Power stocks pack a Narendra Modi punch, return 35-48% in three straight sessions

MUMBAI: Stocks from the power sector, which were beaten down in the last couple of years due to stuck projects and high input costs and lack of funds, are leading the post-election rally.

“We believe measures taken in the past 24 months have reduced risks on power projects. While private projects still face challenges, we believe the power sector will remain a focus for the new government,” said UBS report.

The BSE Power Index has surged over 16 per cent in the last three sessions and the power stocks have surged between 36-48 per cent in the same period.

The interest in these stocks is on hopes that the Modi government will be able to revive growth in infrastructure sector, public sector companies and consumer discretionary stocks.

“We welcome the clear mandate given to the next government, which will provide it the opportunity to undertake suitable policy reforms to (1) enhance India’s energy security and (2) improve India’s fiscal position,” said Kotak Institutional Equities report.

Most of the high-leveraged companies in the sector are likely to benefit with the FII and FDI inflow as it will be easy for them to raise capital to clear debt and also go ahead with capex plans.

In the last three sessions Suzlon Energy has surged 41 per cent, Jaiprakash Power rallied 45 per cent, GVK Power gained 36 per cent and Indiabulls Power soared 48.31 per cent.