Global investment bank Jefferies has identified seven power stocks with significant upside potential following the Reserve Bank of India's 25 basis point rate hike to 5.5%. According to the bank's India utilities outlook published on 7 October 2026, the top picks include Adani Energy Solutions with a target price of ₹2,060 and 53% upside potential, JSW Energy at ₹720 with 45% upside, and NTPC at ₹425 with 32% upside. The bank maintains 'Buy' ratings on all three stocks, along with additional recommendations for Adani Power (₹270, 33% upside), Power Grid (₹315, 23% upside), Adani Green Energy (₹1,695, 29% upside), and Torrent Power (₹1,780, 44% upside).
As reported by Jefferies, power companies have some protection against rate hikes through regulated equity, fixed-rate loans, and lower rate hike pass-through mechanisms. The bank notes that NTPC and Power Grid have 36-57% of their loans on a fixed-rate basis, while more than 70% of their gross block operates under regulated returns where interest costs can be passed through. For Adani Energy Solutions, more than 65% of loans are fixed-rate, providing additional protection against rate increases. However, Adani Green Energy faces relatively higher risk due to net debt-to-equity at around 6.5-6.6 times, with the bank expecting more than 15% impact on earnings per share from a 100 basis point rise in rates. The bank's latest assessment suggests the impact of monetary tightening on the power sector will depend not only on borrowing costs but also on the evolving demand-supply balance, merchant tariffs and the ability of regulated utilities to pass through higher interest expenses.
According to Jefferies, power demand has risen 10% year-on-year so far in 2026, while generation increased 13% year-on-year in September. The bank expects the possibility of power shortages returning in the coming months to remain an important factor for the sector. Higher merchant power prices are anticipated to potentially offset some of the interest-rate impact on JSW Energy, while scope exists for higher merchant tariffs to improve the trading business of Adani Energy Solutions. The brokerage expects power shortages could re-emerge over the next four to five months, which could support merchant power prices. Reports suggesting that El Nino conditions could continue into 2027 also point to the possibility of a repeat of the peak power deficit seen in 2026. The potential tightening in the supply-demand balance could provide an important offset to higher financing costs, with higher merchant power prices particularly helping companies with exposure to merchant markets.
Despite the rate hike concerns, Jefferies remains constructive on the power sector overall and believes the recent correction in stocks from peak levels in the last 5-6 months presents a stock-specific buying opportunity. The bank's analysis shows that interest rate impact on JSW Energy's EPS could be 10-11%, but this would be offset if merchant power prices are higher in CY27. For Adani Energy Solutions, AESL would also see a 9-10% upside EBITDA surprise, given that higher merchant tariffs would materially improve trading business profitability. The bank's final verdict emphasizes that AESL, JSW Energy and NTPC remain their top picks despite the monetary tightening environment, with management strategies of moving toward long-tenor fixed-rate loans overseas and refinancing loans once assets are operational helping mitigate the impact on Adani Green Energy.
