Gail's earnings outlook promising

Gail (India) Ltd's shares have rallied substantially over the past six months, gaining as much as 50%. 

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Investors appear to be thrilled about the volume prospects of the state-run company's gas transmission business amid robust demand.

There is also some optimism around the potential turnaround in the petrochemicals business, despite a loss at the (earnings before interest and taxes) ebit level in the past four quarters.

But not everyone is convinced. Earlier this week, Kotak Institutional Equities analysts downgraded Gail's stock to sell' from 'reduce'.

"As we noted last month, we believe that despite the recent strong gas consumption data, India's medium-term gas demand outlook is weak and long-term outlook is even weaker," Kotak's analysts said in a report on 1 January.

Despite weak profitability, Gail's further large capital expenditure in petrochemicals (petchem) has been a key worry, they added.