Why ONGC & Oil India Are Rising? | HPCL, BPCL & IOCL Are Under Pressure |CA Rachana Ranade

Added: 2026-05-14

[00:00:00]Hey folks, here at Rachana Ranade here, and I welcome you all to a very, very interesting video, which is based on a topic that is like being discussed extremely across the board. It's about oil companies. But wait, not all all the oil companies are the same. They I can divide them into two parts. One could be like an upstream company, one could be like a downstream company. If I'm talking about something like ONGC or Oil India, they fall into upstream companies. And if I'm talking about something like BPCL, HPCL, IOCL, these will fall fall under the downstream category. Okay? But this is just basics.

[00:00:33]What is upstream, what is downstream? We are going to discuss that. But what else are we going to discuss in the video?

[00:00:37]Four key points. Number one, we'll talk about why are upstream companies like ONGC and Oil India rallying?

[00:00:44]Extremely important, super interesting part of this video is the technical analysis of both these companies. Third, we'll [snorts] also understand about what's going on with downstream companies like BPCL, HPCL, and IOCL. And very important, what actions could government take in these companies? So, extremely important video. Keep on watching the video till the end. Now, let's understand what do companies like ONGC, Oil India, which are upstream companies, what do they exactly do? See, they are mainly involved in three activities. Which are the three activities? Number one, exploration, then drilling, and then refining. Okay?

[00:01:17]What do they mean by exploration? They explore. They try to find where can they find reserves for crude oil and natural gas. Okay? Now, exploration, of course, doesn't mean they're going to take a magnifying glass and search. Of course, there are there is a lot of technology involved. They can use sound waves and all that. We're not going to go into it.

[00:01:32]But first things first, what do they do is they are into exploration of crude oil. Now, once they find that, okay, here we we can have there there are possible reserves of crude oil, then they start the process of drilling, obviously post government approvals and all that. Okay?

[00:01:45]Second stage, drilling is done. They will extract crude oil. But can crude oil directly be used in vehicles? Answer is no, and that is why the third stage comes into picture, which is refining.

[00:01:54]Okay? Crude oil is refined into what?

[00:01:57]Refined something like petrol, diesel, ATF, that is aviation turbine fuel, other products also, okay? So, what will they do after that? After they have refined it, they're obviously going to sell it. What? Crude oil, natural gas, okay?

[00:02:08]Now, logically tell me, if crude oil prices rise or if natural gas prices rise, is it going to be beneficial for them? Obviously, yes. Their revenue will increase, EBITDA will increase, their profitability will increase.

[00:02:19]But, the big question is that by how much has UK UK oil or basically crude oil risen, and how much can it impact their EBITDA? Can we quantify that?

[00:02:30]Oil has increased, everyone knows that, but just to give a quick quantification, you can see here, this is the monthly candle. February ended at somewhere around 72, and you can see a March candle itself is a 41% jump. But, if I want to check that from Feb end to date, this is roughly we are saying that this translates into roughly 46% increase in crude oil prices, and this translates to roughly $34 increase in crude oil prices. Let us say $30, okay?

[00:02:58]Now, is there a study that if crude oil rises by $30, by how much can the profitability of upstream companies go up? And for that, I have found a very interesting news article. Now, what does it say? According to an ET report, for ONGC, every $10 rise in crude oil prices adds adds to around 13,000 crores in EBITDA. And for Oil India, the gain is around 2,200 crores. So, basic mathematics. For $10 rise in crude oil, for Oil India, first let's take example of of Oil Oil India. Oil India EBITDA will rise by 2,200 crore rupees.

[00:03:38]Currently, we are saying that already crude oil prices have risen by around $30. Ideally, in that case, their EBITDA can rise by 6,600 crore rupees, okay? Now, we should check how much is their EBITDA. And if I were to check Oil India, their EBITDA is 2,027 crores for a quarter.

[00:03:57]Okay. Right now we are saying because of $30 increase, it could rise by $6,600 roughly. Okay. So I hope you are able to understand the quantification of that.

