Adani Power Rallies Nearly 70% In A Month. Here Is What’s Boosting The Stock Price

Heat wave across the country, shortage of coal at power plants and increase in demand for electricity have led to strong buying interest in shares of the country’s largest private sector thermal power producer - Adani Power. 

Adani Power shares have been witnessing strong buying interest for quite some time now. The stock has jumped a whopping 69 per cent so far this month to hit record high of Rs 312 on the National Stock Exchange making it the top gainer in the S&P BSE 200 index for the current month, data from stock exchanges showed.

With the surge in shares price, Adani Power’s market capitalisation has crossed Rs 1 lakh-crore mark.

The surge in Adani Power shares has led to global investors eying to own the stock as it is expected to be included in the MSCI India Index and an announcement for that can be made by global index manager by May 13, Edelweiss Alternative & Quantitative Research said in a report. Jindal Steel and Power and Tata Elxsi are also expected to make it to MSCI index.

Part of the billionaire Gautam Adani-led Adani Group, Adani Power, is the largest private thermal power producer in India. The company has power generation capacity of 12,450 megawatt comprising thermal power plants in Gujarat, Maharashtra, Karnataka, Rajasthan, and Chhattisgarh and a 40 megawatt solar power project in Gujarat.

Meanwhile, analysts are bullish on the stock with Jatin Gohil of Reliance Securities expecting it to go up to Rs 350 in the near term.

“The key moving averages are sloping upwards on major timeframe charts. The stock has the potential to explore uncharted territory, which could take it towards Rs 320 initially and Rs 350 subsequently. In case of any decline, the stock will find support around the Rs 225-215 zone. Any dips in the stock should be used as a buying opportunity,” said Gohil.

Santosh Meena, head of research at Swastika Investmart told Outlook Business that the stock is trading above all important averages on technical charts.

"It trades above its all-important moving averages and the counter is flying at its all-time high levels. On the downside, Rs 214 is an immediate demand level; below this, we can expect a free fall up to level of Rs 180," Meena said.

Rising summer temperatures across the country also augurs well for Adani Power's business as that will lead to increase in power demand and subsequently reflect in its earnings going ahead, analysts added.

Several parts of eastern India are grappling with a power crisis, as peak demand in states sees a sharp rise amid a sweltering heat wave, officials said.

Odisha, Jharkhand and Bihar have reported power outages in the last few days from major cities as well as rural areas, they said.

"It is expected that entire energy and power sector is expected to outperform key indices as there is shortage of coal supply and demand for power is increasing this summer due to usage of excess use of appliances like AC, fans etc.," said Manoj Dalmia founder and director at Proficient Equities.

Ravi Singh, vice president and head of Research at ShareIndia explained that due to rise in power demand and low coal inventories at most of thermal plants in the country it is expected to boost fortunes of power companies.

"Coal inventories at power plants are tight, at 9 days of stock on average, which is higher than the low levels of 4 days reached in October 2021 but less than half of the 17 days normally held at this time (mid-April). Out of 173 thermal plants, around 100 hold less than 25 percent of normal coal inventory. This shortage of coal, high demand of power and high prices are benefiting the power companies stock prices," Singh said.

"Analysing the recent volume price action in Adani Power, the volumes have been encouraging in the recent up move indicating strong hands have started accumulating the stock at current levels and may touch the levels of 320 - 350 in near future," Singh added.