India's power and utilities sector is experiencing a renewed phase of investor interest, supported by improving electricity demand, firm merchant tariffs, and accelerating renewable energy capacity additions. According to reports from Motilal Oswal Financial Services Research, peak power demand touched a record 256GW during FY26, while April demand growth accelerated to nearly 4.5 per cent year-on-year, reflecting strong cooling demand and improving economic activity. The rise in short-term power prices has strengthened earnings visibility for companies with higher merchant exposure, triggering a sharp rally across several power-sector stocks over the past three months.
India added nearly 57.5GW of generation capacity during FY26, with solar and wind contributing the bulk of additions. As reported by Motilal Oswal, renewable energy now accounts for more than half of the country's installed power capacity, underscoring the structural transition underway as India progresses toward its 500GW renewable target by 2030. Battery energy storage systems are emerging as a key growth area, with the commissioning of large-scale storage capacities and rising merchant tariff spreads expected to create incremental earnings opportunities, especially as utilities increasingly shift toward hybrid renewable-plus-storage projects.
Acme Solar Holdings has been identified as a top pick with a target price of ₹410, supported by strong execution across solar and BESS projects. According to Motilal Oswal, the company secured PPAs for 65 per cent of its 5GW pipeline and reported revenue of ₹550 crore and EBITDA of ₹480 crore in Q4FY26, with operational capacity reaching 2.99GW. JSW Energy is targeting 30 GW capacity by 2030 with renewables comprising 70 per cent of the mix, including an ambitious 40 GWh energy storage portfolio by 2030. The company reported Q4FY26 revenue of ₹4,500 crore (+41 per cent Y-o-Y) and expects EBITDA to grow at 31 per cent CAGR and PAT at 60 per cent CAGR over FY26–FY28.
Despite strong performance, several challenges persist including transmission infrastructure additions lagging targets and delays in grid connectivity. As reported by Motilal Oswal, rising capital expenditure requirements may constrain dividend payouts for regulated utilities, while increasing competition in transmission projects could pressure market share dynamics. However, the sector's structural growth drivers such as rising electricity demand, renewable penetration, energy storage adoption, and grid modernisation continue to support a favourable long-term investment outlook, with valuations across several utilities having rerated sharply and now trading above historical averages.
