Power scrips take bull ride in bearish market

Power stocks sizzled on Thursday, bucking the general bearish sentiment in the broader market, buoyed by the announcement of Reliance Power's (Rel Power) price band for its mega IPO and JSW Energy's $1 billion initial share offerings.

On weak global cues, the bellwether Sensex fell 120 points or 0.50 per cent to close at 20,345.20, while the broader Nifty of the National Stock Exchange ended at 6,178.55, almost flat from yesterday's 6,179.40.

But the BSE Power Index surged 3.17 per cent, led by Reliance Energy, after Reliance Power announced the price band of Rs 405-450 a share for its Rs 11,700 crore ($3 billion) IPO.

Reliance Energy, which holds a 50 per cent stake in Reliance Power, spurted by 6.42 per cent to Rs 2,517.40.

Analysts said the bullish mood in the sector was sustained throughout the day, after JSW Energy, a part of the $8 billion OP Jindal Group announced the sale of shares through an initial public offering to raise $1 billion, according to Bloomberg.

"Thursday's rally in power stocks is basically because of Reliance Power IPO. All power stocks are getting re-rated according to Reliance Power's valuations," said Mehul Mukati, research analyst, Emkay Shares and Stock Brokers.

Re-rating occurs when investors are willing to pay a higher price for earnings.

Torrent Power rose 20 per cent to Rs 228.60. Tata Power was up 4.38 per cent to Rs 1,601, Power Grid Corporation gained 4.01 per cent to Rs 151.70. Even mid- and small-caps outperformed the Sensex. Among mid- and small-caps, power stocks remained in the limelight. Gujarat Industrial Power rose 20 per cent to Rs 178.

According to analysts, the power sector is going to be the biggest beneficiary of huge investments being made in the infrastructure sector.

The government plans to spend around $500 billion in five years, out of which 30 per cent will come from the private sector. To sustain a GDP growth of 9 per cent, India needs to revamp its power sector.