Analysts believe the favourable government policies for the sector, continued peak power deficits and the country’s shift towards clean energy will drive the re-rating of power stocks. Tata Power, NTPC, CESC, NHPC, and SJVN are among the preferred stock picks.
“Favourable government policies, robust power demand, a higher focus on electrification, increased capex towards energy sector projects and improved economics for renewable energy sector are some fundamental reasons that have catapulted to the turnaround of power stocks,” said Manish Chowdhury, head of research, StoxBox. “Moreover, strong financial performance, attractive valuation, large headroom for growth and revenue visibility are prompting investors to make a beeline for these stocks.”
Adani Power, SJVN, Reliance Power, RattanIndia Power, Inox Wind, and JP Power gained over 5% on Tuesday.
Adani Power shares rallied 45% in the last month, and GE T&D India shares have jumped 36% during this period. JP Power and Adani Energy Solutions (erstwhile Adani Transmission) have surged 24% each in the last month. Tata Power, SJVN, and NTPC rose 12% and 17% and 14% in one month. The Nifty declined 2% during this period.
The government has announced many measures for power sectors through the production-linked incentive (PLI) scheme for solar module manufacturing, infrastructure status to energy storage systems, and issuance of sovereign green bonds.
To improve the health of state electricity distribution companies or discoms, the Union government has released ₹66,000 crore to compliant states for reforms done in FY22 and FY23 and earmarked another ₹1.43 lakh crore for FY24.”The power sector is seeing renewed government’s thrust for the transition towards renewable energy, focus on investment in battery storage, stabilising power tariffs and a potential increase in power transmission capex,” said Abhijeet Bora, associate VP, research, Sharekhan. “Many power and energy sector companies have also put up strategic plans to become net zero.”