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AFTER a long time, shares of index heavyweight ONGC were bought by several FIIs.

Dealers said the interest in the stock surfaced on recommendations of several foreign broking firms. One of the main reasons for the buying is that the company is expected to have huge cash flows in the next two years due to high oil prices.

The talk is that the average price of oil on international markets would be $40 per barrel in the next two years and this would generate operating cash flows of more than $5 billion and free cash flows of around $3.8 billion.

Moreover, ONGC's investments in IOC, GAIL, MRPL and overseas oil blocks are also seen as positives.

On Thursday, the stock gained 2.05 per cent on the BSE at Rs 930.85 with volumes of 8.20 lakh shares; on the NSE, it closed at Rs 931.25, up 1.98 per cent, with volumes of 23.54 lakh shares.

Undervalue tag lifts it

EVEN though there is hardly any headroom for FIIs to buy the shares of India's largest bank - State Bank of India (SBI), they are still upbeat on the stock.

The bullishness in the stock is not due to the hopes of lifting the FIIs limit from the GDR but due to under valuation of the stock among Asian banks. A leading European broking firm has sent out a report to its clients that SBI is among the cheapest banks in Asia.

It says that SBI is among the top 10 banks in Asia. The firm believes that with a share of 25 per cent in Indian banking assets, growth prospects for SBI are superior compared to its Asian peers.

The only constraint for the stock is that fresh purchases by FIIs are not allowed as foreign investors limit has already touched the maximum limit of 20 per cent.

Some players in the market have taken the cue from the report and started buying the stock as they anticipate the re-rating of the stock is likely to happen even if the FIIs limit is not increased.

On Thursday, the stock price of the company gained 3 per cent at Rs 742.50 on the BSE with volumes of 24.13 lakh shares; on the NSE, it closed at Rs 742.10, up 2.95 per cent, with volumes of 44.45 lakh shares.

Virendra Verma

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