ONGC up 2.4% as Deutsche Bank says buy, target of Rs 395

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Oil and Natural Gas Corporation (ONGC) shares rose more than two percent, after Deutsche Bank recommended buying the stock with a target price of Rs 395.

"Based on the Rangarajan formula, the average annual price is likely to be close to USD 8 per unit from FY15. If gas prices are raised by USD 4, our target price and valuation for the stock will jump by more than 35 percent," Deutsche Bank report said.

In today’s meeting, the Cabinet Committee on Economic Affairs (CCEA) has deferred decision on natural gas pricing. Finance minister P Chidambaram, while addressing press conference after the meeting, said the cabinet would take up gas price issue in CCEA next week.

Early this year, a panel of experts had recommended doubling domestic gas price from about USD 4.2 per mmBtu (metric million British thermal units), with the price to be reviewed on a monthly basis. However, the oil ministry in its final proposal instead suggested an increase to above USD 6.7 per mmBtu level and has also called for quarterly review.

The note for the CCEA proposes new gas price between USD 6.76/mmBtu to USD 8.93/mmBtu in FY14. Further in FY15, it should be at around USD 10.29 and should be raised to USD 10.92 in FY16.

At 15:22 hours IST, the stock was quoting at Rs 307.55, up 2.41 percent amid high volumes on the Bombay Stock Exchange.