How can surge in power demand in Delhi impact Tata Power, Coal India, and other companies; what should investors do?
As per Parakh, investors could consider allocating funds to the stocks of Tata Power, NTPC, and others as well as they can opt for power sector Exchange Traded Funds (ETF) or mutual funds for diversified exposure.
The power demand in the national capital peaked at an all-time high of 8,656 MW on Wednesday amid the heatwave conditions. This was the highest ever in the history of the national capital, the State Load Dispatch Centre (SLDC) data stated. The national capital's peak power demand clocked 8000 MW for the first time on May 22, 2024. Since then, Delhi's peak power demand has crossed the 8000 MW mark on nine occasions.
Before the records of 2024, Delhi's previous high of 7695 MW was recorded on June 29, 2022. Last year, Delhi's peak power demand was 7438 MW.
Which companies could benefit from a surge in power demand?
With almost all of India suffering from a prolonged, unrelenting summer heat, there are power companies that could benefit.
As per Atul Parakh, CEO of Bigul, prominent power companies like Tata Power, NTPC, and Reliance Power, which have a significant presence in Delhi's power distribution, are likely to benefit from the increased demand.
Parakh added that these companies can leverage their existing infrastructure and capacity to meet the surge, potentially leading to higher revenues and profitability.
However, he said that the sustainability of the demand surge and the companies' ability to manage costs will determine their long-term outlook.
What should investors do with power stocks?
As per Parakh, investors could consider allocating funds to the stocks of Tata Power, NTPC, and others as well as they can opt for power sector Exchange Traded Funds (ETF) or mutual funds for diversified exposure.
Global brokerage Goldman Sachs in a recent report dated June 18 had said Gujarat's annualised grid capital expenditure is likely to rise four times from 10 year average of Rs 29 billion to Rs 120 billion and further expects more states to follow.
The brokerage maintained a 'buy' on Power Grid and gave a target of Rs 355 apiece. Meanwhile, it iterated a 'buy' on Hitachi Energy and gave a target of Rs 8,250 apiece.
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