Torrent Power, NTPC, Tata Power: Trading strategies for power stocks

The medium-term trend on BSE Power Index is bullish as long as the support of 2,700 is upheld.

Shares of power generation and distribution companies extended their rally on Tuesday with the BSE Power index hitting a 10-year high of 3,008 on the BSE. Among individual stock, Adani Power and Torrent Power claimed new all-time highs while Tata Power hit a fresh 52-weeks high. 

In the past one week alone, the S&P BSE Power index has surged 6 per cent, against less than 1 per cent gain in the benchmark index after Ministry of Power (MoP) released a discussion paper on the implementation of Market-Based Economic Dispatch (MBED) which argues for redesigning of day- ahead scheduling of electricity markets in the country on a market based / integrated approach in order to realise the ‘One Nation, One Grid, One Frequency, One Price’ framework.

According to ICICI Securities, MBED will benefit both, generation and distribution companies, as it is a wider scoped SCED, which is already operational, and will result in more efficient utilisation of low cost generating capacity across the country, and thereby, reduce tariffs for discoms and consumers.

While analysts suggest booking profits in the stocks and avoid making fresh buys at current levels, technical charts suggest major stocks are trading in the overbought category.

Given this, here's how related stocks are placed on charts:

S&P BSE POWER

Likely target: 3,200 and 3,300

Upside potential: 6.50% and 10%
 
With a "Higher High, Higher Low" formation, the index continues to overpower the selling pressure. The medium-term trend is bullish as long as the support of 2,700 is upheld. The overall trend is moving in the direction of 3,200 and 3,300 levels, as per the daily chart. The index continues to march ahead even in the overbought category of Relative Strength Index (RSI), indicating a firm underlying strength. CLICK HERE FOR THE CHART
 
NTPC Ltd (NTPC)

Likely target: Rs 125 and Rs 129

Upside potential:   6% - 10%

A close above the resistance zone of Rs 115 levels has opened doors for the next upside towards Rs 125 and Rs 129 levels, as per the daily chart. The stock is seeing a healthy volume action, indicating strong support of market participants. NOw, as long as the stock upholds the support of Rs 112-mark, the upside bias is well protected. CLICK HERE FOR THE CHART
 
Power Grid Corporation of India Ltd (POWERGRID)

Upside potential: Rs 252 and Rs 257   

Likely target: 5% and 7%
 
The stock needs to decisively close above the hurdle of Rs 240 levels to clock a rally towards Rs 252 and Rs 257 levels. The Relative Strength Index (RSI) has made a positive crossover, building a base at 50 value, which suggests a firm underlying strength, as per the daily chart. Unless the stock breaks below the immediate support of Rs 222, the positive bias is likely to continue on the upside. CLICK HERE FOR THE CHART
 
Adani Transmission Ltd (ADANITRANS)

Outlook: Next breakout above Rs 1,650-mark.

Although the stock is showing a positive bias in the overbought category of RSI, the bullish sentiment needs follow-up buying to continue. If that does happen, the stock may see some profit booking. Nevertheless, a firm support is placed at Rs 1,500 levels. Going-forward, if the stock manages to cross the hurdle of Rs 1,650 levels, the counter may hit Rs 1,800 levels.  CLICK HERE FOR THE CHART
 
Torrent Power Ltd (TORNTPOWER)

Upside potential: Rs 500

Likely target: 5%
 
The overall trend in the stock remains bullish with a support of 50-days moving average (DMA), placed at Rs 419.35-mark. The stock is currently managing to conquer the resistance of Rs 460 and sustainability above this level may show an upside breakout towards Rs 500 levels, as per the daily chart. The current momentum is supported by strong volumes, reflecting a positive sentiment for upcoming sessions. CLICK HERE FOR THE CHART

Tata Power Co. Ltd (TATAPOWER)

Upside potential: Rs 123 and Rs 127

Likely target: 5% and 8.50%
 
The stock witnessed profit booking after it entered the overbought category as per RSI indicator. Now, as the stock is attempting to cross these profit booking levels, the RSI indicator is entering the overbought territory again, showing cautious signals. Nevertheless, the price action is supportive of a further upside towards Rs 123 and Rs 127 levels. The immediate support comes at Rs 112 and Rs 109 levels. CLICK HERE FOR THE CHART