BHEL shares notch fresh 52-week high; here are the possible reasons behind the surge

BHEL share price: Shares of the engineering and manufacturing entity, BHEL, notched a fresh 52-week high of Rs 271.2, up 15 per cent over the previous close. 

In a clarification against the news piece that said, "The stock gained after NTPC approved an investment worth Rs 17,195.3 crore for the third phase of the Singrauli Super Thermal Power Project for which BHEL is the only bidder," the company, via an exchange filing, said, "It is informed that our company has not published the referred news article. The company submitted a price bid on December 21, 2023, and is the only bidder for the mentioned NTPC tender, which is an activity in the normal course of business. Submission of a bid does not result in the automatic bagging of an order; therefore, it is not required to be informed under Regulation 30 of the SEBI Listing Regulations, 2015."

As of now, BHEL has not received any order from NTPC regarding the subject project, the filing added.

Rajesh Sinha, Research Analyst, Bonanza Portfolio said that today stock price of Bharat Heavy Electricals Ltd. (BHEL) rallied up by ~12.5% with heavy volume and hit 52- week high as another PSU, NTPC approved an investment worth Rs.17,195.3 Cr for the third phase of the Singrauli Super Thermal Power Project for which BHEL was the only bidder for the construction.

"Last week BHEL has signed a joint venture agreement with Coal India to undertake coal to chemicals business. Under the JV, a coal to 2,000 TPD ammonium nitrate plant will be setting up by BHEL using its in-house developed pressurised fluidised bed gasification (PFBG) technology, the expert added.

The spurt in the share price of BHEL could be due to the stock’s inclusion in the MSCI Global Standard index, which came into effect after the close of the February 29, 2024 trading session. As per Nuvama Institutional Equities, the inclusion of the state-run Maharatna is expected to result in an inflow of US$163 million.

Also, on the sidelines, the company, in a regulatory filing with the exchange, said that it signed a joint venture agreement (JVA) with Coal India (CIL) on February 28.

The company, through the joint venture, aims to undertake the coal-to-chemicals business by initially setting up a coal-to-2000 TPD ammonium nitrate plant using BHEL’s in-house developed PFBG (Pressurised Fluidised Bed Gasification) technology.

Further, as per the terms of the JV, CIL will hold 51 per cent shareholding, while the remaining 49 per cent will be with BHEL. Also, the joint venture company shall be incorporated as a “private limited” company with an initial paid-up share capital of Rs 1,00,000. Besides, BHEL and CIL shall have the right to nominate three directors each on the board of the JVC.

CIL, as part of the JV, shall ensure ammonium nitrate offtake of at least 75 per cent of the rated annual production capacity of the project, subject to acceptance of quality and prices on mutually acceptable terms. 

Technicals suggest avoiding the stock

Technically, such high price levels raise concerns around sustenance, said Jigar S. Patel, Sr. Manager, Equity Research, Anand Rathi. The expert noted that over the past 13 trading sessions, BHEL has exhibited a pattern of consolidation, with its price hovering closely around the 21-day Exponential Moving Average (DEMA). This suggests a period of relative stability and indecision in the market.

However, in the most recent trading session, a significant development occurred as the stock cleanly broke out of its previous consolidation range, which was bounded between Rs 235 and Rs 220. As a result of this breakout, the stock's current trading position is approximately at the Rs 265 mark, indicating a notable upward movement from its previous range-bound trading behaviour. Despite this bullish breakout, caution is warranted as the stock is currently trading well above all major exponential moving averages.

Further, the analyst is of the view that such a high price level signals a potential correction in the near future. Therefore, it is advised against initiating fresh long positions at this juncture, indicating a prudent approach to avoid potential downside risk considering the expected correction.