Power related stocks in demand; NTPC, PFC, REC, Tata Power rally up to 9%

Shares of power generations and power finance companies were in focus, and rallied by up to 9 per cent on the BSE in Friday’s intra-day trade amid heavy volumes on rising demand.

NTPC and Tata Power Company from power utilities, and REC and Power Finance Corporation from power finance surged in the range of 4 per cent to 9 per cent on the BSE. Torrent Power, CESC, Adani Power and BHEL were up in the range of 2 per cent to 3 per cent. In comparison, the S&P BSE Sensex was up 0.14 per cent at 66,359 at 11:13 AM.

The country's power consumption grew by over 16 per cent to 151.66 billion units in August this year compared to that of the same month last year. Meanwhile, the Union Ministry of Power has directed all states, their power distribution companies (discoms) and central and state generating companies (gencos) to meet the rising electricity demand that has crossed a record 241 gigawatts (Gw) last week.

The note highlighted the sub-optimal monsoon, which had impacted hydro and wind power generation. With gas-based generation also on the lower side, the entire onus of electricity supply during non-solar hours was falling on coal, said the note.

“With the monsoon receding and hydro/wind generation falling, the situation may get worse in September–October. The government is ensuring more thermal power plants to operate, deferring O&M shutdown and lifting coal output. A sooner-than-expected peak deficit reinforces the crying need for more Thermal + RE capex to avoid base deficit in two–three years”, said analysts at Nuvama Wealth Management.

Meanwhile, India's power demand is expected to grow by more than 70 per cent over the next decade with a strong focus on non-hydropower renewable sources. The coal-powered generation will still account for a majority of production by 2032, illustrating the country's heavy reliance on the coal sector, BMI, a division of Fitch Group, said in a report. CLICK HERE FOR FULL REPORT

Among the individual stocks, REC (up 10 per cent at Rs 270.05) and PFC (up 9.5 per cent at Rs 297.85) have hit their respective new highs on the BSE. Thus far in the current calendar year 2023, the stock price of these state-owned financial institutions have zoomed 132 per cent and 111 per cent, respectively. In comparison, the S&P BSE Sensex was up 8.6 per cent.

REC in its FY23 annual report said that the power sector in India, is on course for a long period of high growth and transformation which is visible in the increasing deployment of clean renewables. With Government of India, setting and pursuing the target of achieving 500 GW of renewable energy capacity by 2030, energy transition is expected to drive significant investment in the sector.

The global trend towards Electric Vehicles (EVs) and its fast adoption in India is likely to see an increased demand for electricity. The National Smart Grid Mission, which aims to modernize the country’s power grid is expected to improve grid stability and reduce power losses. The government is also promoting the use of smart meters and digital technologies to improve the efficiency of the distribution network.

The government is promoting measures such as cost-reflective tariffs, improved collection efficiency, and reduction in AT&C losses to improve the financial health of distribution companies. As Indian economy continues to grow fast, with a growing population and the current low level of per-capita electricity consumption, the future outlook for investments in power sector is quite promising over the long term, REC said.