JSW Energy, Tata Power: Power stocks gave electrifying returns in August; what next?

Individually, JSW Steel has given over 19 per cent returns, Tata Power has given over 4 per cent returns, CESC has climbed over 9 per cent, SJVN stock has risen over 11 per cent, and CG Power shares rose over 3 per cent during the month, according to Zee Business Research.

Representative image. Source: PTI

Power stocks have given electrifying returns in August. Stocks such as JSW Energy, Tata Power, CESC, SJVN, PFC, and CG Power rewarded investors handsomely.

Individually, JSW Steel has given over 19 per cent returns, Tata Power has given over 4 per cent returns, CESC has climbed over 9 per cent, SJVN stock has risen over 11 per cent, and CG Power shares rose over 3 per cent during the month, according to Zee Business Research.

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What is the reason for the rally?

Power demand hit the peak of 226 GW on August 21 again after August 17, when it was at a peak of 234 GW, notes Zee Business Research. Electricity consumption has increased due to rising temperatures after the monsoon. The changes in temperature are due to El Nino.

According to the United States Geological Survey, the term El Niño (Spanish for 'the Christ Child') refers to a warming of the ocean surface or above-average sea surface temperatures. El Niño recurs irregularly, from two years to a decade, and no two events are exactly alike. El Niño events can disrupt normal weather patterns.

Besides these, there are other factors, too, behind the surge in power stocks. Abhishek Banerjee, Founder & CEO of Lotusdew Wealth & Investment Advisors Pvt Ltd., says that there have been many new users of power, such as electric vehicles, data centres, metro rails, etc. Further, increased consumption to set up factories catering to PLI, power consumption related to defence manufacturing, and electrification of railways all add up to the demand.

Outlook on power stocks

Sharekhan expects the order backlog of power stocks to remain strong, given broad-based order awarding activity in railways, power, infrastructure, and defence for the next few years.

Further, private capex in sugar, distilleries, chemicals, pharmaceuticals, beverages, and wastewater management continues to rise.

The brokerage's preferred picks are NTPC, Power Grid, and Tata Power.

Chola Securities is bullish on JSW Energy for a target price of Rs 430 apiece.

"JSW Energy has demonstrated its forward-thinking approach by investing in solar power battery storage and hydro pump storage," the brokerage said.

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