BSE Power index surges to a 10-year high, up nearly 4% on demand pick-up

Tata Power has surged 10 per cent and trading near its record high; Torrent Power, Power Grid and Indian Energy Excahgne (IEX) from the BSE Power index were all trading at respective all-time highs

Shares of power generation companies were on a roll on Wednesday on expectation of higher demand. The S&P BSE Power index hit a fresh 10-year high. At 02:55 pm; the S&P BSE Power index, the top gainer among sectoral indices, was up 3.8 per cent at 3,192, as compared to 0.1 per cent decline on the S&P BSE index. The power index hit an intra-day high of 3,208.59, its highest level since November 2010.

Tata Power, CESC, NTPC and Bharat Heavy Electricals (BHEL) from the index rallied between 5 per cent and 10 per cent on the BSE in intra-day trade on Wednesday. Power Grid Corporation, Torrent Power and Adani Power were up in the range of 3 per cent to 4 per cent.

Further, Torrent Power, Power Grid Corporation and Indian Energy Excahgne (IEX) from the index were trading at their respective all-time high levels.

The power generation and consumption is expected to improve in the current fiscal 2021-22 (FY22) with the anticipated higher levels of economic activity amid optimism that the vaccination programme would facilitate normalisation and stimulate economic recovery.

Among the individual stocks, Tata Power Company surged 10 per cent to Rs 155.20 on the BSE on back of five-fold jump in trading volume. The stock of Tata group electric utilities company was trading close to its record high of Rs 158 touched on January 4, 2008. A combined around 122 million equity shares had changed hands at the counter on the NSE and BSE.

Tata Power’s transition into the green segment is gaining strong momentum with nearly 40 per cent /10 per cent market share enjoyed by its electric vehicle (EV) charging/solar EPC segments. Its solar pump/ solar rooftop business witnessed 8x/4x growth during Q1FY22 with the highest-ever order book of Rs 1,100 crore across solar pumps. Also, with the de-licensing drive across the UTs and selective states, the opportunity across the discom privatisation space is getting mammoth, analyst at HDFC Securities had said in June quarter result update.

Meanwhile, India’s power demand in August grew by 4 per cent MoM/18 per cent YoY to 129BUsled on strong recovery in both commercial (supported by festive demand amid relaxation for commercial establishments) and industry activity. Demand rose strongly even above the pre-covid level (up 23 per cent over Aug-19) with strong growth across regions, including southern, which had logged muted recovery till Jul-21.

Power demand in August suggests recovering commercial demand and strong underlying industrial demand. All broader macros indicate the formal economy is bouncing back post-second wave and that the trend of higher demand from industrial states is likely to hold up in the near to medium term, analysts at Edelweiss Securities said in power sector update.

Overall, the brokerage firm remains constructive on FY22 demand recovery. While Aug-21 demand is better than expected, we still stick to the 7.5 per cent demand forecast for FY22 (asking rate is around 3 per cent) given a higher base (8 per cent growth) for the remaining seven months, it added.

Power generation volumes remain firm in September 2021 as indicated by the sharp drawdown of plant stock levels. Peak power demand can expect to be higher on a YoY basis as underlying power demand remains strong, analyst at Ashika Stock Broking said in September month power update.