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Heat wave driving power stocks rally

“The surge in demand has been driven by a heat wave in northern India, increased use of air conditioning, and also by further reopening of businesses on easing Covid restrictions,” the domestic brokerage said.

Heat wave driving power stocks rally

Power stocks bucked the trend on Friday as searing heat wave in many parts of the country propelled demand for electricity, spurring a surge in merchant power prices.

Electricity prices on exchanges (IEX) have spiked to Rs 15 per kilowatt-hour (kWh) during the last few days, up from February end price of Rs 4, JM Financial said in a note.

“The surge in demand has been driven by a heat wave in northern India, increased use of air conditioning, and also by further reopening of businesses on easing Covid restrictions,” the domestic brokerage said.

Shares of Adani Power, which may benefit from higher IEX prices due to large open capacities, surged the most during the day-trade on Friday. While Adani Power rallied as much as 9.7% intra-day, Reliance Power gained 3.5%. Other players such as Rattanindia Power and Tata Power rose over 2%. The benchmark Nifty50 ended the day lower 17,153.00 points, down 0.40%.

Buying interest was also seen at the counters of Coal India, being the biggest supplier of fuel for thermal power plants. While the stock of Coal India has surged 13.9% over the last one month, shares of Indian Energy Exchange has risen 12.1%.

Coal India, the best performer on Nifty50 after Hindalco Industries has gained 27.4% between January and now. The stock, which has been a loser every year since 2015, had gained 7.8% in 2021.

While higher power prices have been offset by a surge in input costs for merchant power players like JSW Energy, soaring international coal prices is likely to benefit Tata Power on higher realisations from Indonesian coal mines. Shares of Tata Power have added about 10% so far in March.

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