Trading Idea: March 2012

Sell ONGC 320 Call at Rs 1.40 Premium

The recent auction of 5 percent govt's stake in ONGC has given very good trading opportunity. The floor price for the auction was set at Rs. 290 which was 3 percent higher than the 29th Feb closing price. As a result the response from institutional investors was muted and LIC had to step in to bail out the govt. 

Now since the auctinn is over and it is clearly visible that there is very little demand for the share beyond 290 - 300 levels, one can write 320 call of ONGC March expiry at the current market premium of Rs 1.40

Return from this trading strategy:

Assuming 1 lot of ONGC (1 lot = 1000) is sold at Rs 1.40

Total premium collected = 1000 * 1.4 = Rs 1400

Total Transaction cost assuming Brokerage cost including STT and other taxes at Rs. 50 per lot = Rs 50

Margin money required: Rs. 42,000 (14% of total call value)

Total return = 1350 / 42,000 = 3.2 % in 1 month

Risk: If ONGC moves past 321.4 and closes above this level then there will be a loss of Rs.1000 for every point above 321.4

ONGC stake sale cleared, auction to happen soon

ONGC disinvestment has been given nod by the Empowered Group of Ministers (EGoM) today for the 5% stake sale. The auction is expected to happen in a couple of days. The floor price for the auction is expected to be be disclosed in exchange notice. 

The ONGC stake sale is likely to fetch the exchequer around Rs 12,000 crore. The government is looking at various options to meet its disinvestment target which has been hit due to adverse market situation.

The shares of the company closed at Rs 283 as on 28th feb 2012, up 1% on the Bombay Stock Exchange ahead of the EGoM meeting.

ONGC Q3 FY 2011 - 2012 Result Analysis

Oil and Natural Gas Corporation (ONGC), India's largest oil and gas exploration company, reported a 4.8% decline in net profit at Rs 6,741 crore for the quarter ended December 2011 as against Rs 7,083 crore in December 2010.

Net sales too fell 2.5% to Rs 18,123 crore from Rs 18,586 crore in the same period a year ago. ONGC also reported a royalty reversal of Rs 3,142 crore as against an expectation of Rs 2,500 crore.

The company's stocks reacted negatively and fell 1.4% after the result announcement at Rs 282. However at current market price the stock is available at less than 10 time FY 13 expected EPS. For results press release use the following link: