Power stocks have seen a powerful rally in 2024, with the BSE Power Index outperforming market benchmarks by a large margin, showing 35.8% gains versus the Sensex’s 10.8% and BSE 500’s 16.9% returns. Every one of the 13 power sector stocks delivered positive returns, with 11 outperforming the BSE 500. Data reflects returns from December 29, 2023, to October 25, 2024.
Analysts from Nomura, Motilal Oswal, JM Financial, and IBEF remain optimistic on the sector’s growth. They credit expanding demand for electrification, data centers, EV growth, and green hydrogen, estimating a 7% compound annual growth rate (CAGR) in India’s energy demand until 2030. With a forecasted ₹40 lakh crore in investments for generation, transmission, and metering over the next decade, power sector stocks show promising upside potential.
Top 4 Power Stocks with Strong Upside Potential
Tata Power
Known for its diverse power generation capabilities (thermal, renewable) and a leading position in solar rooftops, Tata Power is set to grow in transmission, EV charging, and hydro projects. Management aims to double earnings by 2027, with renewables playing a key role. Motilal Oswal notes Tata Power’s strong balance sheet and the advantage of synergies within the Tata Group.
Power Grid Corporation
Power Grid benefits from increased investments in transmission infrastructure for renewables, battery storage, and green hydrogen. The company has a robust ₹1.14 lakh crore order book and strong regulated tariff mechanism (RTM) projects, offering a 15% return on equity. Power Grid is positioned to lead in executing high-voltage transmission projects.
REC
As a major financer for the power sector, REC is focusing on renewables, with its green loan mix up from 8% to 38% in just one year. It’s expected to achieve an 18% loan CAGR through 2027, thanks to government schemes supporting distribution utilities and thermal plant upgrades. Motilal Oswal projects REC’s return on equity (RoE) at 21% annually from 2025 to 2027.
JSW Energy
Transitioning to a renewable-focused business, JSW Energy benefits from large-scale renewable energy tenders and long-term power purchase agreements for 92% of its installed capacity. With 38% expected annual EBITDA growth over the next three years, JSW is poised to benefit from strong cash flows, green energy expansion, and upcoming green hydrogen projects.
With these key players leading the charge in a booming sector, power stocks could offer exciting investment opportunities in the coming months.
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