Kotak Maintains Buy on ONGC, Sell on Oil India After Raising FY27 Oil Price Assumption

For ONGC, Kotak revised the fair value to ₹355 from ₹360, retaining the BUY call. The upgrade in valuation is supported by expectations of improved medium-term production, driven by rising gas output from new fields and better realisations from the North-West Gas (NWG) corridor. Kotak also highlighted ONGC’s technical service provider (TSP) agreement with BP for Western Offshore assets, which cover about 70% of production, as a key factor that could help stabilise output despite a base case assumption of 5.5% annual decline.

In contrast, Oil India received a SELL rating with a fair value of ₹360, down from ₹370. Kotak cited the company’s limited reserve base as a reason for expected production declines after a near-term ramp-up, leading to reduced EPS estimates for FY28 and FY29 by 2.5–3.5% due to moderated gas volume assumptions.

The brokerage noted that ongoing West Asia conflict has caused one of the largest oil supply disruptions in recent history, persisting for seven months. However, it observed that global oil markets have remained resilient, with crude flows through the Strait of Hormuz improving to around 13 million barrels per day in September 2026—the highest level since the conflict began. Brent crude averaged nearly $100 per barrel in the first half of FY27, but Kotak expects prices to ease in the second half if hostilities do not intensify and supply normalises.

Kotak also pointed to policy reforms as a tailwind for upstream players, including amendments to the ORDA Act, royalty reforms, and the Samudra Manthan initiative. It highlighted that new-well gas pricing at 12% of Brent is favourable and comparable to imported LNG, enhancing the attractiveness of domestic gas production.

While Kotak increased ONGC’s FY27 earnings estimate by approximately 7%, changes to FY28 and FY29 projections were modest at around 2%. The firm reiterated that its preference for ONGC over Oil India stems from better production outlook, stronger realisations, contributions from new fields, and relatively attractive valuations.