidating in a broader range for last seven months, after making a record high in January 2018. Currently, it’s trading in the middle of the range and formed a fresh shorting pivot. We advise traders to use any technical bounce to go short in the given range.

Oil & Natural Gas Corporation
Rec: SELL FUTURES
Last Close: Rs 174.05
Initiation range: Rs 176-178
Target: Rs 164
Stop loss: Rs 182
After retesting its monthly support zone around 150, ONGC has witnessed a decent recovery in the last two months but failed to cross the major resistance around 180, resulting in the formation of a fresh shorting pivot. We advise creating fresh shorts in the given range.

ONGC, Oil India gain up to 3% as oil prices rule at highest since 2015

STOCK MARKET - Shares of state-owned oil exploration & production companies – Oil and Natural Gas Corporation (ONGC) and Oil India – rallied up to 3.5% on the BSE in early morning trade on rising crude oil prices.

“Oil prices rose 3% on Monday, hitting the highest since early July 2015, as Saudi Arabia's crown prince cemented his power over the weekend with an anti-corruption crackdown, while the US rig count fell and markets continued to tighten,” the Reuters report suggests.

Oil India hit a 52-week high of Rs 382, up 3% on the BSE in intra-day trade, while ONGC rallied 3.5% to Rs 205.50 extending its 16% surge of the last one-month on the BSE. The stock is trading close to its 52-week high of Rs 212 touched on January 31, 2017 in intra-day trade.

Selan Exploration Technology (up 5% at Rs 259), Aban Offshore (up 3.5% at Rs 227), Jindal Drilling & Industries (4% at Rs 174) and Hindustan Oil Exploration (up 3% at Rs 110) from the private sector, trading higher in the range of 3% to 5%, as compared to 0.31% rise in the benchmark S&P BSE Sensex at 09:41 AM.

Higher crude prices will result in higher realisation for these oil exploration companies and result in increased profitability for them.

Analysts at Spark Capital remain positive on ONGC mainly led by their view of crude prices of $56/$60/bbl for FY18/19E - stock currently factoring in around $50/bbl crude price.

ONGC hits 5-month high as Q2 profit beats estimates

STOCK MARKET - Oil and Natural Gas Corporation (ONGC) hit a five-month high of Rs 190, up 3% on the BSE in early morning trade after the country’s biggest oil and gas producer, reported a 3.1% increase in second-quarter profit at Rs 5,131 crore, on back of higher oil prices. The net profit in September 2017 quarter (Q2FY18) was better than expected against an average analysts estimates of Rs 4,543 crore. The stock was trading at its highest level since May 11, 2017.

Revenue was up 3.1% at Rs 18,966 crore in Q2FY18 against Rs 18,395 crore in the corresponding quarter of previous fiscal.
ONGC said oil production was up almost 1% to 6.45 million tonnes in Q2 while natural gas output was up 7.7% at 6.25 billion cubic metres.

“The company notified 9 discoveries so far in FY’18 out of which 4 discoveries have been made since last press release on 27th July, 2017 (1 new prospect and 3 new pool discoveries). Out of the four discoveries, two discoveries each have been made in offshore blocks and onshore blocks,” ONGC said in a press release.

The board has approved an interim dividend of 60%, i.e. Rs 3 on each equity share of Rs 5.

Antique Stock Broking maintain BUY rating on the stock as marginal EBITDA miss aside,  analyst feel earnings otherwise are largely in-line and even as crude price environment has gradually improved to USD 60/bbl (Brent) vs an average of USD 53/bbl YTD, trading at just 8.3x FY19e, the stock is not fully factoring in the same.

In addition incremental gas production coupled with a higher gas price (revised upward for Oct'17-Apr'18) should further aid earnings, the brokerage firm said in Q2FY18 result review.

ONGC hits over four-month high; stock up 3% on heavy volumes

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Oil and Natural Gas Corporation (ONGC) gained 3% to hit over four-month high of Rs 177 on the BSE in early morning trade on heavy volumes. The stock is trading at its highest level since June 5, 2017.

In the first 10 minutes of trade, a combined 2.62 million shares have already changed hands on the counter, as against an average 4.8 million shares that were traded daily in past two weeks on the BSE and NSE.

The state-owned oil exploration & production company has fixed November 06, 2017 as the record date for the purpose of payment of first interim dividend for the financial year 2017-18 (FY18). The board of directors of ONGC scheduled to meet on October 28, 2017, to consider un-audited financial results of the company for the quarter/half year ended on September 30, 2017 (Q2) and declaration of ‘First Interim’ dividend for F.Y. 2017-18.

Edelweiss Securities expect a strong Q2FY18 for ONGC, with profit after tax (PAT) of Rs 5,200 crore, up 34% quarter-on-quarter (QoQ).

