ONGC Shares at Rs. 60: A Long-Term Investment Opportunity?

ONGCis a prominent Maharatna company with its current share price at a multi-year low. For investors with a long-term view, ONGC presents a compelling investment opportunity. This article explores whether it is a good time to buy ONGC shares at Rs. 60 for a year or two, discussing its potential as an investment and the factors affecting its stock performance.

ONGC: A Maharatna Company with a Promising Dividend Yield

ONGC is a Maharatna company, recognized for its role in the Indian energy sector. Currently, its shares are available at a multi-year low price, making it an attractive addition to one's portfolio from a long-term perspective. One of the key reasons for considering ONGC as an investment is its dividend yield of 7%, which is higher than the yields offered by fixed deposits (FDs).

Key Factors Supporting ONGC Investment

Several factors indicate that ONGC shares could be a good long-term investment:

Dividend Yield: With a dividend yield of 7%, ONGC offers better returns compared to fixed deposits, making it an attractive option for income-oriented investors. Growing Gas Demand: As gas consumption increases, ONGC's position in the sector could benefit from this trend. Book Value and P/E Ratio: ONGC has a book value of 154 and a P/E ratio of 11.21, both of which suggest that the stock is currently undervalued and represents a good bargain. Potential for Price Appreciation: While ONGC may not offer the same appreciation as companies like Reliance Industries Limited (RIL), it has the potential to provide decent price appreciation over a long-term horizon.

Investing in ONGC vs. Other Options

Some investors might find alternatives more appealing. For instance, Bandhan Bank, currently trading at 170, could be a more attractive option for those planning to hold for 2 to 3 years. However, the decision to invest in ONGC or Bandhan Bank ultimately depends on individual investment goals and risk tolerance.

Current Market Dynamics and Future Outlook

The current market dynamics and government policies play a crucial role in determining the future of ONGC. The government's shortage of funds has led to the extraction of many dividends, leaving less for capital expenditure. This situation is expected to persist in the near term, and there are no imminent triggers for ONGC's recovery.

Investors are thus advised to consider other options such as BPCL. With the deregulation of city gas prices, BPCL is well-positioned to capture more business from Indraprastha Gas and Adani Gas/GAIL. Additionally, there is potential for strategic acquisitions, with ARAMCO or ADNOC as possible buyers.

Concluding Thoughts

While ONGC shares at Rs. 60 present an attractive opportunity for long-term investors, they should remain mindful of macroeconomic factors such as crude oil prices. If crude oil prices hit 25 dollars, ONGC shares could fall to 45. Investors are advised to avoid buying ONGC until crude oil prices remain above this threshold to mitigate potential losses.

Note: Always conduct thorough research and consider professional financial advice before making investment decisions.