So, what should traders/short term investors do now?
“Traders need to be a little cautious now as the technical indicators are dragged after the sharp rally. The 17,900-18,000 zone appears to be a near time top and is less likely to be crossed in the next 1-2 weeks,” says Sameet Chavan, Chief Analyst, Technical & Derivatives, Angel One.
Instead of ‘Dip on Dip’ phase, traders are now treating it as ‘Sell on Rally’ phase and are selling in any strength since last 6-7 trading days. Futures and options (F&O) data also suggests some long unwinding and short build up. Navneet Daga, Senior VP, Yes Securities said, “October series will be volatile and the next step will be taken only after fresh bottom creation during this period.
As reported in the previous week, Nifty is now trading within a broad range between 17,400 and 18,070. “There is little chance of Nifty breaking the lower band of 17,400. Hence, traders can start increasing their long bets closer to that level with a stop loss at 17,260,” says Sachchidanand Utekar, Deputy VP, Trade Bulls Securities. The 17,260 support is important as it was at the bottom before the last jump. “October series will be challenging and traders should keep a close watch on 17,200-250 and if it breaks Nifty may go below 17,000,” says Chavan.
(Narendra Nathan / ET Office)
Sector Update: Oil & Gas
the rising tide lifts all the boats
Rising domestic gas supply and improving oil and gas realization should accelerate earnings growth and valuations of upstream companies. We anticipate that the price of APM gas will increase by more than 60% to $3/mmbtu in October-March 2021-22 and more than 45% to over $4/mmbtu in April-September 2022-23. We believe Brent crude, currently above $75/bbl, should remain higher, as OPEC supply growth is likely to lag behind global demand growth. We estimate that 3% CAGR oil and gas production growth and 28% CAGR improvement for ONGC and OIL from 2020-21 to 2022-23 should lead to 30-45% CAGR in earnings. Further, this should lead to an increase of over 26-36% in the stock price for ONGC and OIL.
Oil price will remain high in the medium term: Brent crude is currently priced at $75/bbl, up 47% YTD, driven by an improvement in global demand as economies open up. The US was hit by Hurricane Ida in late July, resulting in disruption of 1.7 Mb/d of output from the Gulf of Mexico (GOM) in August. IEA expects supply from GoM to normalize by October-December 2022. With crude oil and product inventories at the bottom of a five-year range and the EIA forecasting an increase in global crude oil supplies in 2021 as global recovery continues to accelerate. , we see an upside risk for crude oil prices.
Sharp jump in domestic gas prices: We estimate that the domestic APM gas price will be revised upward by more than 60% to $3/mmBtu in October-March 2021-22 and by more than 45% to $4/mmBtu from the current price of $1.79/ in September-March 2022-23. Will go MMBTU APM gas price, which is currently at a decade low, should rise sharply, supported by firming global gas prices after economies open up and the current shortage of supplies in Europe ahead of the winter season Is.
Improving realization to benefit upstream companies: We expect, in 2022-23, ONGC (standalone) to produce 23.0 MMT oil and 24.8 BCM gas, and OIL to produce 3.2 MMT oil and 2.6 BCM gas. Rising gas prices and rising Brent crude oil prices should improve realizations and in turn lead to a CAGR of 30-54% in earnings for ONGC and OIL from 2020-21 to 2022-23. ONGC should also benefit from an increase in gas production to 12 mmscmd in the form of production from KG basin blocks from 2020-21 to 2024-25. Every $10/bbl change in oil price realization leads to an increase of 7.2/share (19.5%) in ONGC’s earnings for 2022-23 and Rs.8/share (11.3%) in OIL’s earnings. Every $1/mmbtu change in gas price realization leads to an increase in ONGC’s 2022-23 earnings by Rs 4.5/share (12.3%) and OIL’s by Rs 7.8/share (11.0%). We raise our earnings projections for ONGC and OIL by 21% for 2021-22 and 2022-23 on higher oil and gas realizations.
(HDFC Securities)