Accident of the Day: This F&O Stock Hits a 10% Lower Circuit!

  • Stock Market Analysis
  • Editors Pick

The last day of the week doesn’t seem to go well. The global markets are trading in deep red, the effect of which has been seen on the Indian markets as well. By 10:50 AM IST, the benchmark Nifty 50 index fell 1.09% to 15,606.05 and Sensex is down 1.03% to 52,579 with 10 out of the 11 sectoral indices trading in the red zone. 

A major selling for the day has been coming from the oil and gas counters. Brent crude tumbled by over 5.5% to below US$108.5 per barrel. Although easing oil prices is good news for the Indian markets, it's a bad one for oil producers such as ONGC (NS: ONGC ). However, a double whammy for these oil stocks is the government’s decision to hike export duty on petrol, diesel and ATF (air turbine fuel) to keep the supply in the economy at sufficient levels and reduce the dependence on imports.

The government has increased INR 6 per litre on ATF, INR 12 per litre on diesel and INR 5 per litre on petrol. The sudden increase in export duty would reduce the export revenue for these companies. In FY22 the country exported around US$42.3 billion of petroleum products to countries like UAE, Malaysia, Hong Kong etc. and ONGC also plays a role in the export of these petroleum products via its subsidiaries such as MRPL (NS: MRPL ). 

Image Description: Weekly chart of ONGC showing support and resistance

Image Source: Investing.com

The share price of ONGC tanked to a low of INR 136.4, hitting a 10% lower circuit. However, there are no fixed circuits for F&O stocks, and they keep on getting revised during the session as the stock keeps on making a significant one-sided move. Now, the lower circuit for ONGC shares has been revised to INR 128.85.

Today’s massive fall of 10% has negated the rally delivered in the last few days after the government deregulated the domestic oil market and gave autonomy to oil producers to sell their locally produced oil to any refinery, which was earlier decided by the central government.

Although the stock is clearly in a downtrend, having been corrected around 30% from the 52-week high of INR 194.95, marked on 8 March this year, there is a very strong support zone at around INR 130 - INR 128. This is the same level from where ONGC shares turned in December last year after almost a 2-month long correction.

The current strongly bearish sentiments indicate that the stock might touch this level again. However, a convincing fall below this support might create more panic for existing shareholders which could lead to more liquidation.  

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  • NITESH SHARMA @NITESH SHARMA
    Buy
    Like 0
  • Elizabeth Dylan @Elizabeth Dylan
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    Like 1
  • Abhishek Gelda @Abhishek Gelda
    buy
    Like 0
  • Abhishek Gelda @Abhishek Gelda
    buy
    Like 0
  • SULTAN KHAN @SULTAN KHAN
    sell or buy today in gold please tell I lost lot of as beginners what is future
    Like 0
    • jass royal @jass royal
      dt buy without any chart confirmation..
      Like 0
    • Ranjit Kumar Jain @Ranjit Kumar Jain
      future dark and darkness all3around
      Like 0
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      100
  • SULTAN KHAN @SULTAN KHAN
    about gold bro it will be sell or NY today 1.6.2022
    Like 0

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