JSW Energy, NTPC Jefferies Top Picks As Power Sector Demand Seen Rebounding From FY27
Assuming a return to normal weather patterns, the brokerage believes demand growth should rebound to around 6% from financial year 2027 onwards.
Jefferies remains constructive on India’s power sector despite the sharp correction in stocks year-to-date, arguing that the market has overreacted to what is essentially a weather-led demand slowdown in calendar year 2025. JSW Energy and NTPC continue to be Jefferies’ top picks, supported by strong execution pipelines and resilient medium-term earnings visibility, the brokerage said in its note on Monday.
Power demand growth in fiscal 2026 year-to-date has been flat year-on-year, largely due to above-average monsoons that curtailed cooling and irrigation requirements. Jefferies points out that this phenomenon is not unprecedented.
In both financial year 2008 and fiscal 2014, periods marked by strong GDP growth, power demand rose by only 1–2% as higher-than-normal monsoons dampened consumption. Assuming a return to normal weather patterns, the brokerage believes demand growth should rebound to around 6% from financial year 2027 onwards.
Regionally, the weakness has been concentrated in the North, where demand declined 3% year-on-year in eight months of this fiscal, making it the weakest-performing region.
The West and North each account for 31% of India’s power demand, followed by the South at 25% and the East at 12%. While the North saw declines, other regions posted a modest 1% year-on-year increase.
Demand across the top 10 states, which together account for 71% of total consumption, has been flat between April and November 2025. Uttar Pradesh, representing 32% of northern demand and 10% of India’s overall demand, fell 4% year-on-year, while Gujarat and Karnataka, both up 3% year-on-year, helped cushion the national average.
Jefferies remains confident of a medium-term recovery to 5–6% demand growth, driven by domestic durables, a 10% capex CAGR, and rising consumption from data centres and electric vehicles.
Domestic demand, which makes up about a quarter of total power consumption, has been particularly impacted by lower cooling needs. Consumer durables account for nearly 80% of this segment, with the share of air conditioners and coolers more than doubling to 15% in FY24 from 7% in fiscal 2007.
However, cooler temperatures and higher rainfall during the April–June 2025 period weighed heavily on usage. Voltas noted that AC industry sales likely declined 35–40% year-on-year in the first quarter of this fiscal, while a power utility highlighted flat residential demand in its Mumbai distribution area during first half of financial year 2026. The addition of around 5 GW of rooftop solar capacity in FY26E is expected to shave less than 0.3% off overall demand.
Industrial demand, which accounts for 42% of total consumption, has also been under pressure amid weak macro indicators. India’s IIP grew just 2.8% year-on-year in Apr–Oct 2025, compared with 4% in the same period last year, with mining contracting 1.9% due to extended monsoons and construction activity slowing, as highlighted by L&T. Agriculture, contributing 17% of demand, has been affected by reduced irrigation and pumping needs.
