MUMBAI: The leading index ONGC has corrected by 10 percent in the last two years despite an influx of positive news such as the government raising petrol prices, easing the burden of subsidies after the fall in crude prices and deregulating diesel prices. The possibility of poor viability and the government’s concern over continuing epidemics is weighing on the stock market.

The stock has also lagged significantly behind the BSE 2017 Oil and Gas Index declining 4.5% per annum. Meanwhile. The price of Brent crude oil has fallen by nearly 30%, from $116 a barrel in June to $82 a barrel in November. Analysts say the fall in crude prices has affected oil exploration companies like ONGC and Oil India. This is because the cash per barrel of crude oil is linked to world prices.

“Global crude oil prices have fallen by nearly $10 per barrel in the past one year. The sharp fall in the past one month has not affected the growth of companies like ONGC,” said Vinod Nair, head of fundamental research at Geojit BNP Paribas Final. The services sector is unfavorable for oil exploration companies as crude oil prices are expected to fall sharply. The report said the state-owned exploration companies want the government to intervene to protect their crude cash flow in the event of a global price fall due to concerns that cash flow could fall below $40 per barrel In the event of a global price fall, the report said. ONGC wants the government to reduce compensation to oil marketing companies.

Analysts predict some visibility ahead of ONGC’s pandemic program, which is seen to have a negative impact on fixed inventories, although the mechanism for subsidy sharing is not yet clear.

Anand Rathi, Senior Vice President and Director, Financial Services, “Traditionally, Oil and Natural Gas Corporation of India (ONGC) it could be a popular candidate for this fiscal,” said the company. Traditionally, most government equity sales have been made at lower market prices and uncertainty over the subsidy sharing mechanism has also been affected.” Devang Mehta said, stock advisory.

Brokers recently lowered ONGCC profit estimates to below market expectations after the government raised petrol prices to 5.6 mmbtu. Bank of America Merrill Lynch is set to downgrade its 2017. fiscal year earnings per share (EPS) estimates down by 2%.

Kunj Bansal, CIO, Centrum Wealth Management “We recommend retail investors to avoid ONGC for now as there are no short and medium term factors.”

According to analysts, ONGC stock is currently trading at an inexpensive 13 times FY2015 P/E. The stock closed down 0.14% on Monday, reporting Rs 404. However, the limited subsidy sharing formula may prevent the company from undertaking more complex oil and gas exploration activities, which could impact its potential future revenues.

While the government’s relaxation of control over diesel prices is seen as beneficial to the company, ONGC said diesel sales account for about 55% of the total revenue of oil marketing companies. With the diesel recovery shortage disappearing, the subsidy burden on the company is expected to come down significantly. However, analysts said falling global crude oil prices could offset the benefits of the reduced subsidy burden.