Recent adverse weather conditions, primarily due to rainfall, have put pressure on prominent power sector stocks like NTPC, Tata Power, and Power Grid. Production and distribution challenges have contributed to a decline in the share prices of these companies.
Heavy rainfall this summer season has impacted the earnings of power companies. Electricity consumption declined in the April-June quarter. This was attributed to above-average rainfall and relatively lower temperatures. Reports indicate that approximately 60% of the days in this quarter saw above-average rainfall across major parts of the country, leading to reduced demand for fans, air conditioners, and coolers, consequently decreasing electricity consumption.
Decline in Electricity Demand in Q1
A report by SBI Capital indicates that electricity demand in the first quarter of fiscal year 2026 saw a year-on-year decline of approximately 1.5%. This is the first time in several years that consumption has decreased in Q1. Excluding the COVID year of 2021, this has not been observed since 2016.
The report also noted that the peak electricity demand in the country in May 2025 was 231 gigawatts, down from 250 gigawatts in May 2024. This represents a decline of about 7.5%. This has visibly impacted the revenue of power generation and distribution companies.
Impact on Power Sector Stocks
The listed power companies' stocks have been directly affected by this seasonal change. NTPC's share price fell by around 6.4% in Q1. Shares of JSW Energy and Torrent Power also declined. However, these stocks saw a slight recovery in the latter part of June due to the strengthening of the market.
During the same period, the broader market, the BSE Sensex, recorded a rise of approximately 8%, while the BSE Power Index managed to increase by only 5.2%. This shows that power sector stocks did not fully follow the market's pace.
Higher Expenses, Reduced Profits
The report also states that companies with higher costs may suffer more during periods of fluctuating demand. They often have to rely on the merchant market to maintain profits, where electricity prices are not stable.
This situation becomes particularly challenging for companies operating thermal power plants. Production costs are continuously rising, while the decline in demand affects revenue.
Long-Term Outlook Still Positive
Despite this, many brokerage houses and market experts believe that the long-term prospects of the power sector remain b. Equity Strategy Director at WealthMills Securities, Kranti Bathini, said that the future of the power sector is bright, but a slight pressure situation could arise due to weather-related uncertainties.
Ravi Singh, Senior Vice President (Retail Research) at Religare Broking, echoed this view. He stated that the growing demand for electricity from new sectors like data centers, electric vehicles, and green hydrogen could prove to be a major opportunity for companies in the long term.
Investors Focus on NHPC, Power Grid, and Tata Power
Market experts are currently particularly focused on three companies: NHPC, Power Grid, and Tata Power. The stocks of these companies were recently in a consolidation zone, but now show signs of a breakout.
According to Ravi Singh, these three stocks could see an increase of 8 to 10% in the coming time. The fundamental position of these companies is b, and the government has also consistently supported their sector.
Forecast of Rapid Growth in India's Electricity Demand
The International Energy Agency (IEA) stated in a report that India's electricity demand could grow at an average annual rate of 6.3% between 2025 and 2028. This rate is higher than the average of 5% from 2015 to 2024.
Additionally, the rating agency ICRA has also estimated that the country's electricity consumption will grow at a rate of 6 to 6.5% between fiscal years 2026 and 2030. The contribution of segments like data centers, EVs, and green hydrogen could be 20 to 25%.
Foreign Investors Also Showing Interest
Foreign investors' interest in power companies also appears to be increasing. Experts say that the rapid progress India has made towards energy transition has also increased the confidence of foreign investors in these companies.
In the past few months, there has been an increase in FII holdings in companies like Tata Power, NHPC, and Power Grid, which indicates that international markets are also positive about the long-term growth of these companies.
