Do it yourself

One sector that is inflicting extreme pain to the investors in Indian equity is ‘power'. The stock prices of almost all companies present in the power sector value chain have corrected 25-50% from their 2024 high levels. The correction in stock prices has been particularly pronounced after the declaration of ‘energy emergency’ by the president of the United States. In my view there are three factors responsible for this correction, viz., technical, fundamental and sentimental. Technical: The stocks of companies in the power sector value chain had seen a sharp runup in the past three years. Reasons for enhanced investor’s interest in the sector was underperformance of a few years showing bottom formation on charts; exciting announcements by the government relating to the sector; state electricity board reforms to reduce transmission & distribution losses; power demand growth picking up; and electric mobility and climate control commitment of several governments etc. The enh...

If we go by the popular media narrative, the country is facing acute power crisis. Many states are witnessing scheduled power cuts of 1 to 3 hours. The headlines screaming about worsening coal shortages are scaring the users, as the already hotter summer weather is entering its peak phase in May and June. Some industrial units in the states like UP, Haryana, Delhi, Punjab, Rajasthan, Tamil Nadu and Andhra Pradesh etc., are reportedly considering production cuts, in case power situation worsens further, considering the high cost of diesel based power backup. The government on its part has outrightly denied any power or coal crisis in the country. The concerned ministry and related officers have also assured availability of adequate coal stock. Not surprising, the power sector has been one of the most favorite sectors with investors in the past few months. The stock prices of the power sector companies, encompassing the companies in the business of power generation, power transmissio...

One of the key features of the Union Budget for FY22, that needs to be noted by the investors, is the proposal to implement some important reforms in the power sector. The finance minister mentioned the following in her speech on this subject: “61. The distribution companies across the country are monopolies, either government or private. There is a need to provide choice to consumers by promoting competition. A framework will be put in place to give consumers alternatives to choose from among more than one Distribution Company. 62. The viability of Distribution Companies is a serious concern. A revamped reforms-based result-linked power distribution sector scheme will be launched with an outlay of Rs3,05,984 crores over 5 years. The scheme will provide assistance to DISCOMS for Infrastructure creation including pre-paid smart metering and feeder separation, upgradation of systems, etc., tied to financial improvements.” Budgetary outlay for the sector has also been enhanced by 22...