Mumbai: Expectations of a revival in business activity led by the gradual lifting of lockdown by various states has fuelled a rally in power stocks of late. Stocks such as Adani Power, Tata Power, Reliance Power, Jaiprakash Power and Rattanindia Power rallied between 20 per cent and 50 per cent in the last five trading sessions. The BSE Power index hit its highest level since November 18, 2010, ending a decade long bearish trend.“Improved prospect of a sharp recovery in volumes, especially from industrial and commercial segments, lifted sentiment about power stocks,” said Binod Modi, head strategy, Reliance Securities. “A likely improvement in the plant load factor (PLF) of power producers is expected to improve margins and cash flows in the ensuing quarters.”“Additionally, liquidity support to REC and PFC can potentially lead to a reduction in dues from discoms to power generation companies in the coming months,” he added.Demand for power has been weak in May and June so far. On an year-to-day basis till May, nation-wide daily and peak demand were higher by an average of 28 per cent and 26 per cent year-on-year. In May, it was up 12 per cent and 10 per cent from the same period last year.“Easing of lockdowns from June onwards may reverse the decline in power demand while 9GW capacity auction expected over the next two months will help kickstart the renewable energy auction space again,” said Rahul Modi, analyst, ICICI Securities. “We remain positive on stocks such as NTPC, NHPC, CESC, and PTC India as their earnings are based on capacity creation and not utilisation, and they continue to trade at low valuations and high dividend yields.”Tata Power is the top pick of analysts in the sector .
from Economic Times https://ift.tt/3cAsM6p
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