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India's Power Sector Poised for Rebound in 2026, Predicts Jefferies

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  Published in Stocks and Investing on Friday, January 2nd 2026 at 4:15 GMT by moneycontrol.com

Power Sector Poised for Rebound in 2026: Jefferies Predicts Demand Recovery & Highlights JSW Energy, NTPC

Mumbai – After a period of muted performance, India's power sector is expected to witness a significant resurgence starting in 2026, driven by a recovery in electricity demand and favorable policy tailwinds. This optimistic outlook comes from brokerage firm Jefferies, which recently released a report highlighting the potential for substantial growth and identifying key investment opportunities within the sector. The report suggests that concerns surrounding renewable energy cannibalization and regulatory uncertainties are gradually easing, paving the way for a renewed focus on traditional power generation.

The core of Jefferies' prediction rests on the anticipated recovery in electricity demand. While the initial post-pandemic rebound was hampered by factors like increased solar capacity and reduced industrial activity, the brokerage believes these headwinds are now diminishing. They point to a projected increase in economic growth, rising incomes, and expanding electrification across rural areas as key drivers for future power consumption. Specifically, Jefferies anticipates a return to demand growth rates closer to historical averages – around 6-7% annually – beginning in fiscal year 2026 (April 2025 - March 2026).

Addressing Previous Concerns & Regulatory Landscape

The report acknowledges that the power sector has faced challenges in recent years. The rapid expansion of renewable energy sources, particularly solar and wind, initially raised concerns about cannibalization – where cheaper renewables displaced traditional thermal power plants. Jefferies notes that while this impact remains a factor, it's now being better managed through grid stabilization measures and policies promoting flexible generation assets.

Furthermore, regulatory uncertainties surrounding tariffs and fuel supply agreements have historically weighed on the sector’s profitability. However, Jefferies believes these issues are gradually being addressed by government initiatives aimed at streamlining processes and ensuring more stable pricing mechanisms. The focus is shifting towards encouraging a balanced energy mix that incorporates both renewables and reliable thermal power to meet peak demand and ensure grid stability. The report specifically mentions the importance of peaking plants – those designed to quickly ramp up and down to match fluctuating demand – which are often reliant on gas or coal-fired generation.

Top Picks: JSW Energy & NTPC Lead the Way

Jefferies’ analysis has led them to identify several power companies poised to benefit from this anticipated recovery. Their top picks include JSW Energy and NTPC Limited.

• JSW Energy: The brokerage is particularly bullish on JSW Energy, citing its strategic investments in renewable energy projects alongside a robust portfolio of thermal assets. Jefferies highlights the company’s focus on building a diversified power generation mix that includes hydro, wind, solar, and thermal capacity. They believe JSW Energy's ability to leverage both green and conventional sources will provide resilience against regulatory changes and fluctuating fuel prices. The report emphasizes JSW Energy’s commitment to expanding its renewable energy footprint while maintaining the stability of its existing thermal power plants. They also note the company’s focus on battery storage solutions, which are crucial for integrating intermittent renewables into the grid. The brokerage has a "Buy" rating with a target price reflecting significant upside potential.

• NTPC Limited: As India's largest power generating company, NTPC is considered a core holding by Jefferies. The report acknowledges that NTPC’s reliance on coal remains a factor to monitor, but the company’s scale and operational efficiency provide a competitive advantage. Jefferies believes NTPC is well-positioned to benefit from increased electricity demand and government support for power infrastructure development. They also note NTPC's diversification into renewable energy sources, albeit at a slower pace than JSW Energy, demonstrates a commitment to adapting to the evolving energy landscape. The brokerage maintains a "Buy" rating on NTPC, anticipating steady growth driven by its established market position and ongoing expansion projects.

Other Companies Under Consideration:

Beyond JSW Energy and NTPC, Jefferies also mentioned other companies as potential beneficiaries of the power sector recovery, including Adani Power and Tata Power. However, they emphasized that these companies face specific challenges – such as regulatory hurdles for Adani Power and a complex business model for Tata Power – which require closer monitoring.

Investment Implications & Risks

Jefferies’ report suggests that investors should consider increasing their exposure to the power sector, particularly focusing on companies with diversified generation portfolios and strong financial fundamentals. However, they also caution against overlooking potential risks. These include:

• Fuel Price Volatility: Fluctuations in coal and gas prices can significantly impact the profitability of thermal power plants.
• Regulatory Changes: Government policies related to tariffs, fuel supply contracts, and renewable energy mandates remain a key risk factor.
• Grid Infrastructure Constraints: Inadequate grid infrastructure could limit the ability to transmit electricity from generation sources to demand centers.
• Environmental Concerns: Increasing pressure to reduce carbon emissions could lead to stricter regulations on thermal power plants.

The brokerage’s optimistic outlook hinges on these risks being effectively managed and a sustained recovery in electricity demand materializing as predicted. Overall, Jefferies' report paints a promising picture for India's power sector, suggesting that the current challenges are temporary and that a period of renewed growth is on the horizon, particularly benefiting companies like JSW Energy and NTPC.

Disclaimer: This article summarizes information from the Moneycontrol.com report and does not constitute financial advice. Investors should conduct their own due diligence before making any investment decisions.