After the second wave of Covid infections, all major states had announced restrictions and partial lockdowns, which put a break in economic activity and power consumption. However, various states have relaxed the curbs in June and economic activities are resuming.
India’s power consumption surged 12.6% in the first week of June to 25.36 billion units, pointing to a recovery in demand. The consumption last June stood at 22.53 BU, according to the power ministry.
JM Financial Services, the May 2021 power generation data showed optically high 8 per cent year-on-year growth on a low base due to the May 2020 lockdowns, but has declined 4 per cent on a two-year CAGR basis since May 2019.
While in March 2021, more industrialised states in North/ West India witnessed stronger power demand, but May data showed signs of growth slackening, potentially due to the lockdowns. The power demand continues to languish on a year-on -year basis.
Stock Performance
Among the key constituents of BSE Power Index, has gained over 56 per cent and Adani Transmission 35 per cent in the last one month, followed by at 31 per cent and ABB at 23 per cent.
Torrent Power,
and have gained between 13 and 16 per cent.. State owned power generation and distribution utilities like NHPC, and Power Grid, too, have posted double-digit gains in last one month.
What should investors do?
Analysts suggest investors stay invested in these stocks as the momentum is likely to remain positive. They are bullish on the power stocks as the opening up of the economy will boost the power demand in the country.
Likhita Chepa of CapitalVia Global Research said the utility space remained in focus over the past few weeks with a positive momentum. Technically, most of the indicators are signalling ‘buy’ on these names from a medium to long-term perspective.
“We expect growth in power demand to continue as the demand increases after relaxations in many states and discom collections are expected to rise. Investors can consider including these stocks to their portfolios as the sector prospects appear to be good,” she said.
Power Grid Corporation and Torrent Power are her top picks thanks to their strong fundamentals.
Discoms dues have eased off from the peaks. Analysts are expecting higher recovery of Discom dues. “With disbursements under the Atma-Nirbhar stimulus package, Discom dues have reduced as evident in case of NTPC, which has seen a 74 per cent drop in Discoms dues,” JM Financial said in a report.
