New Delhi

India's power sector is likely to maintain a strong growth trajectory through this fiscal year, supported by robust electricity demand, rising peak load, continued thermal generation and rapid renewable capacity additions. With power consumption expected to remain firm amid expanding industrial and commercial activity, utilities with a mix of fuel-secure thermal assets and scalable renewable portfolios are likely to be best positioned for sustained earnings growth, according to a report by 360 ONE Capital.

India's electricity consumption rose around 8 per cent year-on-year during April-June 2026 to nearly 485 billion units, while peak power demand touched 270.82 GW in May, according to the brokerage. The report said the increase was driven by extreme heatwave conditions, delayed monsoon onset and higher cooling demand. Exchange-traded electricity volumes on the Indian Energy Exchange also grew nearly 16 per cent year-on-year in 1QFY27, reflecting increased reliance on short-term markets during periods of tight supply.

The power sector is expected to benefit from a dual-track energy strategy, with thermal generation continuing to provide reliable base-load power even as renewable capacity expands. "Coal remains the backbone of India's electricity system, contributing ~70% of total power generation and providing dependable base-load power," the report said, adding that this dependence is unlikely to change materially over the coming decade given strong demand growth and the need for round-the-clock power.

India's installed power generation capacity crossed 548 GW as of June 30, 2026, with non-fossil sources accounting for around 54 per cent of total capacity. Around 16.8 GW of new capacity was added during the quarter, including 13.2 GW of renewable capacity, 2.9 GW of coal-based thermal capacity and 650 MW of hydropower.

Sector's outlook for FY27 remains favourable, with energy security considerations and the possibility of an El Nino impact potentially supporting thermal demand, the brokerage noted. Overall power generation grew 8 per cent year-on-year during the quarter, with thermal generation rising 7 per cent and renewable generation increasing 21 per cent.

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Against this backdrop, the brokerage expects a strong quarter for several utilities, with improved generation and capacity additions supporting earnings. However, higher interest and depreciation costs could weigh on some renewable-focused companies in the near term, while coal inventory levels and the pace of capacity execution will remain key monitorables. Over the longer term, the combination of rising electricity demand, thermal capacity additions, renewable expansion and storage development is expected to create a favourable growth environment for the power sector.