As our nation India becoming manufacturing hub, the demand for the power is continuously increasing. As a result these power sector stocks going to get benefitted from this short term opportunity. To play with this stocks we should know the basic things of these power sector stocks because as these stocks are not for long term, just for the short term. We should exit the stocks after 50% – 100% returns.
If you observe the below data we can see the power demand statistically but the capacities are not expanding as much as required because the major power source in india is thermal power which is generated from burning the coal and gases. As thermal power causes to the heavy pollution, our nation trying to move to renewable energy side and increasing the capacities gradually but not able to produce the power as much as required.
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So clearly we understood that major power source of our country is thermal power, but the global warming constraints are not allowing to expand the capacities. The green energy capacities are expanding but not able to generate the enough power. That’s why it’s the short term opportunity, which we can play for 2 – 3 years, till the renewable energy sources produces sufficient power.
Now if you look at the power sector stocks, we can’t play with all stocks as it’s high risky and high capital intensive business. We can play this opportunity by going through the following stocks from 2 categories like, power generation stocks and power distribution stocks. From summarizing the above analysis we’ll get the same, where exactly the opportunity created.
Key drivers of power sector stocks:
1. Immense demand is raising as our nation becoming manufacturing hub.
2. As our per capita income increasing, the power consumption is also increases in the ways of TV, AC, Washing machines, fridges, bunch of electronic devices and more over big houses.
3. Above mentioned data showing that major power source is thermal power but capacities are bot building to meet the demand.
4. Though renewable energy capacities are expanding, the production is lower.
The rapid urbanization and infrastructure development consuming high power.
5. As you already knows the growing economies always demands uninterrupted power supply to provide seamless services.
Key risks of power sector stocks:
1. High capital intensive businesses
2. This is the only short term opportunity
3. High cyclicality
4. Regulatory guidelines
5. Supply and distribution problems
6 power sector stocks:
1. NTPC Ltd
NTPC Ltd is the India’s largest and giant company in producing the thermal power as this company is having 26 renewable and 52 thermal based total 78 power generation stations, which are capable to generate 69,134 MW of power to serve the nation. Also this company aggressively adding their capacities in the renewable side.
Though demand increases phenomenally, this company may not make more money as it’s a PSU entity, government may control the prices to benefit the public. And NTPC Ltd is currently trading at 221.
2. NAVA Ltd
NAVA Ltd is also a power generation company which is having their plants in Andhra Pradesh, Telangana and Odisha. The benefit of this company is that they have been set up their plants, very nearer to coal mines. NAVA Ltd is currently trading at 406.
4. Torrent Power Ltd
Torrent Power Ltd is a Gujarat based power generation and power distribution company in India. As this company is capable to do both power generation and distribution. And the key advantage for this company is that this company having their distribution network at India’s fastest growing economic zones such as Surat, Gandhi Nagar and Ahmedabad.
Torrent Power Ltd has 2700 MW gas based plant, 360 MW coal based plant, 804 MW wind based plant and company doing renewable capacities expansion. And this company is currently trading at 659.
4. JSW Energy Ltd
JSW Energy Ltd is aggressively adding their renewable capacities and as said management they are going to increase their capacities to produce 20 GW. This company is currently having 3158 MW thermal, 1391 MW Hydro, 235 MW Solar and 27 MW wind based power generation plants and acquired Mytrah energy, Ind – Bharat thermal and RE assets. As said this company more 3 GW renewable power generation capacities is going to add as they are already under construction. And JSW Energy is currently trading at 368.
5. TATA Power Company Ltd
TATA Power is having 14000 MW power generation capacities across the nation in different segments such as thermal and renewable. Also this company works in other different segments which are making this company profitable. And TATA Power is now trading at 246.
6. IEX Ltd
IEX Ltd is the power exchange in India. If the power demand raises, automatically the power exchange would get benefitted as this company trades the power and tries to stabililse demand and supply mismatch. IEX Ltd is currently trading at 125.
7. NHPC Ltd – ₹50
8. BHEL Ltd – ₹118
Conclusion:
As I mentioned this opportunity with these power sector stocks is only for short term as our country in phase of transition to move to renewable side. The best way to play with this stocks is better to exit after 50 to 100% gains, which is more than enough. So try to understand the growth factors and the key risks involved in these power sector stocks before investing.
Note: so befor investing into any stock please consult your financial advisor as we are npt SEBI registered and the views and analysis, posting here are purely my personal.