Adani Power, NTPC Green to JSW Energy: Power stocks surge up to 6% — What's behind the rise?

Shares of power companies jumped in the early morning trade on Friday, March 13, as investors' interest in these stocks peaked on a spike in power demand. The index extended gains following a 2.5% rise in the previous session.

Several power stocks like NTPC Green Energy, Adani Power, JSW Energy and Tata Power gained up to 1-6% in the early trade. However, a few stocks were either trading flat or in the red around 11 am amid a sharp fall in the Indian stock market and profit-taking by investors.

In the last trading session, too, most of the power stocks had zoomed up to 12%, with NTPC Green Energy shares emerging as the best performer. Today, the stock was also higher by 6.5%.

Adani Power stock jumped 3.5% after over 6% rise yesterday, while JSW Energy shares rose as much as 2%, adding to 6% gain in the last trade.

Shares of Coal India and NTPC also rose marginally, hitting fresh 52-week highs on the BSE today before paring gains to trade flat.

What's behind the rise in power stocks?

The gains in power stocks came amid the peak power and expectation of a harsh summer. According to a JM Financial report, evening power demand hit 224.6GW (up 7% year-on-year) at 7:00 PM on March 10 — the highest-ever recorded for March.

During these non-solar hours, supply was supported by renewable energy, hydro, gas, nuclear and coal operating at utilisation of must-run of 67%, 28%, 87% and 95%, respectively.

With deficits anticipated in gas and hydro, we expect higher PLFs for thermal utilities and the coal value chain, said the brokerage. Additionally, given the current geopolitical developments, there could be a higher probability of a scenario of persistently high LNG prices and intense summer, leading to a spike in coal-fired generation to meet evening demand.

"Hence, we expect implementation of Section 11 or some other mechanism to enable operationalisation of ICB along with continued higher utilisation (PLF) of existing thermal power plants," said the brokerage.'

On a medium-to-long-term basis, too, demand for power remains high amid a growing push for data centres and electric vehicles.

"As we move toward the summer season, electricity consumption typically rises significantly, while hydropower generation tends to decline. As a result, power demand usually remains on the higher side. Additionally, with the recent rise in oil prices, there is likely to be increased focus on power sector stocks. In the short to medium term, the growth of data centres and the gradual adoption of electric vehicles (EVs) are also expected to drive demand for power and energy, supporting revenue growth for companies in the sector," said Kranthi Bathini of Wealthmills Securities.

Which power stocks to buy now?

However, amid the heightened uncertainty in the Indian stock market due to the US-Israeli conflict with Iran, Bathini is advising investors to avoid picking stocks.

Meanwhile, for JM Financial, the pecking order for power stocks is: Adani Power, Tata Power, NTPC, Adani Green, Coal India and JSW Energy.

Disclaimer: This story is for educational purposes only. The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.