PSU Shares - Gold Mine or Black Hole ?

Dear Investors,

The recent rally in BSE and NSE has given a big boost to the most neglected sector - Public Sector Undertakings.  

BSE PSU Index comprises of 59 scrips out of which 24  belong to Nationalized Banks.  Rest 35 shares belong to core business / manufacturing activities.  Many stocks in this sector are under owned by both FIIs and Domestic Institutions, HNIs for the simple reason that these are thoroughly mis-managed.

The Sector is out of investment radar of large investors due to uncertainty. There are several reasons for the downturn in PSU stocks include decline in net profit and the government's move to sell shares of some of these companies via offer for sale, at a discount to prevailing market price.  Any further equity dilution means - more supply depressing the market price.  FPOs by the government has become a nightmare for the Retail investors as they are now trading at deep discount to their issue price.  

For the smart investors this gives a golden opportunity to buy into high quality stocks at attractive valuations.  The top ten identified by our Research Team is given below :

1. BHEL
2. BPCL
3. BEML
4. Coal India
5. Engineers India
6. GAIL
7. Hindustan Copper
8. Indian Oil
9. NMDC
10. ONGC

Investors should carefully analyze the price movements of these shares besides the Q4 results for 2014 before taking any investment decisions.

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ONGC - Buy

Latest Quotes | News/Announcements | Quarterly Results | P&L |Price History The state-owned oil and gas major remains a safe bet in the current turbulent times, thanks to its robust balance sheet, inexpensive valuations and attractive dividend yield despite the compulsory subsidy sharing that's eroding profits. In the past one month, it has hardly fallen although the Sensex has lost 13.7%. If global oil prices fall due to another recession, ONGC stands to benefit as realisations will go up.

The stock has been under performing during the last 1 year as evidenced by the prices given below during the last 1 year

Time Span	Price	Change	%Change
Today	278.00	-4.20	-1.48
Week	275.75	6.45	2.33
Month	276.40	5.80	2.09
Three Months	283.00	-0.80	-0.28
Six Months	262.95	19.25	7.32
One Year	320.24	-38.04	-11.87

Investors with long term horizon should buy the stock on steep declines to Rs.250 levels and hold for a good return over a period of 1 year. With the fall in crude prices the scrip will gain and the reduction on subsidy burden on petrol and diesel will a positive trigger for the scrip.

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TA - ONGC 27-04-09

ONGC

ONGC too moved in a very narrow band between Rs 830 and Rs 890 and ended the week with a mild loss. The short-term trend in the stock is down since the peak at Rs 922. Resistances for the week ahead would be at Rs 890 and Rs 922. Failure to move above the first resistance would result in a decline to Rs 816 or Rs 790 in the near term. 200-day moving average present at Rs 816 will be a key support from a medium term perspective. Weekly close below this level would herald a decline to Rs 740 over the medium term. This stock has retraced 38.2 per cent of the down-move recorded from the November 2007 peak. Failure to move above Rs 920 will mean that the stock can move in a wide band between Rs 600 and Rs 900 for the rest of this year.

source : businessline 27-04-09

ONGC has climbing up from 600 levels and the rise in the last month has been steep.  The ideal range to buy would be Rs.725-750 for a target of Rs.1000 in 6 months time frame.

Equity Research Team

Intelligent Investor -

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Ravina Consulting -Bangalore India

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Technical Analysis - ONGC

ONGC

ONGC moved in line with our expectation, reversing downward from the resistance at Rs 920. The zone around Rs 920 is a key medium-term resistance and a sharp reversal from here can result in the stock moving in a range between Rs 600 and Rs 900 for a few more months. Therefore investors should wait for a weekly close above Rs 920 or for decline below Rs 800 to buy this stock. The 50 and 200-day moving averages will provide support in declines.

Short term trend in ONGC is down and immediate supports for the stock are Rs 835 and Rs 816. Immediate resistances are Rs 894 and Rs 922. Traders can initiate fresh short positions on a failure to move above the first resistance. – Lokeshwarri S.K.

— Lokeshwarri S.K. businessline.com

ONGC - Avoid / Sell on rise

ONGC

ONGC achieved our medium-term target of Rs 920 and moved sideways thereafter. As mentioned in our previous column, target of the third wave from the Rs 637 trough is Rs 926.

The sharp up-trend from the March 6 trough can lose steam around these levels and a correction can ensue that pulls the stock lower to Rs 800 or even Rs 750. Firm break-out above Rs 960 is required to mitigate this view.

The short-term trend in ONGC is positive and short-term traders can buy on declines as long as the stock trades above Rs 850.A strong move above Rs 920 can take the stock to Rs 1005. Medium-term investors can hold the stock as long as it trades above Rs 800.

Lokeshwarri S. K.

Businessline 12-04-09

Our View :

Drop in volumes and drop in prices indicate short term correction in the stock.  Avoid or sell above 950 and close positions intraday.

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Technical Analysis - ONGC

It was a spectacular 8 per cent rally in ONGC last Friday that made the stock close well above the short-term resistance at Rs 820. Target of the third wave from Rs 637 trough gives us the next target at Rs 926. Fibonacci retracement of the long-term down-move gives the next target at Rs 962. 

