ONGC, Oil India gain up to 6% as govt increases gas prices; MGL falls 4%

The government has hiked prices of domestically produced natural gas for the October 2022-March 2023 period

Shares of state-owned oil exploration companies Oil and Natural Gas Corporation (ONGC), and Oil India gained up to 6 per cent on the BSE in Monday's intra-day trade after the government increased gas prices. ONGC rallied 6 per cent to Rs 134.50, while Oil India gained 4 per cent to Rs 182.10 in the intra-day trade. In comparison, the S&P BSE Sensex was down 0.30 per cent at 57,255 points at 09:19 AM.

The government, on Saturday, hiked prices of domestically produced natural gas for the October 2022-March 2023 period. The rate for gas produced from old fields was hiked to $ 8.57/mmbtu from $ 6.1/mmbtu. Simultaneously, the price of gas from difficult fields was hiked to $ 12.46/mmbtu from $ 9.92/mmbtu. A further hike in domestic gas price is expected in the next revision in April 2023.

The beneficiaries of the gas price hike include ONGC, Oil India, and to a much lesser extent, Reliance Industries (RIL). 

"Upward revision in gas prices is beneficial for upstream companies such as ONGC and Reliance as their realisation would increase," ICICI Securities said in a note.

Although the savings potential of CNG against petrol/diesel would still remain high even after the hike, it is difficult to gauge till what extent the companies would be able to pass on the hikes as well as the upcoming cost pressures (next hike likely in April. 2023), Motilal Oswal Financial Services said.

Meanwhile, shares of Indraprastha Gas, Mahanagar Gas, and Gail (India) slipped up to 4 per cent on the BSE. In the past six months, these stocks have outperformed the market by gaining up to 10 per cent, as compared to 1 per cent decline in the S&P BSE Sensex.