The Hindu Business Line : ONGC up on hopes of index weightage

SEVERAL investors are buying ONGC, a key index stock, in the last few days on expectations of an increase in its weightage in indices after the de-merger of Reliance Industries and on the rise in international crude prices.

Dealers said the main reason for the purchase of ONGC shares is that the weightage of the stock would increase in the Sensex and Nifty after the de-merger of Reliance Industries.

"There is steady buying by investors in ONGC stock. All index funds would have to buy more shares of ONGC after January 18," said a dealer with a domestic brokerage.

From January 18, the stock of Reliance Industries would be traded without the investments made by it and there is a possibility of its weightage falling from the current levels.

On Monday, the ONGC stock rose 0.91 per cent to Rs 1,210.65 on the BSE with volumes of 7.75 lakh shares; on the NSE, it rose 1.40 per cent with volumes of 15.11 lakh shares.

Due to the changes in the weightage of ONGC in indices, index funds tracking Sensex and Nifty would have to make changes in their portfolio in the same proportion as ONGC has in these indices.

ONGC has the highest weightage of 12.55 per cent in Nifty and in Sensex, it has the sixth highest weightage as this index is based on a free-float methodology.

The rise in international crude prices is also likely to benefit the company. The crude rates have started rising again and on Monday, touched a three-month high of $64 a barrel in international markets.

"Every dollar rise in crude rate benefits ONGC and the rise should benefit the company in the current quarter," said an analyst with a domestic broking firm.