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Sensex Opens Flat; Oil & Gas Stocks Gain
Mon, 27 Feb 09:30 am

Asian equity markets are lower today as Japanese and Hong Kong shares fall. The Nikkei 225 is off 1.16% while the Hang Seng is down 0.03%. The Shanghai Composite is trading down by 0.26%. Stock markets in the US finished their previous session on a positive note.

Meanwhile, Indian share markets have opened the day on a flat note. The BSE Sensex is trading higher by 9 points while the NSE Nifty is trading lower by 8 points. The BSE Mid Cap index and BSE Small Cap index both have opened the day up by 0.1% & 0.3% respectively.

Sectoral indices have opened the day on a mixed note with FMCG stocks and automobile stocks witnessing selling pressure. While, oil & gas stocks and information technology stocks are among the top gainers on the BSE. The rupee is trading at 66.83 to the US$.

Engineering stocks have opened the day on a mixed note with Jyoti Structures and Manugraph India being the most active stocks in this space. As per an article in a leading financial daily, Larsen & Tourbo's (L&T) arm Larsen and Toubro Hydrocarbon Engineering has bagged orders worth Rs 11 billion from Indian Oil Corporation for its Bongaigaon refinery in Assam.

The contract is for setting up a 0.740 MMTPA Fluidised Cracking Unit (FCC) including LPG Treatment Facility at their Bongaigaon Refinery in Assam.

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The scope of work under the contract covers extended basic engineering, detailed engineering, procurement, supply, transportation, storage, fabrication, inspection, construction, installation, testing, mechanical completion, pre-commissioning and commissioning of the unit.

Diversification continues to help L&T (Subscription Required) negotiate and get better terms and margins for projects. Apparently, this is because it is less desperate to win orders as compared to a company which are present in only a couple of sectors. Its reputation, extensive technical prowess, and large skilled workforce have enabled L&T to command a certain premium from customers and vendors alike. Whether, further addition to these new projects provides a cushion to its profitability will be an interesting thing to watch out for going forward.

Subscribers can access to L&T's latest result analysis and L&T stock analysis on our website.

Moving on to the news from oil & gas stocks. According to an article in a leading financial daily, the board of Oil & Natural Gas Corporation (ONGC) Ltd has approved the signing of an agreement to buy Gujarat State Petroleum Corporation Ltd (GSPC)'s entire 80% stake in the KG basin gas block for US$1.2 billion.

Under the agreement, to be signed by the two companies, GSPC will have to buy natural gas from the block at a price of about US$6 per million British thermal units. In the fifth year, the price would be US$6.9 per mBtu.

Further, ONGC will also invest US$1.10 billion in GSPC assets to produce about 15 million tonnes of oil and about 3 billion cubic metres (bcm) of gas. Also, ONGC's decision is in line with the government's idea of public investments taking the lead in stimulating the economy.Meanwhile, The Economic Times reported that, ONGC will take control of Hindustan Petroleum Corp (HPCL) as part of the government's plan to create an integrated public sector oil entity.

The government of India will transfer its majority shareholding (of 51.11% in HPCL) to ONGC, which will then become the holding company of HPCL. Further, it was also reported that the status of all other oil companies such as Oil India Ltd (OIL) and Indian Oil Corp. (IOC) would remain unchanged.

The thinking behind such vertical integration is that it will reduce risk-high crude oil prices will boost the exploration business and when they drop, the distribution segment will benefit.

ONGC Share Price Performance

ONGC Share Price Performance

To know more about the company's financial performance, subscribers can access to ONGC's latest result analysis and ONGC stock analysis on our website.

ONGC share price opened the day up by 1.1%.

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Jan 17, 2018 02:41 PM