Election Results 2024: Nifty Oil & Gas Index Cracks 10%; GAIL, ONGC Plunge Up to 17%

The Nifty Oil & Gas index fell nearly 10% on Tuesday following the 2024 election results. Key companies like GAIL Ltd, Oil and Natural Gas Corporation (ONGC), Hindustan Petroleum Corporation, and Oil India Limited saw their share prices drop between 10-17%. GAIL Ltd was the hardest hit, with a 17% decline.

Major Losers

Other major losers included Bharat Petroleum Corporation Ltd, Petronet LNG, Mahanagar Gas Ltd, and Indian Oil Corporation Ltd, with their shares falling 8-10%. Reliance Industries, a major player in the index, saw its share price decline by more than 6%. City Gas distribution companies like Gujarat Gas Ltd and Indraprastha Gas Ltd also experienced a drop of more than 6%.

Crude Oil Prices

The uncertainty around the election results contributed to the decline in share prices, as investors are concerned about the continuity of policies affecting government-run companies. Falling crude oil prices also played a significant role in the drop in upstream oil and gas producers’ shares.

ONGC and Oil India experienced significant declines due to the fall in crude prices. Brent Crude, which was around $84 a barrel on May 28, has now dropped to about $76 a barrel. This is a notable drop from over $90 a barrel in April. The weakening crude prices also negatively impacted GAIL India’s share prices.

Lower crude oil prices affect investor sentiment towards oil and gas producers. For upstream producers, the government adjusts the windfall tax based on crude prices. When crude prices rise, the windfall tax increases, capping net realizations. Conversely, when crude prices fall, the government lowers the windfall tax, cushioning net realizations.

For upstream producers, increasing production and higher prices for domestically produced gas are crucial factors.