Power Stocks: An Era of Outperformance

The BSE power index has underperformed against the benchmark BSE Sensex for the past 14 years, between 2008-2022.

If you are a regular reader of my note and follow my YouTube videos, I describe the 14-year cycle as Ram Vanvas.

The underperformance of 14 years for the power index ended in 2022 when the ratio chart (below right) ended its lower high - lower low structure.

Power Index Charts

 

The power index, an outperformer in 2007, lost its mojo as banks, auto, IT, and pharma stocks led the rally after the 2008 market crash.

Since the covid crash in 2020, we are witnessing frequent sector rotations and the market momentum has been fast and furious.

The market crash was followed by a V-shape recovery in 2021. The bulls rejoiced. 2022, at least so far, belongs to both bulls and bears.

But the power sector witnessed a higher high - higher low bullish structure since the reversal from 2020. This indicates the bulls are in control of the trend.

An All-Time High & Trending Higher...

The high of 4,929 in 2008 was crossed this year indicating Acche Din ahead for the power sector.

I had posted a video on 12 January 2022 - Focus: Power Sector Stocks - when the index was trading around 3,700.

Back then, I highlighted the breakout, shown in power chart (above left), when the bullish momentum began. This was after the break out of 491 weeks or over 9 years.

Since its breakout, the bulls have powered up their investments. The index now trades above the 5,000 level. It hit a new all-time high of 5,114 today.

As an investor, the power sector is still the best sector to buy on dips in the current market.

Here are the constituents of BSE Power Index:

1. ABB India
2. Adani Transmission
3. Adani Power
4. BHEL
5. GMR Infrastructure
6. JSW Energy
7. KEC
8. Kalpataru Power
9. NTPC
10. NHPC
11. Power Grid
12. Torrent Power
13. Suzlon Energy
14. Siemens
15. Thermax
16. Reliance Infrastructure
17. Tata Power

Fundamentally speaking, power stocks have been on the rise for quite some time now. Most states have relaxed Covid related restrictions and businesses are operating at near full capacity.

The summer season resulted in many parts of the country experiencing heatwaves. Thus, drawing up domestic power consumption.

With a rising urban population, the need for clean and infallible power supply gives immense scope for growth in the power sector.

So it's safe to say the momentum in power stocks is here to stay.

At present, the BSE power index is trading at 5,057 levels, up 0.4%. I'll share more on this on my telegram channel.

If you're interested in being part of my charting journey as I share how to create wealth from the profitable trade setup, join my telegram channel - Fast Profits Daily. You'll get access to the best trading ideas in the stock market.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...