The momentum of the S&P BSE Sensex may have run out of steam, but the S&P BSE Energy Index and the S&P BSE Power Index hit a new high on Wednesday.
Energy stocks are in the limelight amid news about the potentially game-changing 2021 Electricity Law Amendment Bill, as well as high energy prices and growing demand for electricity, especially in China and the European region.
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“The rally is due to the news circulating on the Electricity Amendment Bill 2021 which was presented in the 2021 budget, if passed, will be beneficial for the many players in the electricity sector,” said Mohit Nigam, Head of PMS, Hem Securities.
“The bill provides for the elimination of state monopolies in the distribution of electricity and to open them up to competition. In this way, the consumer has the choice to choose his electricity service provider, ”he said.
Brent crude oil prices have stabilized after hitting $ 80 a barrel, their highest level since October 2018, according to a Reuters report. China faces increasing pressure to increase coal imports and secure supplies to keep the lights on, which has also increased demand for the energy space, he said.
“Energy markets grab the headlines as natural gas and oil prices hit multi-year highs. The energy crisis raises fears of the next winter heating season and more lasting tension, ”Norbert Rücker, head of economics and research on the next generation, Julius Baer, mentioned.
The S&P BSE Energy Index hit a high of 8,013 while the S&P BSE Power Index hit an all-time high of 3,191 in intraday trading on Wednesday.
Following the momentum, 10 stocks hit a new high in 52 weeks, including names like Coal India, NTPC, Power Grid, Tata Power, Torrent Power, IOC, OIL, etc., among others.
“The energy index is at an all time high due to high energy prices and increasing demand for electricity, especially in the region of China and Europe,” said Sandeep Matta , founder and investment advisor of TRADEIT.
Chinese companies are in the throes of a severe shortage of coal and electricity-based fuel and are unable to cope with the post-covid growth spurt as crude oil and natural gas prices also trade at low prices. obnoxiously higher levels.
“Electricity companies like India Coal, Tata Power, NHPC, Power Grid, etc. are the main beneficiaries of this global supply shortage and shares of these companies are reaching daily highs despite depressed market conditions,” did he declare.
Expert recommendation on electricity and energy stocks. If someone is considering investing in the energy space, they should ideally have a time horizon of 12 to 15 months.
Expert: Ankit Pareek, Research Analyst at Choice Broking.
Best Choices – NTPC, Power Grid, and Tata Power
The world’s largest consumer of electricity, China, faces an electricity shortage amid tight coal supply and stringent emission standards. As a result of this report, Indian energy and power stocks are seeing strong buying traction.
We have a positive view of NTPC, Power Grid and Tata Power. Ideally, investors should have an investment horizon of two to three years and adopt a strategy of further declines.
Expert: Sandeep Matta, Founder of TRADEIT Investment Advisor, said.
Best Picks – GAIL India, BPCL, NHPC, IOC
Most of the energy and power related meters are already significantly increased and should be kept for more gains.
Companies like GAIL India, BPCL, NHPC, IOC still look attractive and available at a lower valuation, but new investors are advised to follow a larger accumulation strategy with the long term horizon in mind. from 12 to 15 months.
Expert: Ajit Mishra, Vice President – Research, Religare Broking Ltd
Best Choices – Tata Power, Power Grid and NTPC
The energy shortage in China is currently fueling the recovery of electricity and other related actions, not only in India but also in developed markets.
In addition, expectations of a better-than-expected economic recovery and government measures to revive the power sector are further boosting momentum.
This space has not been a great creator of wealth given the number of challenges encountered by the sector in recent years. Even though the government has announced several measures, it would take time to reflect on the ground.
We recommend being selective and favoring companies with stable activity, strong cash generation and solid fundamentals. We are positive on stocks like Tata Power, Power Grid and NTPC in the long term.
Expert: Mohit Nigam, Head – PMS, Hem Securities
Best Picks – Tata Power and IEX
Investors should have a long-term time horizon of 3 to 5 years to invest in the electricity sector. As project construction and infrastructure development take a long time to develop and put into operation.
CAPEX plans force companies to go into debt or dilute equity, which impacts short-term profits but improves long-term corporate profits.
The companies that seem attractive in this space are Tata Power, present across the entire electricity, generation, transmission, distribution and renewable energy value chain.
In addition, the monopoly Indian Energy Exchange business must have efficient electricity trading and price discovery. IEX provides a platform by offering power producers and consumers the opportunity to enter into short-term contracts or spot purchases at optimal prices benefiting the entire value chain.
(Disclaimer: The opinions / suggestions / advice expressed here in this article are solely by investment experts. Zee Business suggests that its readers consult their investment advisers before making a financial decision.)