Strong power demand has kept most of the power producers as well as transmission and distribution companies in focus. Power Grid Corporation of India while scaling 52-week highs on Wednesday, NTPC, Bharat Heavy Electricals Ltd with gains of 26-107% in the last six months are also trading near 52-week highs on Tuesday. Other notable gainers include JSW Energy, which has gained more than 55% in the last 6 months.
The peak power demand in November remained buoyant. Overall, power demand for November-23 grew 6% year-on-year to 120 billion units, according to data from Nuvama Institutional Equities. India’s November 23 peak power demand touched 204 GW (gigawatt) with no deficit compared to 240 GW in September and a 5% deficit in evening hours.
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As renewable capacities increase, the focus and reliance on thermal power generation is likely to remain. Also, although daytime demand is supported by solar power generation, evening demand is met by increasing thermal Plant Load Factors and the trend is likely to continue until renewable storage capacities emerge, which is four to five years away, say analysts.
Analysts believe that peak power shortage is likely to remain as power demand in the country is likely to continue to grow led by domestic and industrial segments. The capex incurred by corporations will also contribute to an increase in demand. The recent state election results pointed to political stability and experts recommending investors for investments in cyclical stories such as power, industries, property, banks, etc. Thus a focus on power stocks is likely to continue.
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After Jefferies India power summit 2023, analysts at Jefferies India Pvt Ltd said there was broad consensus that peak power shortage is here to stay for at least 18-24 months. The power demand force is driven by both industrial and households. They believe that as India enters a phase of capex-driven GDP growth, power intensity should increase. Power generation and Transmission and distribution investments should increase 2.2 times to $280 billion in FY24-30 against FY17-23.
Analysts believe thermal capacity addition should increase to 17 GW annually from a 2-5 GW run rate from FY18, while Renewables are also picking up materially. NTPC, Power Grid and JSW Energy are Jefferies India Pvt Ltd top picks within utilities.
BHEL and NTPC stand among Nuvama’s top picks, given near-term triggers for thermal power amid rising PLFs and fresh capital.
Disclaimer: The opinions and recommendations made above are those of individual analysts or trading companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions
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Published: 06 Dec 2023, 11:02 IST
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