Global brokerage firm Jefferies has released a bullish outlook for India's power sector, forecasting a significant recovery in demand that is expected to drive substantial upside for key players by the financial year 2026. The analysis highlights a shift from the recent slowdown, pinning hopes on industrial consumption and economic growth.
From Slowdown to Recovery: The Demand Trajectory
Jefferies points out that India's power demand growth has moderated to 5.5% year-on-year in the first ten months of FY25. This marks a slowdown from the robust 7.5% growth witnessed in FY24. However, the firm anticipates this trend to reverse. The core of their optimistic projection lies in the expectation that demand growth will re-accelerate, reaching approximately 6.5% by FY26.
The anticipated recovery is not based on speculation alone. Jefferies analysts attribute this coming surge to a combination of factors. A primary driver is the steady increase in industrial activity across the nation, which consumes a massive portion of generated electricity. Furthermore, broader economic growth and continued urbanization are expected to contribute significantly to higher power consumption patterns in the coming years.
Capacity Additions and Investment Implications
To meet this rising demand, substantial capacity additions are in the pipeline. Jefferies estimates that India will need to add around 25-30 gigawatts (GW) of thermal power capacity over the next four to five years. This presents a major opportunity for companies involved in the construction and operation of coal-based power plants.
The report identifies clear winners in this evolving landscape. NTPC Ltd., India's largest power generator, is poised to be a major beneficiary. Jefferies expects NTPC to lead the charge in adding new thermal capacity. Similarly, Power Grid Corporation of India Ltd. (PGCIL), the central transmission utility, is set to gain from the increased need for robust evacuation infrastructure to wheel this additional power across the country.
Beyond the giants, the analysis also casts a positive light on the capital goods and equipment manufacturing sector. Companies that manufacture boilers, turbines, and other critical power generation equipment are likely to see a surge in orders, fueling their growth trajectories.
Stock Recommendations and Market Outlook
Jefferies has translated its sector analysis into specific stock recommendations, expressing a clear preference for companies with visible growth pipelines. The firm maintains a 'buy' rating on NTPC with a price target of Rs 425. For Power Grid, the recommendation is also a 'buy', with a target price set at Rs 365.
The rationale for these picks is grounded in their strategic positioning. NTPC's dominance in generation and its active role in new projects make it a direct play on the demand recovery. Power Grid's near-monopoly in interstate transmission offers a stable and regulated business model that is essential for the sector's expansion.
The overall message from Jefferies is one of structured optimism. While near-term demand figures show moderation, the fundamental drivers for long-term growth in Indian power consumption remain intact. The anticipated recovery by FY26 is expected to unlock value across the sector's value chain, from fuel suppliers and generators to transmission companies and equipment makers. Investors are advised to position themselves in these key players to capitalize on the upcoming cycle.
