Cheer for ONGC investors: Higher oil and gas prices should drive earnings

But subsidy sharing risk rises if crude oil sustains above $70, which could drive down stock

The Oil and Natural Gas Corporation (ONGC) stock has significantly lagged the benchmark S&P BSE Sensex over the past year, even as prices of crude oil, its mainstay, have rallied (see chart). There has been some catching up in the past week, led by improving prospects in the business. If the trend sustains, which seems likely, ONGC’s investors could see good returns.

The unknown, however, is whether the government will ask the company to bear the subsidy burden if oil prices rise sharply, as was the case a few years ago. This is one reason the market is cautious on government-owned