In short, those holding long positions can allow their profits to run till the stock reaches the band between Rs 920 and Rs 962. A firm close below Rs 820 is required to mitigate this positive view. Short-term trend in ONGC is also positive. The strength in weekly and monthly oscillators indicates that this is one of the first pivotals to shake off the bear market blues. — 

Lokeshwarri S.K. businessline — Lokeshwarri S.K. businessline

ONGC - Stock watch

ONGC
Last week's close (Rs) 1,548.38 
Prev. week’s close (Rs) 1,338.88 
Week’s high (Rs) 1,582.70 
Week’s low (Rs) 1,352.00 
Last week’s ave. daily turnover (Rs cr) 1,422.74 
Prev. week’s ave. daily turnover (Rs cr) 825.16 
Number of up/down move 4/1

Reliance Industries (RIL) shares will be in the limelight on announcement late last week that the company has entered into gas sales and purchase agreements with twelve fertiliser sector players.

These include public and private sector units such as NFCL, RCF, IFFCO, GNFC and Tata Chemicals. The signing of agreements with customers is a precursor to the initial start of gas production of around 15 mmscmd in April. RIL is expected to reach peak production of 80 mmscmd in a year’s time.

RIL would sell gas to the companies at $4.20 per mmbtu for a period of five years. Reliance Gas Transportation Infrastructure, a group company along with GAIL and GSPC will be transporting gas to the fertiliser companies. At Rs 1,548, the stock is trading at around 15 times of its trailing EPS.

source : business-standard

Technical Analysis - ONGC

ONGC moved in line with our expectation, racing to the band between Rs 810 and Rs 820 and then turning hesitant at that level. As discussed in our last column, there are numerous hurdles in this band in the form of the long-term 200-day moving average, the target of the up-move that began from October 27 trough and the upper end of our medium-term trading range. A reversal from here can pull the stock lower to Rs 750 or Rs 708. Short-term traders can continue to buy in declines as long as the stock trades above the first support. The stock is currently at a key medium term resistance level. A close above this level can take ONGC to Rs 867 or Rs 950. Lokeshwarri S. K. businessline 29-03-09

Dashes Expectations leads to Crash in NSE and BSE

Disappointed with the interim budget presented today, the Indian markets steadily declined until the end of the trading session thus closing deep in the red. The Sensex closed lower by around 340 points, while the Nifty closed lower by around 100 points. Stocks from the mid-cap and small-cap indices too ended the day on a negative note. Stocks from the metal and capital goods sectors led the pack of losers today. Rupee closed at 48.79 against the US dollar. The Asian markets ended on a mixed note today. The European indices are currently trading weak.

As per a leading business daily, demand for power has fallen by around 600 MW during the period April 2008 to January 2009 as against the corresponding period last year when it had increased by 4,500 MW. The demand for power declined from 106,943 MW to 106,336 MW during the period under consideration on account of slowdown in the industrial consumption due to the current economic crisis. It may be noted that the Ministry of Power had estimated the electricity demand to increase to 859 bn units by 2012, if India were to maintain an 8% GDP growth rate, while to maintain a 7% GDP growth rate it would require an electricity demand of around 820 bn units. However, currently India’s power demand stands at around 730 bn units as against a generation of around 666 bn units of power annually. Any further weakening of demand for power may adversely affect power equipment manufacturers like L&T and BHEL, as the healthy demand for power equipment in the past few years has been largely due to the continuously increasing demand for power in the country. The stocks of L&T and BHEL ended the day on a weak note.
As per a leading business daily, ONGC and other state-run explorers will pay refiners Rs 320 bn as subsidies for selling fuels below cost for FY09. This amount will be part of the compensation for PSU refiners like IOC and HPCL which may lose revenue of about Rs 1 trillion during the year. In January 2009, the PSU retailing companies were making a profit on petrol and diesel. However, those gains were wiped out by losses on kerosene and cylinder of LPG. The refiners will get bonds from the government to cover the remaining amount for which all accounts will be settled at the end of FY09. The stock of ONGC, HPCL and IOC ended the day on a weak note.

As per the interim budget announced today, despite the severe global financial crisis, India recorded a 45% YoY growth in foreign direct investment (FDI) between April and December 2008. It received an FDI inflow of US$ 23.3 bn during the period. This even though during FY08, India's FDI inflow was already a robust US$ 32.4

NTPC's nuclear foray
The markets continued to trade in the negative territory on account of sustained selling activity witnessed during the previous two hours of trade. Stocks from the power, engineering and construction sectors are leading the pack of losers, while select stocks from the media, auto and FMCG sectors are trading higher. The overall decline to advance ratio is poised at 2:1 on the BSE.

As per a leading business daily, the government may soon put in place norms for monitoring prices of costly imported patented medicines for diseases such as diabetes, arthritis, obesity, cancer and heart diseases. Once finalised, the new norms will see the government negotiating prices for imported medicines for identified diseases based on prices of the same medicine in other markets and the estimated cost of production. The companies would be expected to voluntarily keep prices lower in India for other imported patented drugs. Though this move is aimed at increasing the affordability of these medicines for consumers, the same would prevent MNC companies such as GSK Pharma, Eli Lilly, Roche, Aventis and Pfizer from selling their drugs at a huge premium in the country.

Power stocks are trading lower led by Reliance Power, Power Grid Corporation and NTPC. As per a leading business daily, NTPC and Nuclear Power Corporation of India (NPCIL) has signed a MoU to form a joint venture (JV) company that will set up nuclear power projects in India. NTPC would hold around 49% stake in the JV, while the remaining would be with NPCIL. It may be noted that NPCIL is the sole agency generating nuclear power in the country with a capacity of about 4,120 MW. Total nuclear power generation in India is estimated to be around 20,000 MW by 2020. This move would help NTPC to gain presence in the nuclear power segment which is expected to witness strong focus by the government going forward.

Source : Equitymaster.com