Adani Power shares may reverse trend; Buy, short-term gains likely: Anand Rathi

Shares of Adani Power Ltd could be in for a reversal, as the Adani group stock broke above a key bearish trendline on the daily chart, suggesting a potential reversal in the momentum from its previous downtrend.

The Adani Power stock rallied 5 per cent on Monday after the Adani group firm secured a bid for supplying 1,496 MW (net) thermal power to Maharashtra State DISCOM from its new 1,600 MW ultra-supercritical capacity.

Prior to this breakout, said Jigar Shahtilal Patel of Anand Rathi Share & Stock Brokers, the stock had formed a double bottom pattern, a bullish reversal structure that indicates strong support and a potential shift in price direction.

"This double bottom was accompanied by a bullish divergence in the Relative Strength Index (RSI), where the RSI moved higher while the price remained low, signalling weakening selling pressure and a possible move upward," Patel said.

The analyst said the bullish divergence occurred near a significant demand zone and previous breakout range, which further enhances the positive sentiment surrounding the stock.

"These technical factors suggest that Adani Power is positioned for a strong upward move. As a result, a long position is recommended in the price range of Rs 655-675, with an upside target of Rs 755," he said.

To manage risk, Patel recommended placing a stop-loss at Rs 620. Exit on a close below this level, he said.

Adani Power shares are down 4 per cent in the past one month but are up 27 per cent year-to-date.

As far as the Maharashtra State DISCOM order is concerned, the thermal capacity has been awarded to Adani Power on design, build, finance, own and operate (DBFOO) basis with sourcing of fuel from coal linkages allocated under Para B (iv) of the SHAKTI Policy.

Under the terms of the award, Adani Power will enter into a 25-year Power Supply Agreement (PSA) with MSEDCL for supply of 1,496 MW of electricity (net of auxiliary consumption) on long term basis from a new thermal power plant having installed capacity of 1600 MW (2x800 MW) to be set up utilising ultra-supercritical technology. Power supply under the proposed PSA will commence three and a half years after the appointed date as defined thereunder in case of Unit 1 (800 MW) and four years in case of Unit 2 (800 MW).