Sideways movement on ONGC

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Oil and Natural Gas Corporation (ONGC) is an Indian Multinational Crude oil and Gas corporation which is a state-owned enterprise under the control of the Ministry of Petroleum and Natural gas. It is the largest oil and gas exploration and production company in the country that produces around 70% of the country’s crude oil and around 84% of its natural gas. The company operates in around 17 countries with several projects. The Saudi Arabian oil giant has slashed the per barrel price for Asian region which would result in the lower procurement costs as it boosts the refining margin.
The uncertainity in the oil price environment has caused heavy losses to the domestic oil companies as Brent crude is trading below $30 a barrel which would not help the domestic companies to recover their production costs. ONGC’s cost of production is close to $31 a barrel which would result in the company posting a loss at the pre-tax level. The company’s shares climbed 13.5% during March 24, 2020 as it declared its interim dividend of Rs.5 per share boosting its share price for the trading session. The ichimoku cloud indicator shows the downward trend for the stock which has been caused due to the oil price trade wars and also the effect of COVID-19 on the industry as it disrupted the global supplies due to the lockdown of companies.
 

The company had recently declared their interim dividend of Rs.5 which meets the requirement of Govt owned companies to pay a minimum annual dividend equal to 5% of their net worth which led to its decline in cash and cash equivalents of the company which were at Rs.6700 crore on September 30,2019 from Rs.24,700 crore on March 31,2016. The net borrowings of the company has increased to about 1 lakh crore from Rs.21,500 crore which shows the increase in its borrowings for capital expenditures of the company. Despite being a leader in the industry, the financials of the company is not considered as strong due to its bulk payments during the crisis which reduces its liquidity and increases its operational risk.


The Bollinger bands shows the downward trend of the stock as there is a sharp decline in the price of oil in the global market with declining demand. The parabolic SAR shows an upward trend for the stock as the dividend declaration boosted the share prices of the stock.

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