The oil and gas sector may not be the first sector you turn to for investment in the stock market. Why? Because this sector tends to come with a risk element as far as stock investment is concerned. Nonetheless, for serious investors, oil and gas stocks may present useful investment opportunities and knowing what affects such stock value is important. While investing, it is a good idea to have a rough guide as to the best companies to invest in as well.
Today, there are a variety of commodities to invest in India. The Indian markets offer several commodities and most are worth investing in as they give good returns. It is common knowledge that commodities, and in turn, their stocks, are affected by different factors, not least of which are supply and demand. While investing in commodities, especially oil and gas, there are certain risks to keep in mind:
This is not to say that investors who invest in oil and natural gas stocks do badly with their investments. Most analysts will advise you to go in for long-term stock investment in oil and gas. In the last few years, oil and natural gas stocks have witnessed a fair amount of volatility due to almost simultaneously occurring geopolitical events.
Nonetheless, the sector of oil and gas in India, as far as India’s GDP growth is concerned, is touted to have a positive run in future months. The sector will play a large role in India’s rising GDP levels and this is indicated by growing investment in the sector. For oil and gas stocks in India, industry prospects look positive. With the increasing demand for crude oil and its growing use in both industrial and domestic domains, sector expansion appears optimistic.
Another factor that makes this sector a fruitful investment option is the fact that the Government of India has updated the regime of regulations in this sector. This is aligned with the government’s bid to make business operations in India easy for foreign investors. Teething problems are being addressed with dynamism as India encourages investment in the oil and gas markets.
Top stocks in the sector of oil and natural gas have retained leading positions as far as some companies go, with some additional companies to consider. Here are the key players in the sector, along with a brief overview of each:
This central public sector company, OIL for short, is owned by the Ministry of Petroleum & Natural Gas of the Indian government. Oil India conducts several key operations like production and exploration with vital services in the transportation of crude oil, the manufacture of liquefied petroleum gas, the provision of pipelines, etc. The Indian government owns a 66.13% stake in the enterprise, the rest being held by retail and institutional investors. Considered a solid undertaking for investment with a government-backed guarantee of support, this is at the top of investment picks in this sector.
The Oil & Natural Gas Company, another reputed undertaking of the Indian government, is a leader in this sector. The company is responsible for producing around 84% of natural gas in India, and approximately 70% of India’s crude oil. This takes care of the majority of the demand in India’s oil and gas sector, some 57%. As far as oil and gas stocks go, investing in ONGC has always been lucrative for investors with a history of stability.
This is a company with interests in work-over functions, drilling operations, gas compression and production and exploration. The company is a pioneer in the service segment of oil and natural gas, especially in the services of gas compression. It also provides vital services for manufacturing equipment and installation. This is a growing enterprise and with niche, but crucial services, this is a good stock to own.
With a participating holding spread across nine gas and oil fields in the Cambay, Assam, Cauvery, and Arakan, as well as in Rajasthan basins, the Hindustan Oil Exploration Company participates in several stages of exploration, production, and development. With expanding interests in the Gulf and more developments in the company’s operational pipeline, you cannot go wrong with this stock.
With headquarters in Mumbai, RIL is a conglomerate with multinational operations. It deals with petrochemicals, energy, natural gas, retail, and several other industry segments. Considered India's most profitable business, Reliance Industries is the country's largest publicly traded enterprise, revenue-wise and by market capitalization. A crucial contender in the sector of the oil and natural gas, oil and gas stocks do well according to historical returns.
Other promising companies in the oil and natural gas sector include Jindal Drilling & Industries, Petronet LNG, Asian Energy Services, and Bharat Petroleum Corporation Limited. To diversify your portfolio for the long run, a range of oil and natural gas stocks is a must for your financial health.