Notwithstanding an 8.1% stake sale to the US-based investment firm GQG and other investors in a $1.1 billion deal last week, the stock has displayed significant momentum since hitting a 52-week low of Rs 132.40 on the NSE on February 28 as a fallout of the Hindenburg report. The stock has since then given multibagger returns of 145%.
Despite market upheavals over the past one month where the 50-stock Nifty has delivered a negative return of 1.42%, this Adani stock has rallied more than 37%.
Adani Power shares are currently trading above their 50-day and 200-day simple moving averages (SMAs) and Monday’s move has taken the stock into an overbought zone. The day’s RSI and MFI stood at 78 for both indicators, as per data available on Trendlyne. A number above 70 indicates that the stock is trading in an overbought zone.
The stock still has some steam left in this leg of the rally and could see an upside of 10% from Monday’s closing price if it crosses the immediate resistance of Rs 330, Anuj Gupta, Head Commodity & Currency at HDFC Securities said while fixing the next target at Rs 360. Gupta said that the stock is forming higher tops and higher bottoms and is looking positive with a bullish chart structure. Support is seen at Rs 290 with next support at Rs 260, the HDFC Securities analyst said while recommending a buy on declines.
After a trend reversal in April 2023, the stock has has surpassed all its short and medium-term averages on a closing basis and sustaining above the same, which reconfirms a bullish trend in the medium-to-long term, Rajesh Palviya, Senior Vice President, Technical and Derivatives Research at Axis Securities said. A Cup & Handle formation breakout at Rs 292 levels amid huge volumes indicate increased participation, he added.
The weekly and monthly strength indicators are likely to propel the stock to levels between Rs 360 and Rs 430 which is a 10-32% upside. The immediate support lies at Rs 274 while strong support is seen at Rs 230, Palviya said.Analyst Nilesh Jain, who is Assistant Vice President (AVP), Equity Research Technical and Derivatives at Centrum Broking said that the stock is looking positive on charts and would surpass its short-term targets of Rs 330. Calling it a high-beta stock, he said that the movements in Adani Power are usually big and after a 15% rally, the risk-to-reward ratio does not seem favourable and investors are advised to avoid buying at current levels. The right level to make a move is around Rs 300, Jain said while recommending a buy only for aggressive traders.
Meanwhile, Aamar Deo Singh, Head Advisory at Angel One recommends profit booking arguing that the stock has closed in the green for four weeks in a row and was up about 6% week-on-week as of Friday.
Adani Power stock is a high-beta stock with a tendency for sharp moves. It has traded with a 1-year beta of 1.1 while the 1-month beta is also above 1, according to Trendlyne.
Since the listing of the stock on August 21, 2009, the stock has seen bouts of significant upsides and downsides. On the listing day, the stock closed at Rs 103 but fell to its all-time low of Rs 16 in June 2018. The stock has seen sharp upward moves since March 2020 with an even steeper rise from December 2021.
The stock reversed after hitting an all-time high of Rs 432 in August 2022 to hit a 52-week low of Rs 132.40 on February 28, 2023. Since then it has been moving north and on Monday, August 21, the counter surpassed an important resistance level of Rs 323.
ET CONTRIBUTORSFundamental Take
Adani Power posted a consolidated profit of Rs 8,759 crore, up 83% year-on-year for the quarter ended June 2023. It was Rs 4,779.8 crore during the corresponding quarter in FY2022. The consolidated revenue from operations stood at 19.8% at Rs 11,005.5 crore as against Rs 13,723 crore in the corresponding quarter in FY2022. Consolidated EBITDA rose 41.5% to Rs 10,618 crore in the said quarter as compared to Rs 7,506 crore in Q1 FY23.
Kranthi Bathini, Director-Equity Strategy at WealthMills Securities sees the power sector space as a promising segment which he said has been in the limelight in recent times and is experiencing buying interest, coming back.
On Adani Power, the analyst feels that the stake purchase by GQG has increased the confidence of the investors in this stock. He attributed the same to the ongoing rally in the stock.
However, he called the current valuations stretched in the short to medium term and recommends buying only on declines. “Adani Power is a high beta stock and investors need to look at the earnings of the next few quarters to see if the stock justifies its valuations over the long term period,” Bathini said while advising against buying the stock at current price. “It will be difficult to ascertain the target since the stock is very volatile and moves quickly with the momentum,” he warned.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of the Economic Times)