India’s power sector is showing mixed signals as strong demand growth is juxtaposed with changing investment trends and a cautious market outlook. A recent report by Nuvama Institutional Equities highlights both opportunities and risks in specific energy stocks, especially as the industry gradually transitions to new renewable solutions.
According to the brokerage, companies like Suzlon Energy Limited and Inox Wind Limited may face slower growth after FY28. This is primarily because many new projects are now focusing on solar power combined with battery storage systems, also known as solar plus BESS. These systems are becoming more popular because they can supply electricity even during evening peak hours, which wind energy alone cannot always manage well.
While both companies still have long-term growth stories, Nuvama believes that short-term gains may be limited. The target price for Suzlon is ₹55, which suggests a small upside from current levels, while the target for Inox Wind is ₹123, which suggests a potential upside of 44%.
The brokerage also maintains a cautious stance on Indian Energy Exchange Limited, commonly known as IEX, and assigns it a ‘Reduce’ rating. A major concern is the ongoing uncertainty surrounding market coupling, which could impact power pricing and trading in the future.
Meanwhile, large players like Tata Power Company Limited and Power Grid Corporation of India Limited hold strong long-term potential, but their current valuations appear to be overvalued. Nuvama notes that there are limited short-term triggers that could drive further growth in these stocks.
Of all the companies reviewed, Nuvama has the highest confidence in NTPC Limited and CESC Limited. Both stocks are expected to deliver returns of approximately 24 to 25 percent based on their target prices, making them more attractive in the current market environment.
These companies are seen as stable players with strong operational capacities and well-positioned to handle both traditional and renewable energy demand.
India’s electricity demand increased significantly in May 2026, rising 11.6 percent year-on-year despite average temperatures of around 30.9 degrees Celsius. Peak demand reached a record 270 GW compared to 231 GW in May 2025, highlighting the rapid growth of energy consumption.
Thermal power plants also performed well, with plant load factors increasing to 72 percent from 68 percent last year. However, the March quarter was comparatively weak, with demand growing by only 1.9 percent, leading to lower tariffs and some pressure on renewable energy use in some regions.
India’s total installed power capacity reached 537 GW by April 2026, supported by renewable additions of 51 GW during FY26. Currently, 368 GW of renewable projects are under development, of which approximately 50 percent are focused on solar plus BESS solutions.
Electricity trading volumes on the IEX also increased by 18.6 percent in May, supported by strong growth in both the day-ahead and real-time markets. Solar power prices remained low at around ₹2.4 per unit, reflecting higher supply during daylight hours.
Looking ahead, the sector’s outlook for FY27 appears strong, with demand increasing by approximately 8 percent so far. Improved transmission work and rapid renewable energy deployment are expected to support overall growth, although some challenges such as labor shortages in infrastructure projects still remain.
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