POWER SHOWS: MARKET THIS WEEK

Last week is to be marked for two reasons; first the index is just a whisker away from another milestone (Sensex: 18,000) and for the extreme volatility at this high valuation.

Secondly, the phenomenal rise of a dormant sector after a very long time, the POWER sector. Almost all the power stock surged ahead anticipating better market viability after the Power Grid Corporation of India made its debut in stock market (at a premium of 93.5% over issue price). Let us look at the followings and believe the appreciation in the last week only,

Reliance Energy by 20.12%
Tata Power: 10.52%
CESC: 15.76%
Suzlon: 13.79%
GVK Power by 2.3%

ADAG is talking about the mega issue of Reliance Power; so the street is now busy with Power play. Let me note a few figures down here

India’s per capita power consumption is 606 units per annum, a dismal low figure.
90,000 MW new generation capacity will be required in next seven years (we have 135,000 MW now).
Rs 8,00,000 Crores investment opportunity will be there.
Government is emphasizing in this sector.

May be Power merits some investment from the small investors? It is now correct to say “Power shows”. (Word of caution: Power stocks may correct after its too fast run.)

The volatility ensured the market to appreciate only reasonably in last week, Sensex by 2.79% and Nifty by 3.28%, CNX Midcap is laggard by only 0.63%.

Is the extreme volatility a sign of an impending correction?

To put down a hopeful statement “small and meaningful correction” is the best scenario for small investors.
Political issues on Nuclear Deal with United States (another Power story for a power starved nation like India) are proposing to take the shape of a snow ball. Statements are running thick and hard. Caution is prescribed for small investors, book some profit.

If the market corrects itself, small investors can buy some power stocks like Reliance Energy , Tata Power, NTPC, Power Grid Corporation of India etc at lower price. Note: RNRL may have some hidden story in the present Power sector story.

Bankex took some breathers fearing CRR hike last week. CRR hike now is ruled out by experts and downplayed by authorities. Look in that space too; SBI and Centurion Bank of Punjab may have some aces in its sleeve (some block deals last few days).

I should not forget to thank my friend “Greta”; she changed the layout of my blog.