 "ONGC, BPCL rally up to 5% as Saudi Aramco draws India investment plan")
Shares of Oil and Natural Gas Corporation (ONGC) and Bharat Petroleum Corporation (BPCL) rallied up to 5 per cent on the BSE in Friday’s intra-day trade on reports that Saudi Aramco was in discussions to invest in two planned refineries in India.
Individually - ONGC surged 5 per cent to ₹254.75, while, BPCL was up 3 per cent at ₹284.45 in intra-day trade. In comparison, BSE Sensex was down 0.04 per cent at 77,574 at 11:38 AM.
State-controlled Aramco proposes to supply oil equivalent to three times its stake in each project, and wants to sell its share of production either in India or by export, Reuters reported quoting several Indian sources with direct knowledge of the matter.
Saudi Arabia's share of India's oil imports has declined as refiners that have invested billions of dollars in upgrading their plants diversify crude sources to tap cheaper alternatives, including from Russia.
This move is driven by Saudi Arabia's desire to secure a stable outlet for its crude oil in India, the world's fastest-growing emerging market. Aramco is specifically targeting BPCL’s refinery in Andhra Pradesh and ONGC’s refinery in Gujarat. India's Prime Minister Narendra Modi is scheduled to visit Saudi Arabia in the second quarter, and both countries aim to reach an agreement before this visit.
ONGC is engaged in exploration, development and production of crude oil, natural gas and value-added products.
BPCL is engaged, primarily in the business of refining of crude oil and marketing of petroleum products. The Corporation has, among others, refineries at Mumbai and Vishakhapatnam, LPG bottling plants and Lube blending plants. The Corporation’s marketing infrastructure includes vast network of Installations, Depots, Aviation Service Stations, Retail Outlets and LPG distributors.
Meanwhile, according to Kotak Institutional Equities, with increased geopolitical concerns as the new US administration wants to set tariff policies with several countries and countries planning/implementing mitigating and/or retaliatory measures, oil prices declined to 3-year lows in early March 2025. However, unlike the previous cases, OPEC+ (Organization of the Petroleum Exporting Countries), after a meeting on March 3, 2025, decided to proceed with a reversal of voluntary increases, starting from April 1, 2025.
OPEC+ announcement on March 3, 2205 that the gradual increases may be paused or reversed subject to market conditions. However, in the brokerage's view, OPEC+ decision to go ahead with production increases despite weak oil prices indicates its frustration of not being able to control oil markets and prices.
“According to the International Energy Agency’s (IEA) estimates of current sustainable capacity, the implied spare capacity for OPEC+ is nearly 6.5 mb/d, of which nearly 5.3 mb/d is with nine OPEC countries. With an aggressive Trump administration wanting to increase US oil production in an overall weak demand environment, OPEC+ may like to focus on market share for now, in our view,” the brokerage firm said in the sector report.
With retail prices frozen, the lower oil prices are optically positive for oil marketing companies (OMCs). However, some of this positive impact will be offset by rising US oil supplies, declining Russian crude and a weak INR. There remains a strong case to cut/free-up retail prices, analysts said.
However, despite oil & gas sector headwinds, including lower crude realizations and policy challenges, valuations remain undemanding, and strong free cash flows support healthy payouts. An overhang of global impact of trade wars remains analysts at YES Securities said they prefer playing higher dividend yield stocks, a correction if observed, we recommend looking at these names given the volatility that could persist.
The oil & gas sector presents a compelling dividend play, with ONGC and Oil India standing out as the only stocks expected to offer yields of 5-6 per cent in FY26-27, while others Bharat Petroleum Corportion (BPCL), HPCL, Petronet LNG above 4 per cent and Indian Oil Corporation (IOCL), GAIL offers above 3.5 per cent yield, making them attractive bets at current levels as well as if they correct.
The upstream players like ONGC and Oil India face a lower crude realization outlook, making volume growth critical to earnings stability. Despite these challenges, valuations across the sector are near multi-year lows. OMCs are trading close to worst-case book values, making them attractive from a risk-reward perspective. The dividend outlook for refiners and marketing companies, upstream players and select gas utilities are better positioned for stable payouts, making them compelling dividend plays, a further correction into these names would yield better yields, the brokerage firm said in sector report.