Title: Relationship of ONGC Ltd with Nifty50
Author: Omkar Gawde
Introduction:
Oil and Natural Gas Corporation Limited (ONGC) is India’s largest state-owned oil and gas exploration and production company, playing a vital role in the country’s energy sector. Established in 1956, ONGC operates under the Ministry of Petroleum and Natural Gas and contributes approximately 70% of India’s crude oil and 80% of its natural gas production. Headquartered in New Delhi, the company is listed on both the NSE and BSE and is a key component of the Nifty50 index. ONGC also has a global presence through its subsidiary, ONGC Videsh Ltd. (OVL), which focuses on overseas oil exploration. In addition to traditional hydrocarbon production, the company is actively expanding into renewable energy to support India’s sustainability goals. Given its significant contribution to the energy sector, ONGC is a crucial subject for research in areas such as market performance, energy policies, stock analysis, and economic impact.
Objective:
To find out the Beta of ONGC and its significance.
Literature Review:
1.1 Volatility and Returns
Miroslaw Wasilewski & Serhiy Zabolotnyy (2013) the study examines the relationship between stock price volatility and shareholder returns for companies in the WIG-Ukraine Index on the Warsaw Stock Exchange. It finds that Ukrainian stocks show higher volatility and lower capitalization compared to WIG20 firms. The research highlights a negative correlation between investment effectiveness and the index, meaning lower volatility leads to higher returns. It also categorizes investment strategies, showing that low-volatility stocks offer stable but lower returns, while high-volatility stocks carry greater risks and losses. The findings challenge the assumption that higher risk always leads to higher returns, offering insights for investment strategies in emerging markets.
2.2 Impact of Tax Policy on Stock Prices
Server Demirci & Musa Onur Beskisiz (2024) the study examines the impact of a dividend tax reduction (15% to 10%) on stock prices in the BIST 100 and Participation 30 Index. The results show no significant effect on BIST 100 stocks, but a notable price increase in the Participation 30 Index, indicating that investors in this index are more sensitive to tax changes. The findings suggest that tax policy influences investment behavior and that the Participation 30 Index has low market efficiency.
Data Collection:
ONGC and Nifty50 data was download from NSE website for the period 1-1-24 to 31-12-24 and data was manipulated to find out the Friday closing prices. Weekly returns were calculated by using the formula i.e. (New closing price – Old closing price)/Old closing price. Weekly return of Nifty50 was X and Weekly return of ONGC was Y. Y was regressed on X.
Data Analysis:
Equation: ONCG = 0.08322 + 1.022302 (Nifty50) (3.21392)
N= 47 R2= 0.18669 F= 10.32930
Interpretation: The above equation shows the relationship between Nifty50 and ONGC share price. ONGC share price is a dependent variable and Nifty50 is independent variable. Positive sign means there is a direct relationship between ONGC share price and Nifty50 meaning if the Nifty50 rises the ONGC share price will also increase and vice versa. If Nifty50 rises by 1-rupee ONGC share price will rise by 1.02230. Figure in bracket is t-Stat and p-value of these is 0.002 which is less than 0.05 meaning Nifty50 is statistically significant at 5% level. N is 47 meaning no. of observation are 47. R2 = 0.18669 which means 18.67% of ONGC share price is explain by Nifty50. Balance 81.33% is the error due to the variable which are not in the model. F = 10.32930 and the p-value is 0.88 which is more than 0.05 which means overall the model is not statistically significant at 5% level.
Conculsion:
ONGC’s beta is 1.002 this indicates that it is good to invest for short term.
Reference:
Miroslaw Wasilewski & Serhiy Zabolotnyy, 2013. “The Dependence Between Volatility of Share Prices and Shareholder Return of the Companies from WIG-Ukraine Index of Warsaw Stock Exchange,” Oblik i finansi, Institute of Accounting and Finance, issue 2, pages 54-63, June.
Server Demirci & Musa Onur Beskisiz, 2024. “Comparative Analysis of the Effect of Tax Policy on the BIST 100 and Participation 30 Index,” Journal of Economic Policy Researches, Istanbul University, Faculty of Economics, vol. 11(1), pages 87-97, January.