[00:04:09]Now if I'm talking about ONGC also, they are saying for ONGC, it's $10 for every $10 rise, it could lead to 13,000 crores adding up to the EBITDA. Okay. And for EBITDA. So $30 will lead to 39,000 crores of EBITDA. And currently they are at 25,335 crore rupees of EBITDA for only one quarter. So I hope you have understood the quantification part as well. And if the numbers look so interesting, are their charts also looking extremely interesting? Answer is yes. And that's exactly what we're going to check in the next section of the video. Batch one sold out. Batch two sold out. And this Sunday I'm conducting another webinar which is about options selling strategy.

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[00:06:02]Now first, let's check at the technical analysis of Oil India and for that have a look at this. Now if you see here, latest candle is 9th of February, last 3 months data, everyone knows that, okay.

[00:06:11]So here if you see the stock price had gone up to roughly which is what is that? 484, okay. It came down. Look at this downfall. This is how much? This should be more than 20 30% maybe. Yes, 31% okay. So 30% downfall, again it came up to this similar range and from that it went down by almost 20%. So here you can see there is a contraction in the volatility. Here it [snorts] fell by almost 30%. Here it fell by almost 20%.

[00:06:40]Now what is the next question? In the last 3 months you have to check whether there could be two three possibilities.

[00:06:46]It goes time pass sideways only, possibility number one. Possibility number two, it can further go down like this or possibility number three, it is again challenging this range and if the volatility is again lesser, there is a very clear cut VCP which has been formed here, volatility contraction pattern.

[00:07:05]And [snorts] then for those who have done my course on price action analysis, you already know how the target prices are to be calculated. If you have not checked out my course please please do check the decoding price action analysis course as well. I'll give the link in the pinned comment and description box, okay. So very interesting chart pattern for Oil India. Let us also check for ONGC. Now for ONGC if you check, this is a monthly chart that we are going to go for ONGC. And if I were to just uh do Oh, sorry sorry. One second.

[00:07:34]Yes, so if I if I were to check the monthly chart for ONGC, here you can see that there was an ATH back in 2014.

[00:07:44]After which the stock moved beyond this again, there was a big evening star, the stock came back, and now you what you have to check is again same three possibilities. It could have gone down from here or sideways or it is again challenging this old same level. If there is a breakout with volumes, if there is a confirmation candle as well, both these charts can look extremely interesting.

[00:08:07]Now let's understand that this crude oil prices going up and all that has been happening since Feb end.

[00:08:13]The technical charts that we discussed are looking very interesting. But why is the buzz around these two stocks happening since the last one or two days? Because both these stocks are up around 7 to 11% in the last one or two days. What is the new news about this company? The new news is about royalty.

[00:08:29]Now what is royalty in simple terms?

[00:08:30]See, whenever companies like Oil India or ONGC are drilling crude oil, where are they drilling it from? From land or from seabed? Land be it land or be it seabed, to whom does it belong to? It belongs to India, right? Indian government. So if these companies are drilling and are extracting crude oil, they have to pay some money to Government of India, and this money will be nothing but royalty.

[00:08:53]Simple.

[00:08:54]>> [snorts] >> Now Government of India is saying, "Try and uh extract crude oil to the best possible level. It's not like they can expand their uh production capacities to a huge extent all of a sudden, but government is trying to encourage that."

[00:09:08]Why? Because when we are importing crude oil, everyone has already been knowing this since a long time that we import almost 85 to 90% of our crude oil requirement. The moment we import crude oil, what happens is that there is a dollar outflow. If there is a dollar outflow, our rupees going to weaken further. So instead of importing more, if we can use maximum of the crude oil that is being uh drilled by ONGC or Oil India, it'll be more beneficial for us, right? And that is the reason why to encourage they have reduced the royalty, but from what to what? From 20% to if it is royalty on crude oil, crude oil from where onshore oil production, they have dropped it to 12.5%. If it is from shallow water offshore, it is 7.5% for a deep water blocks and ultra deep water blocks, first for first 7 years it is zero and then it is later 5% and 2% respectively. Now, please understand when it is about extracting crude oil from deep water blocks, ultra deep water blocks, it's it's very expensive, okay?

[00:10:06]And plus it's also pretty much hard to actually extract a crude oil from these deep water blocks, ultra deep water blocks. And that is the reason why you can see that more incentives have been given to these companies. This is about crude oil. Now, if you check for natural gas also, it has been reduced again all four columns all four pointers are exactly the same, but the new royalty rates are 10% 7.5% 0% for first 7 years and then later 5% and 2% okay? But this is for what? This is for existing blocks. What about new blocks? Because government also wants to encourage these companies to find new blocks where crude oil can be found again. And for that they have come up with this help policy.

