While benchmark indices Nifty-50 and Sensex have given strong returns of around 17.5 to 18.5% during the calendar year 2023 to date, the key sector indices that have underperformed the benchmark indices include Metals, Private Banking, Banking and Financial Services as well as Oil. & Gas index.
Nifty metals saw gains of around 14.5% while Nifty Banks, Nifty Financials, Nifty Banks gained 11-13.5%. The biggest laggard was oil and gas Nifty index, which is up only 9.37%
The oil and gas sector has been affected by volatility in crude prices. The voluntary production cuts made by OPEC+ (Organization of (Oil Exporting Countries)) caused Brent crude to rise to near $100 a barrel by September. Rising US oil production and concerns about demand, however, led Brent crude to drop by the end of the year. .
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Petrochemical prices also remained volatile and unfavorable for petchem producers as concerns over rising supplies from China dampened prospects. The refining margins also remained volatile.
Overall, the major heavyweights like Reliance Industries did not see a significant increase in share prices during 2023 and this also weighed on the performance of the Oil and Gas index.
Oil marketing companies did well during 2023 with record growth in marketing and refining profits. The City Gas distributors, however, faced volume growth constraints.
Meanwhile, the prices of base metal and steel did not support activity of Metal companies. While the opening of the Chinese economy after the relaxation of Covid restrictions in early 2023 was viewed with optimism, picking up demand in China has disappointed. Global recessionary concerns also weighed on metal prices leading to underperformance of metal supplies.
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In the Banking space while PSU banks outperformed the Private Banking Index underperformed the Nifty 50 index gains. Experts believe that Private Banks have already seen a good run. Also, generally large caps did not participate much in the recent rally and so there was underperformance by private banks. The heavyweight as HDFC Bank also did not participate in the rally earlier as concerns remained raised about HDFC Bank and the HDFC Ltd merger, causing some impact on the margins.
Disclaimer: The opinions and recommendations made above are those of individual analysts or trading companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions
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Published: 20 Dec 2023, 14:38 IST
(tagsTo Translate)Oil and Gas