“We estimate oil and gas production to rise 2%/11% year-on-year (YoY). We also estimate oil realisation to increase 4% QoQ,” the brokerage firm said in result preview Q2FY18.

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ONGC, Oil India trade firm on rising crude oil prices

Shares of Oil and Natural Gas Corporation (ONGC) and Oil India were trading higher by up to 4% on BSE in otherwise subdued market on rising crude oil prices as demand outlook brightens.

ONGC rallied 4.4% to Rs 166, while OIL India gained 2% at Rs 325 on BSE in intra-day trade on Friday. So far in the calendar year 2017, ONGC (down 17%) and Oil India (down 6%) had underperformed the Sensex, which gained 21% till Thursday.

US West Texas Intermediate crude briefly broke above $50 on Thursday, hitting a four-month high, and finished 1.2% higher at $49.89, its highest close since July 31.

“US crude is on track for a nearly 5% gain this week, buoyed by the return of refineries after Hurricane Harvey and stronger indications of demand. Brent is heading for a 2.6% gain and a third consecutive weekly rise,” the Reuters report suggests.

The Organization of the Petroleum Exporting Countries (OPEC) this week forecast higher demand for its oil in 2018 and pointed to signs of a tighter global market, indicating its production-cutting deal with non-member countries is helping to tackle a supply glut. That was followed by the IEA saying the global oil glut was shrinking thanks to strong European and U.S. demand, as well as production declines in OPEC and non-OPEC countries, added reported.

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ONGC deal is not value accretive for HPCL shareholders: analysts

STOCK MARKET - Hindustan Petroleum Corporation Limited (HPCL) slipped 4.4 per cent to Rs 367 on the Bombay Stock Exchange (BSE) on Thursday, a day after the Union Cabinet approved the sale of its 51 per cent equity in the company to Oil and Natural Gas Corporation (ONGC) post market hours, while ruling out the possibility of an open offer to the minority shareholders of HPCL given no change in effective ownership.

Since July 12, HPCL has outperformed the market by gaining 12 per cent till Wednesday on reports that the merger with ONGC will be completed by the end of this fiscal year. ONGC, which ended 1.8 per cent higher at Rs 166 on Thursday, has gained 1.7 per cent as compared to 0.66 per cent rise in the S&P BSE Sensex since July 12.

Analysts have given a thumbs-down to the deal, which they feel will not be value accretive to HPCL’s shareholders. Going ahead, HPCL will continue to operate as a separate entity, albeit with a possibility of a merger with MRPL – another ONGC subsidiary – in the future. On the other hand, as a majority shareholder in the company, it will be within the means of ONGC to leverage HPCL's balance sheet, they say.

“The apprehension is that a full merger will not be value accretive to the shareholders of HPCL, which has enjoyed a 900 per cent appreciation in price in the last three years. That is because; HPCL and BPCL have been the two biggest beneficiaries of the free pricing of petrol and diesel,” points out a note from Angel Broking.

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BSE Midcap index hits fresh high, up over 1% for the day

STOCK MARKET - The S&P BSE Midcap index hit a new high of 15,265, up 1% on BSE, after a strong gain in oil & gas, metals and financial stocks. The index surpassed its previous high of 15,247.90 touched on Monday, July 17, 2017 in intra-day trade.

Mangalore Refinery & Petrochemicals (up 6% at Rs 130) and Hindustan Petroleum Corporation (up 4% at Rs 383) from the oil & gas sector up more than 3% on merger talk with Oil and Natural Gas Corporation (ONGC).

Wockhardt, Alkem Laboratories, Divi’s Laboratories and Glenmark Pharmaceuticals from the pharma sector up 3%-4%, while Bajaj Finserv, Indian Bank, Mahindra & Mahindra Financial Services, Indian Bank and Bank of India from the financials including banks were up between 2% and 3% on BSE.

A Reuters poll showed that India will reclaim its position as the fastest growing major global economy this year, partly propelled by benefits from Goods and Service Tax (GST) regime and bolstered by an expected interest rate cut by RBI in its next policy meeting in August.

India's annual retail inflation eased to 1.54% in June, its slowest pace in more than five years, but is expected to begin rising again through to mid-2018.

With inflation currently well below its target, the central bank is expected to cut borrowing costs by 25 basis points (bps) at its next meeting on Aug. 2. It last cut rates, by the same amount, to 6.25% in October 2016.

HPCL rallies over 10% in two days after merger announcement with ONGC

STOCK MARKET NEWS - Hindustan Petroleum Corporation Limited (HPCL) rallied 6% to Rs 382 in intra-day trade, extending its Wednesday’s 5% gain on the BSE, after the media report suggested that the merger of the company with Oil and Natural Gas Corporation (ONGC) is likely to take place soon.

