Daman Project Advances Swiftly

Gas is now flowing from Oil and Natural Gas Corporation's (ONGC) Daman Upside Development Project (DUDP) to its Hazira Plant. The $1 billion DUDP began commercial supply on Sunday, March 29, 2026. This crucial domestic output arrives as global energy markets are severely disrupted by geopolitical tensions in the Persian Gulf, especially the conflict involving Iran, which has tightened international supplies and impacted oil prices.

ONGC Stock Rallies Amidst Market Woes

ONGC's stock has demonstrated resilience, outperforming the broader market and sector challenges. On March 27, 2026, ONGC shares climbed 3-5% during trading, significantly beating the BSE Sensex's decline of over 1.5%. For 2026 year-to-date, ONGC has risen 15%, while the Sensex has fallen 12.8%. High trading volumes, with over 1.72 crore shares changing hands on March 27, and increased call option activity before the March 30 expiry signal strong investor interest. This upward trend is driven by rising crude oil prices, now over $100 a barrel due to the Middle East conflict, which benefits producers like ONGC via higher earnings. Competitors, including Reliance Industries, are also adjusting strategies, increasing LPG output and reallocating natural gas from their KG-D6 block to priority sectors amidst the supply shortage.

Valuation and Analyst Ratings

ONGC's valuation looks attractive, with a trailing twelve-month P/E ratio between 7.88x and 9.34x as of March 2026. This places it as a value stock, trading well below the Indian Oil and Gas industry average P/E of 15.8x. Analyst sentiment is mixed, though most recommend 'Buy' (18 Buy, 5 Hold, 6 Sell). Firms like Morgan Stanley and CLSA maintain positive ratings with price targets up to ₹415. However, institutions such as Goldman Sachs and HSBC have issued 'Sell' ratings and lower price targets. The average 12-month analyst price target stands at ₹293.83, indicating a potential upside of about 4.21%. Company guidance for FY27 targets crude and gas production at 21 million metric tons and 21.5 billion cubic meters respectively, with significant contributions expected from projects like KG-98/2 and Daman.

Persistent Concerns Remain

Despite positive momentum, concerns persist regarding potential windfall taxes, a factor CLSA noted could impact profitability at elevated oil prices. Some analysts have voiced concerns about ONGC's valuation, leading to previous 'Hold' downgrades by some metrics on February 23, 2026, citing industry challenges. Historically, ONGC's crude output from mature fields has declined, and its profits have been affected by commodity price swings and foreign exchange losses. Additionally, the company has seen weak sales growth over the past five years and a relatively low return on equity, indicating ongoing operational challenges. The expiring tenure of three Independent Directors on March 28, 2026, also signals a change in the board's composition.

Outlook and Future Operations

Looking ahead, ONGC is expected to continue benefiting from its ongoing projects. The Daman project is anticipated to peak at 4-5 mmscmd gas output in FY27. ONGC's focus on boosting domestic production, along with its strong market position and competitive cost structure, offers a strategic edge, especially in the current volatile global energy landscape. Investors are also watching the company's dividend prospects, which have been supported by robust interim dividends in the first nine months of fiscal year 2026. Through ongoing redevelopment and new field initiatives, ONGC is set to improve its production levels and benefit from higher prices driven by global energy market shifts.