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The BSE Power Index (2,418.1) is a benchmark index for power-related companies. This index comprises 19 scrips of electric utilities and heavy electrical equipment industries. The stocks are BHEL, NTPC, Tata Power, Power Grid, Siemens Reliance Infra, Crompton Greaves, Adani Power, Reliance Power, NHPC, ABB, Torrent Power, Suzlon Energy, GMR Infra, JSW Energy PTC India, GVK Power Infra and Lanco Infra.
BHEL has the highest weight in the index with 18.7 per cent. Among other companies that enjoy significant weights in the index are NTPC (18 per cent), Tata Power (13 per cent) and Power Grid (10.6 per cent). GVK power and Lanco Infra have the lowest weights, less than a per cent each.
Long-term view
After registering its all-time high at 4,929 in January 2008, the index declined till it bottomed out recording a lifetime low at 1,274 in October 2008. Though the index recovered from its all-time low, it encountered resistance at 3,250 levels in October 2009, after which it moved sideways for some time. However, it struggled to move beyond the significant resistance band between 3,250 and 3,400 for over a year, and started to decline from last October. Since then the index has been on an intermediate-term downtrend and it appears to have resumed its long-term downtrend. Last week, the index tumbled 4.5 per cent conclusively breaking through its long-term support level at 2,500.
Next key long-term supports are at around 2,230 and 2,100. Strong weekly close below 2,100 will pull the index lower to 1,860 and then to 1,640 levels in the long term. However, a reversal from 2,100 levels will confine the index to move in the broad range between 2,100 and 2,500 levels. Significant long-term resistances are pegged at 3,000 and 3,400 levels.
Medium-term view
Since the October 2010 peak, the index has been on an intermediate-term down, forming lower peaks and lower troughs. However, it found support at around 2,500 levels this February and started to consolidate forming a descending triangle pattern. In May and June 2011, the index took support from the horizontal line at around 2,500 and moved higher shaping the last leg of the pattern. However, the index emphatically broke out of this pattern by declining sharply during previous week. It is now trading well below its 21- and 50-day moving averages. Both daily as well as weekly indicators are featuring in the bearish zone, signalling downward momentum. The index can decline to 2,230 and then to 2,100 in the medium term.
This intermediate-term down trend has retraced 50 per cent Fibonacci retracement level of its prior up move. However, any up move from current levels will be short lived and can encounter resistance at 2,418 and 2,500 levels. Next key resistances are positioned at 2,650 and then 2,800 levels. Strong move above 3,000 is required to mitigate this downtrend and take the index higher to 3,300-3,400 range.
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