The NTPC stock, also a part of the S&P BSE Sensex index, rose from Rs 236 on October 27, 2023, to Rs 324 on January 29, 2024. This translates into an upside of 37% in just three months. The momentum pushed the stock to a fresh record high of Rs 325 on January 29, 2024. It rose over 4% in a week after remaining rangebound last month. The stock has been making higher-top and higher-bottom structures in the last 6 out of 7 months on the monthly charts. Dips, if any, were largely bought into, which indicates that it is in an uptrend.
"As per our ‘Nifty fair value model, the index is now close to 20% overvalued. Thus, we do not anticipate a large upside to the index from this point. The most likely outcome for the index in the next 6-9 month period seems to be a time correction," Kotak said in a note.
In the 'curious' case of BHEL, Kotak said the market is willing to give multiples to limited-period or limited opportunity earnings, a clear violation of any reasonable valuation framework.
While the recent performance of stocks like REC, PFC and recently listed IRDEA has brought focus back to one segment of power companies. But the fact is that in the last few years, the sector has been going through a consolidation. Some of it was forced by the banks due to many companies going under the IBC and some due to the fact that any industry which has gone through a troubled phase of almost a decade, the players who are able to survive tend to get more attention because they have learnt the art of surviving a tough phase which is one most important feature for long term survival. Power sector stocks are now catching up with what the market has witnessed in the last few years.