Kotak 'downgrades' GAIL stock after a stellar nearly 70% run in 2023. Here are 3 major reasons why

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₹167.55 against the previous close of ₹166.30 and fell 5 per cent to the level of ₹158.05 on the BSE. Around 10:45 am, the stock was 3.94 per cent down at ₹159.75. Kotak Institutional Equities has downgraded the stock of GAIL (India) to a 'sell' from a 'reduce' while raising the target price (fair value) to ₹125 from ₹120 due to the strong gain of the stock last year.

GAIL share price surged 68.6 per cent in 2023, strongly outperforming the equity benchmark Sensex which rose about 19 per cent. In the previous session on Monday, January 1, the stock hit its 52-week high of ₹169.35. Kotak observed that GAIL share price had a good run, linked to high oil prices before.

However, despite oil prices dropping, GAIL's stock stayed strong because of hopes for higher transmission volumes. Kotak believes India's future gas demand looks weak in both the medium and long term, despite recent high gas use. Also Read: Sensex Today | Share Market Live Updates: Sensex down 300 pts, Nifty below 21700; IT, auto stocks fall The brokerage firm said its assumptions for GAIL’s key businesses have been as such liberal.

"We have increased transmission volume assumptions further by 1-3 per cent to an optimistic 128/134 mmscmd for FY25/26E. Offset by higher costs (lower APM allocation) and 48 per cent reduction in the KG basin pipeline tariff, the EBITDA increases are nominal at nearly 1-2 per cent," said Kotak. Here are three major reasons why Kotak has downgraded GAIL stock: Kotak pointed out that GAIL is realising a nearly 18-20 per cent higher tariff versus approved by PNGRB (Petroleum and Natural Gas Regulatory Board) for its INGPL (Integrated Natural Gas Pipeline) network which is a positive.