Introduction

Investing in the stock market can be a significant opportunity for generating returns. One such stock garnering attention is ONGC (Oil and Natural Gas Corporation) at its current market price (CMP) of ?61. This article delves into whether investing in ONGC is a wise decision, providing detailed analysis and recommendations for long-term investors.

Why Invest in ONGC?

ONGC is a reputable player in the Indian oil and gas sector, known for its upstream production capabilities. Here are key reasons to consider ONGC as an investment:

1. Dividend Yield

The current price of ONGC results in a dividend yield that exceeds 10%, which is considered highly attractive. This high yield is a significant factor for long-term investors looking for steady returns.

2. Upcoming Price Fluctuations

Crude oil prices have seen a downturn, which is not sustainable for a prolonged period. As oil prices naturally revert to higher levels, ONGC stands to benefit in the next couple of months. Economic packages globally aimed at stimulating growth are expected to positively impact oil prices.

3. Stability as a PSU

ONGC operates as a public sector undertaking (PSU) and is a leader in oil and gas production in India. This ensures a level of stability, reducing the risk of company shutdowns or major financial crises that might otherwise be associated with corporate operations.

Comparative Analysis

While ONGC may be a good investment, it is essential to compare it with similar or related companies to make a more informed decision. Herein, we compare ONGC with other players in the sector:

1. OIL (Oil Gas Exploration and Marketing)

Despite OIL’s stronger financial position and leadership in BS norms, ONGC often trades at a lower price compared to OIL. Additionally, ONGC's dividend pays are modest given its book value, which is just ?179, compared to OIL’s ?275.

Investment Strategy

To ensure a balanced portfolio, the article recommends diversifying investments in addition to ONGC. Here are some stock options to consider:

Out of these, two should be selected based on thorough market research and analysis. Below are the reasons to consider investing:

1. Current Market Trends

ONGC, OIL India, and IOC are all experiencing multi-year lows, offering strong contra-buy opportunities. These companies pay around ?15 annually in dividends, providing a potential dividend recovery within the next five years.

Conclusion

In conclusion, while ONGC offers attractive returns, it is important to remember that investment in any stock involves risks. Diversifying your portfolio with other strong performers such as SAIL, Indian Cement, and Exide Industries is advised for a balanced and robust investment strategy.