InvestorQ : Did you see any positive cues in the core sector numbers for the month of November 2020?
Lavanya Subramanian made post

Did you see any positive cues in the core sector numbers for the month of November 2020?

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Anamika Sodhani answered.
5 months ago
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Even as the core sector data remained negative, there were some positives for sure. There were some positive revisions of the previous month data and that is good news. For example, in November, core sector growth for Aug-20 was revised up from -7.3% to -6.9% while core sector for Oct-20 was also revised from -2.5% to -0.9%. That is hope for Nov-20.

But above all, the real hope comes from the oil space, which had a direct and direct exposure of nearly 45% in the core sector basket. Brent crude prices bounced to above $50/bbl on the back of growth revival and vaccine plans. That worked in favour of the core sector in Nov-20 as it helped crude extraction, refinery products and natural gas.

Just to illustrate, the contraction in crude oil production and the refinery segment used to be deep in double digits. With the spike in prices, we have seen better realizations and also better gross refining margins or GRMs. This led to more improved output in crude and in refinery products, although gas production remained muted due to unfavourable pricing.

In the case of refinery products and crude extraction, the contraction is now in the region of -4% to -4.5% only. It is estimated that if oil prices in the Brent Crude market stay above $50/bbl, crude and refinery products could pick up sharply in coming months and even turn positive. That could have a positive impact on core sector growth.

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