At 12:43 pm; the stock was trading 5% higher at Rs 376, against 0.66% rise in the S&P BSE Sensex. It is quoting close to its record high of Rs 390 (adjusted to 1:2 bonus shares) on February 14, 2017 in intra-day trade. ONGC, on the other hand, was down 2% to Rs 160, erases its entire previous day’s gain.

“The Cabinet is likely to consider this month sale of government's 51% stake in HPCL) to ONGC for over Rs 26,000 crore,” the PTI report suggests.

After the Cabinet nod, the government will move to appoint valuation and transaction advisers while ONGC too may decide to hire merchant bankers to arrive at the valuation of government shareholding, added report. CLICK HERE TO READ FULL REPORT.

Media reports today speculated that HPCL’s disinvestment may take place at a premium to current market price.

Analysts at SBICAP Securities believe HPCL’s marketing assets are undervalued, notwithstanding the expected competition. Further, an open offer is likely to be triggered to protect minority shareholders’ interests and prevent the risk of litigation. An event trigger, if any, is likely to accelerate value creation.

According to analysts, the expenditure of around Rs 26,400 crore to buy the government’s stake in HPCL is likely to exert further strain on ONGC’s balance sheet and constrain its ability to acquire more oil and gas assets overseas.

“ONGC’s strategy of acquiring only producing assets limits the scope of value creation; hence, the investment in HPCL’s assets is likely to be positive for ONGC’s shareholders. However, we see significant downside risks to crude prices, and ONGC is significantly levered to the same (every US$1/bbl increase/decrease in crude price results in 1.6% increase/decrease in ONGC’s EPS). Hence, we continue to prefer OMCs over upstream PSUs,” added report.

stock markets continue trading subdued in afternoon trade ahead of June CPI data

STOCK MARKET NEWS - Benchmark indices continued trading subdued but in green in the afternoon trade with Nifty above the 9,800-mark ahead of June CPI data, to be announce later in the day. Investors expected the inflation to be at record low, which will put pressure on RBI to cut rates in the coming monetary policy review meet.

Asian Markets were also trading mixed amind political controvery surrounding Donald Trump after  emails disclosed by President Donald Trump's eldest son cited Russian support for his father's 2016 election campaign. Street also watched out for US Fed Chair Janet Yellen's testimoney to get clues on timeline of further rate hikes by Fed.

At 2:12 pm, the S&P BSE Sensex was trading at 31,789, up 42 points while the broader Nifty50 was ruling at 9,809 up 23 points

In the broader market, the S&P BSE Midcap and S&P BSE Smallcap index rose 0.4% each.

"The overall trend is still positive in the short term wherein 9,900 levels is an immediate target in the short term whereas above 10,000 levels in the medium term. On the lower side, 9,740 is an immediate support and below that 9,710. The momentum indicator MACD is well in the buy mode on the daily charts which is very supportive and bullish in the short term," said Anand Rathi Technicals in a note.

ONGC, HUL, Tata Motors and RIL contributed the most to BSE Sensex while TCS, Bajaj Auto, HDFC Bank and HeroMoto Corp shed the most on the index.

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Sensex flat, Nifty hovers around 9,800 in noon deals; ONGC, HUL top gainers

STOCK MARKET NEWS - Benchmark indices pared some morning gains to trade flat in the noon deals with Nifty trading hovering around 9,800 ahead of June CPI data, to be announce later in the day. Investors expected the inflation to be at record low, which will put pressure on RBI to cut rates in the coming monetary policy review meet.

Asian Markets were also trading mixed amind political controvery surrounding Donald Trump after  emails disclosed by President Donald Trump's eldest son cited Russian support for his father's 2016 election campaign. Street also watched out for US Fed Chair Janet Yellen's testimoney to get clues on timeline of further rate hikes by Fed.

At 11:40 am, the S&P BSE Sensex was trading at 31,768, up 21 points while the broader Nifty50 was ruling at 9,800 up 14 points

In the broader market, the S&P BSE Midcap and S&P BSE Smallcap index rose 0.4% each.

"The overall trend is still positive in the short term wherein 9,900 levels is an immediate target in the short term whereas above 10,000 levels in the medium term. On the lower side, 9,740 is an immediate support and below that 9,710. The momentum indicator MACD is well in the buy mode on the daily charts which is very supportive and bullish in the short term," said Anand Rathi Technicals in a note.

ONGC, HUL, Tata Motors and RIL contributed the most to BSE Sensex while TCS, Bajaj Auto, HDFC Bank and HeroMoto Corp shed the most on the index.

Religare Enterprises extended yesterday's losses, down over 5% after ending in the 20% lower circuit on Tuesday amid speculation that lenders had sold some shares, pledged by the company’s promoters, in the open market.