Bhel inched ahead on Friday on good buying support, especially from local funds.

The scrip of the state-run power equipment major was up by 0.5% at Rs 218.55 on the BSE in early-afternoon trades. Earlier, it hit a high of Rs 219.90, staging a recovery from the day's low of Rs 212. Volumes on the counter were modest with 340,000 shares changing hands.

Bharat Heavy Electricals stock has surged in recent sessions on the back of buying support from institutions, especially local funds, due to its attractive valuation and on hopes that the US-Iraq war, that has just begun, may end soon.

Meanwhile, the BSE Sensex was up by 7.9 points at 3,200 in early-afternoon trades. In two sessions (on Wednesday and Thursday), the Sensex has gained a total of 108 points.

Bhel is one such stock that is a favourite of institutions. On Thursday, private mutual fund Alliance Capital mopped up the stock. Alliance' support saw the stock leap 4.4% to settle at Rs 217.35. The rally on the Bhel counter came amid a higher volume of 1.04 million shares. A session earlier i.e. on Wednesday, the scrip surged by 3.8%. In two sessions (on Wednesday and Thursday) the stock has gained 8.4% at Rs 217.35, becoming the market's top gainer. The Bhel stock currently trades at a 52-week high, having rallied sharply in the last few months. However, the surge in the stock was amid volatility.

Analysts favour the Bhel stock, given the company's huge order book position and the sustained flow of new orders. Last week, the company bagged a Rs 1,589-crore worth project from Madhya Pradesh for setting up a 500-MW-capacity unit at Birsinghpur thermal power station. Bhel said the project, placed by Madhya Pradesh State Electricity Board, is expected to be commissioned within 42 months. The project envisages the design, manufacture, supply, erection, testing and commissioning of main plant equipment comprising turbine generators and boilers with the associated auxillaries and control and instrumentation system.

The Union Budget for 2003-04 has proved to be a mixed one for Bhel. On the one hand, it has slashed customs duty on high voltage transmission equipment from 25% to 5%. The measure will reduce the total cost of import of such equipment and may put pressure on demand for domestic power equipment. On the other hand, the Budget has been held to be favourable for the power sector in the long term due to the proposed reforms in the sector. The Budget has laid much emphasis on infrastructure, which could form the core trigger for industrial development. Other announcements include the extension of the mega power project policy to all power projects. Also, the Electricity Bill is expected to be passed in Parliament soon.

Analysts said the Bill will aim at improving the health of state electricity boards. This, in turn, will help Bhel improve its financials as the power equipment major receives 60% of its revenues from SEBs.

For the third quarter ended 31 December 2002, Bhel posted a net profit growth of 1.5% to Rs 81.33 crore, compared to Rs 80.15 crore in the corresponding period of the previous year. Total income increased by 14% to Rs 1,699.76 crore (Rs 16.99 billion) from Rs 1,490.17 crore (Rs 14.9 billion) in DQ 2001.

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