[00:10:45]What is help? Hydrocarbon exploration and licensing policy, okay?

[00:10:50]>> [snorts] >> So, under this policy they are saying that if you are able to explore new blocks, if you are able to extract new blocks, you will be given further concession for same four pointers, onshore, shallow, deep water, ultra water. You can see that the royalties have further dropped.

[00:11:06]I'm not going to read this out, you can pause the screen and check it out, but if you compare it with the previous table also, you'll understand that all these four percentages are lower than what we discussed for the existing blocks. Now, because of all these things, brokerage house CLSA they have given a target price of 405 rupees on ONGC. Are we going to blindly rely? No, we also can do technical analysis. So, what I want you all to do is do the technical analysis of ONGC and as per you what could be the target price of ONGC? I want you all to let me know that in the comment section below.

[00:11:38]Now, let's move on to the downstream companies which is HPCL, BPCL, IOCL.

[00:11:42]What is the overall sentiment behind these stocks? Kind of negative. Why?

[00:11:48]Now, for downstream companies what they do as a business is obviously they'll buy crude oil. They'll refine it and then they'll sell petrol diesel, okay?

[00:11:56]Now, if the crude oil prices rise, is it going to be bad for them? Obviously for them the raw material is going up and if that be so, is it going to put pressure on their profits on their profit margins? Answer is yes.

[00:12:07]But last one or two days again there has been some spark in these stocks, some news around these stocks because of which people are saying that there could be some positive sentiment in this stock as well. But, what could be the reasons?

[00:12:20]There could be three primary reasons.

[00:12:21]Third one is extremely interesting for these downstream companies, but first let's start with the very first one.

[00:12:27]People are saying one solution for these downstream companies who are bearing the brunt of rising crude oil prices. How can they ease that out? Possibility number one by cutting out excise duty.

[00:12:37]Has the government already done that?

[00:12:39]Answer is yes, this was done on 27th of March where government of India reduced excise duty by 10 rupees per liter on both petrol and diesel with immediate effect. Let's understand with the help of an example how can these downstream companies benefit with reduced excise duty? Let's take a simple example.

[00:12:56]Assume that petrol was sold at 100 rupees by these companies. And let's say excise duty was 13 rupees. So, what used to happen? 100 rupees collected from the customer, 13 rupees has to be paid to the government. So, what is left with these downstream companies is 87 rupees.

[00:13:10]And from that crude oil price has already increased, so their profit margins are going to squeeze, right?

[00:13:16]Now, instead of that what have they done is that they have reduced crude oil they have reduced the excise duty by 10 rupees. Now, what would happen now? 100 rupees collected from the customer, but now excise duty to be paid to the government is not 13, but now it would be only 3 rupees and that is the reason why these oil marketing companies will be left with 97 rupees. So, can that give them a cushion on the profit margins? Answer is yes, okay. But this has already been done. So, no other action to be taken here. This is already priced in too, okay. What is the second possibility for a trade in for these stocks? Second possibility could be that upstream companies are asked to share the burden. They are asked to bear the part of the subsidy burden. So, what will happen is that whatever is the brunt that these downstream companies are sharing are are actually you know, they are they are taking it on them.

[00:14:06]This burden can be shared between upstream companies and downstream companies, but uh Right now there are no specific news on how much will be the burden sharing and all that. If such news come up, then please keep a track on these news. And the third one which is extremely interesting, not good for people like you and me. This could be nothing but a rise or price hike in petrol or diesel prices.

[00:14:29]If this happens, obviously the top line itself for downstream companies is going to improve and it will improve their profitability, but the problem is that this will typically lead to higher inflation and government doesn't want that because that brings a burden on the common man. So, government typically tries to delay this as far as possible, but there are certain news in the market right now which are saying that there is a possibility that maybe uh petrol and diesel prices may rise. If that be so, then the companies like these downstream companies can definitely stand to benefit. What are your thoughts? Will petrol diesel prices increase or not?

[00:15:03]Let me know in the comment section below. If you like today's video, please don't forget to share this with your friends. I'll see you in the next one.

[00:15:08]Till then, take care. Jai Hind and bye-bye.

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