Gas Transmission Is The Contrarian Fund Manager's Bet
The Nifty 50 has been volatile in 2025, making investment decisions challenging for many. This coupled with the poor performance of momentum strategies during market downturns, prompts a looks into moves by 'focused' and 'value' mutual funds.
Buying and selling activity by such funds revealed a single sector with divergent trends: gas transmission.
The analysis is based on the distinct investment strategies the funds work on:
Focused Funds: These invest in a limited number of stocks and concentrates the portfolio based their best investment ideas. They buy what's going up, and sell what's going down.
Value Funds: These focus on undervalued stocks, or identify companies with strong fundamentals, but are currently out of favour with the market. Their strategy is contrarian and thus they buy what's going down, but at attractive valuations.
What The Data Showed
While focused mutual funds have been selling in the banking, chemical, non ferrous metal, plastic products and gas transmission space, average allocation of value funds in these has increased in March 2025.
Gas Transmission Stocks: Are Valuations Attractive?
The three major gas transmission stocks listed on Indian exchanges are Indraprastha Gas Ltd., Mahanagar Gas Ltd., and Gujarat Gas Ltd. The forward price to earnings multiple of these stock are currently lower than their average forward valuations.
Gas Transmission Stocks: Clearer Margin Trajectory
India's gas transmission sector has experienced significant policy shifts, particularly regarding the de-allocation of Administered Price Mechanism gas. Initially, this de-allocation posed a substantial risk to gas companies' profit margins and sales growth, as it meant sourcing gas from the pricier spot LNG market. This led to the allocation being raised again.
However, on April 11, the government again reduced APM gas allocation for Indraprastha Gas and Mahanagar Gas. This time, though, the shortfall will be compensated with 'New Well Gas', which, while $1.3/mmBtu more expensive than APM gas, remains cheaper than most alternatives like spot LNG. This has improved future margin trajectory for the companies.
Other factors that have also been working for the gas transmission space is stable and rising CNG and PNG demand, lower competition from alternatives with respect to price, as well as the companies' expansion into new geographical areas.
Gas Transmission Companies: Earnings Potential
What Do Analysts Think?
The analyst view on gas stocks like Indraprastha Gas and Mahanagar Gas are largely bullish, and the current consensus target price suggests a 10% to 14% upside on the counters.
The view on Gujarat Gas, on the other hand, stands bearish.
-
Signature Play: The Classic Cocktail Is Dead. Or Is It?
Classic cocktails are disappearing from India's cocktail menus. But they're still being ordered, taught to bartenders and borrowed from. So, who's really having the last drink?
-
A New Samvat Wishlist: Inclusive Prosperity And Human Development
India has strengthened its economic foundations through infrastructure, digital access and enterprise. Its next growth chapter must deepen productivity, create better livelihoods and widen participation in prosperity.
-
Love, Sex Aur Dhokha: The Audacious Plot To Spy On Jensen Huang
A Taipei dinner, a Singapore chip buyer and a suspected Chinese asset: inside the alleged spy operation that got close to NVIDIA's Jensen Huang.
-
Ten Things I Learnt This Samvat
Patience can be a trap. Cheap stocks can stay cheap. Leverage can wipe you out. What did Samvat 2082 teach us? Niraj Shah writes on 10 lessons from the year gone by.
-
Talking Points This Week: Tech Nerves, FII Buying, And A Faraway Banking Shock
The global markets are not shining this Diwali. The exception in the large markets is, India.
-
Midterm Rally Lasted A Day. The Hard Reality Of A Divided US May Last Two Years | Opinion
Between a contested AI boom, a debt ceiling that arrives in 2027 and a president with every incentive to act alone, the next two years may prove more volatile than the first day's rally suggests.
-
Blue Wave Will Derail the AI Trade but Won't Dismantle the AI Era | Unhedged Position
The Democrats' sweep of the US Congress will see politics collide with economic forces both over the long and short term.
-
It's Time To Take The GST Council's Bet On Trust Global
Payment records can prove India's services exports, and clear, proportionate rules can bring foreign digital sellers into the tax net.
-
Opinion | India at 38: From Innovation Overperformer to Innovation Powerhouse
India now has 453 VC-backed deep science startups, 18 of them late-stage, after 117 percent growth since 2020. Laurus Labs, at USD 9.3 billion, is the most valuable deep science company in any middle-income economy outside China.
