Sensex Opens 240 Points Up; ONGC Rallies

Mon, 12 Feb 09:30 am

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Asian stocks are higher today as Chinese and Hong Kong shares show gains. The Shanghai Composite is up 0.38% while the Hang Seng is up 0.68%. Meanwhile, the Dow Jones industrial average rebounded more than 300 points Friday, paring deep losses for investors in what still amounted to the worst week in two years.

Back home, India share markets opened on a strong note. The BSE Sensex is trading higher by 241 points while the NSE Nifty is trading higher by 68 points. The BSE Mid Cap index and BSE Small Cap index opened the day up by 1.1% & 1% respectively.

All sectoral indices have opened the day in green with metal stocks and realty stocks witnessing maximum buying interest. The rupee is trading at 64.37 to the US$.

Oil & gas stocks opened the day on a mixed note with Gulf Oil Lubricants & ONGC leading the gainers. As per an article in a leading financial daily, a consortium of Indian companies led by Oil and Natural Gas Corp. Ltd (ONGC)'s overseas arm, ONGC Videsh Ltd, has bought a 10% stake in the UAE's offshore oil and gas field Zakum.

Reportedly, the Indian side will pay a sign-up bonus of US$600 million as part of the deal inked in Abu Dhabi between company executives and UAE officials.

The deal gives the Indian consortium, which includes Indian Oil Corp. Ltd and Bharat Petroleum Corp. Ltd's overseas arm Bharat PetroResources Ltd, access to about two million tonnes of annual share from the field which produces about 400,000 barrels of oil a day.

Backed by diplomatic efforts, Indian energy companies have been aggressively pursuing a share in the world's most prolific oil and gas fields. In 2016, Indian Oil, Oil India Ltd and Bharat PetroResources had bought stakes in two assets in Siberia owned by Russia's state-backed PJSC Rosneft Oil Co. for US$3.3 billion.

Although global oil prices have been rising recently, it is far below the US$100-plus levels seen three years ago, forcing many oil-rich nations to narrow their budget deficits by selling assets and diversifying into non-oil sectors of the economy.

US exporters stepping up their supplies is also helping to reduce the effectiveness of the supply cuts by the Organization of the Petroleum Exporting Countries (Opec), aimed at propping up prices.

Further, ONGC Videsh stated that stake acquisition in Zakum is the first time that Indian oil and gas companies have been given a stake in the development of Abu Dhabi's hydrocarbon resources. The deal has a term of 40 years.

Meanwhile, the country's energy subsidy burden has come down over the past few years. As per a report by the International Institute of Sustainable Development, the value of energy subsidies the central government doled out declined by 38%, from Rs 2.17 trillion to Rs 1.35 trillion between FY 14 - 16.

Steady Decline in Energy Subsidies (in Rs billion)

During this period, India lowered its overall subsidy bill with a steep 70% cut in Oil and Gas subsidies.

Although subsidies given to the renewable segment have risen four folds, it still constitutes a miniscule 6.9% of the overall energy subsidies. This means that the lion's share of subsidies still favour fossil fuels rather than renewable sources.

However, electricity remains inaccessible to a sizeable population, and fossil fuel still dominates the energy mix in the country.

The pertinent question here is, how will India find the balance between fulfilling its energy needs while honouring its commitment towards global climate change?

ONGC share price opened the day up by 3.5%.

Moving on to the news from steel sector. Tata Steel share price surged 2.9% after it reported a five-fold jump in its fiscal third-quarter net profit on the back of strong volume growth in the domestic market and a hike in steel prices.

For the quarter ended 31 December 2017, Tata Steel reported a net profit of Rs 12.9 billion (US$201) million), compared with Rs 2.4 billion in the comparable quarter of the previous fiscal.

Consolidated revenue from operations grew 15% to Rs 334.5 billion, compared to Rs 276.8 billion in year-ago.

Further, its Indian business showed a 10.6% growth year-on-year at Rs 156 billion and European sales grew 20.7% to Rs 146.9 billion, while revenue from Indian operations grew 22%.

Tata Steel stated that its Indian business reported earnings before interest and tax (EBIT) growth of 37% at R 46.5 crore and Europe business reported an EBIT degrowth of 10.6% at Rs 6.3 billion compared to same quarter last year.

Quarterly steel deliveries were up nearly 8% at 6.56 million tonnes, with domestic market accounting for about 50% of the total.

The company's gross debt decreased by Rs 16.6 billion to Rs 886 billion since the quarter ended September 2018.

The liquidity position of the group remains robust with approximately Rs 225.4 billion, comprising Rs 126.8 billion in cash and Rs 98.6 billion in undrawn credit lines.

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