Power stocks see profit-taking after sharp rally on SEB restructuring

Shares exposed to India's state-owned electricity distributors gained in early trade on Tuesday before succumbing to profit-booking, after the government approved a bailout plan for the cash-strapped utilities. The BSE Power index, which opened nearly 2 per cent higher, ended with 0.5 per cent gains. This was the third straight day of gains for the index.

On Monday, the government approved a scheme for financial restructuring of the debt of seven state electricity boards (SEBs). Short term loans worth Rs. 1.9 lakh crore as of FY'11 will be restructured.

The restructuring will lower debt burden of distribution companies and will support merchant prices. The package will improve payment security for power producers.

Shares in Lanco Infra gained 2.6 per cent, while Adani Power advanced 1.1 per cent. Both stocks closed off the day's high. Among other stocks, Power Trading Corporation rose 1.8 per cent higher, while Reliance Power shared ended 0.94 per cent higher. Tata Power shares closed 0.24 per cent lower.

Kotak Securities said investors should wait and watch for implementation and results. It retained its "sell" call on BHEL in the cap goods space. Concerns about loans to the private sector by banks, PFC and REC remain, Kotak said in a note.

PSU banks, which had opened with strong gains, closed flat. Shares in Union Bank declined 0.5 per cent. Canara Bank and Bank of India advanced nearly 1 per cent.

Antique Stock Broking maintained its "buy" rating on PFC and REC and said PTC India was its top pick among utilities.