Why did the shares of GAIL rally so sharply in the last few days?
Answer
Answer
Gas Authority of India or GAIL has rallied sharply by nearly 15% in the last few days to touch Rs.120 levels. The stock has also seen strong volumes even in a tepid market overall. In fact, trading volumes on the counter doubled with 6.1 crore shares exchanging hands.
The really in the stock came after the Petroleum and Natural Gas Regulatory Board or PNGRB notified fresh regulations for unified gas transmission tariff structure. Tariffs will now be based on distance from the source, which is likely to benefit GAIL resulting in the stock gaining nearly 42% in the last one month.
Unified tariffs are value accretive for GAIL because it will encourage gas transmission companies to set up new pipelines leading to long term volume growth. However, most oil & gas analysts are sceptical about the stock due to subdued performance from gas trading segment and volatility in the petrochemicals segment.