Oil and Natural Gas Corp. was the only stock trading higher on the blue-chip Nifty 50 index on Thursday. The ONGC share price gained as much as 2.5% intraday compared to a 2.9% decline in the benchmark. The total traded turnover turnover was Rs 563 crore on the NSE.
The decline in the stock market and the rise in ONGC is triggered by the same reason: higher crude oil prices. International benchmark Brent surged to $115 per barrel during the day. That is bad news for India Inc. and the broader economy, but positive for the PSU oil explorer and producer.
When crude oil prices jump, the oil ONGC sells fetches a higher price, directly boosting revenue and profit margins. In simple terms, higher crude prices mean the company earns more for the same barrel of oil, which improves earnings expectations and makes their stocks more attractive to investors.
A key driver for ONGC is improved realisation from its crude output. A growing share of production from new wells, which are more market-linked, is boosting pricing power. This is complemented by recent policy changes that reduce the likelihood of heavy-handed government intervention during periods of high oil prices.
Historically, windfall taxes and subsidy burdens have capped upside for upstream companies. However, the current framework suggests that any such levies would likely be temporary and less severe, lowering downside risks.
Despite recent gains in oil prices, ONGC's valuations remain relatively reasonable. Kotak Institutional Equitieshas has raised its earnings estimates for FY27 and FY28 this week, supported by both higher crude assumptions and better operational metrics.
The brokerage also sees room for valuation expansion as earnings visibility improves, especially in a global environment where energy security concerns are back in focus.
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