InvestorQ : Should I sell My ONGC shares since the price is falling?
Rohit Purkait made post

Should I sell My ONGC shares since the price is falling?

Arti Chavan answered.
12 months ago

There are broadly 3 reasons for the fall in the ONGC prices. Let us look at each of the reasons.

Firstly, the ONGC stock took a big hit after it was forced to merge with HPCL by buying out the government stake in HPCL. This led to ONGC taking on debt and also made its balance sheet vulnerable. That was the primary reason for the poor performance.

Secondly, weak oil prices have been a key factor in the fall in ONGC stock price. ONGC is an upstream company and its profit depends on the crude oil prices. However, due to weakness in global growth, tepid industrial growth in China and the ongoing trade war between the US and China have dampened the spirits of the stock.

Finally, the most important reason of late has been the sharp cut in gas prices. Let us look at this point in greater detail. The 12.5% cut in domestic natural gas price has been highlighted as credit negative for ONGC by Moody’s. That is because, ONGC will see earnings fall by over Rs.1,400 crore. It may be recollected that the gas prices were cut to $3.23 per million British thermal units (mmBtu) from $3.69 per mmBtu. This marked the first reduction in gas price in India after April 2017. This fall in profits represents 0.3 per cent of the consolidated revenues and 2% of consolidated EBITDA for fiscal 2020. It is this gas impact that actually hit the prices of ONGC stock very sharply.