BSE Oil & Gas index rally 7% in 1 week; Gail surges 7% on positive outlook

As of 09:22 AM; the BSE Oil & Gas index was up 1.7 per cent, as compared to 0.68 per cent rise in the BSE Sensex.

Shares of oil & gas companies are continuing their upward move for the second straight day, with the BSE Oil & Gas index surging nearly 4 per cent in the past two trading days backed by a strong rally in Gail (India), Indraprastha Gas (IGL) and Oil India.

 

As of 09:22 AM; the BSE Oil & Gas index was up 1.7 per cent, as compared to the 0.68 per cent rise in the BSE Sensex. In the past two days, the oil & gas index has gained 3.8 per cent. In the past one week, the index has rallied 7.3 per cent, as compared to the 4.2 per cent rise in the benchmark index.

 

However, in the past six months, the BSE Oil & Gas index has underperformed the market by falling 18 per cent, as against the 8.8 per cent decline in BSE Sensex.

 

Among the individual stocks, Gail (India) rallied 7 per cent to ₹186.50 amid heavy volumes. In the past one week, the market price of the gas transmission and marketing company has soared 19 per cent. However, the stock is down 24 per cent from its 52-week high level of ₹246.35 touched on July 31, 2024.

 

Motilal Oswal Financial Services (MOFSL) said they maintain a positive outlook on Gail (India), based on strong transmission and marketing outlook. The brokerage firm estimates a 7 per cent compound annual growth rate (CAGR) in transmission and marketing volumes over FY24-27. 

 

The International Energy Agency (IEA) estimates India’s natural gas consumption to rise 60 per cent by 2030 from 65bcm in 2023. Further, IEA estimates India’s LNG consumption to grow at 11 per cent per annum over 2023-2030, driven by the city gas distribution (CGD), power and industrial sectors. Gail (India) will be the key beneficiary of rising gas penetration in India. Key catalysts for Gail (India) in FY26 include the start of 3,115 km new pipelines and a potential tariff hike in Q1FY26 (5 per cent PAT impact).

 

The brokerage firm said they foresee limited downside from the current level amid robust transmission volume growth, a steady marketing outlook and a diversified petchem portfolio. Accordingly, MOFSL said they reiterate 'BUY' on Gail (India) with SoTP-based target price of ₹195.

 

Meanwhile, analysts maintain 'buy' ratings on ONGC and Oil India given a robust production growth outlook in the next one to three years (~12 per cent for ONGC and ~25 per cent for Oil India) and expectation that Brent prices are likely to be supported at ~$70/barrel; Oil India also benefits from Numaligarh Refinery Limited (NRL) capacity expansion.

 

However, ONGC/Oil India's earnings will be negatively impacted if Brent crude price decline significantly below USD 70/bbl with every USD 5/bbl decline in net crude realisation, resulting in a decline in our FY26 EPS and valuation by 8-12 per cent, according to analysts at JM Financial Institutional Securities.

 

Further, according to analysts at Mirae Asset Sharekhan, Crude oil futures remain in a bullish backwardation structure, with shorter-term contracts at a higher price than longer-dated ones, as we enter the peak global demand season from April to August. This could see prices making some recovery; however, the trade war remains the biggest hurdle to sustainable price recovery, analysts said. CLICK HERE FOR FULL DETAILS