Brighter prospects ahead for power sector stocks amid economic momentum

Though there are a few monitorables, rising consumption should drive up volumes, investment

Devangshu Datta
A trigger for the current crisis was power plants shutting down because of heavy losses on buying expensive coal and selling into a highly regulated electricity market

Thermal generation remains the single largest contributor and Coal India and Neyveli Lignite (NLC) are likely to be beneficiaries of this

Power consumption is closely linked to economic activity and the data indicates that power consumption is likely to rise substantially through FY24 and also in Q4 of FY23. Power consumption in January 2023 rose by a huge 18.4 per cent year-on-year (YoY) and 6.2 per cent month-on-month (MoM), albeit on a low annual base (January 2022 was up only one per cent YoY).  
If this trend continues, there will be an investment focus on utilities and the power supply chain. Investors will also have to study the expansion of receivables up and down the chain, since the sector has a persistent problem with outstanding dues from state utilities, and since this has a political component, it could be hard to deal with it, in a year with multiple elections. That apart, the power sector should see steady rise in generation volumes.
India’s current installed capacity of hydropower, thermal and renewable energy (RE) stood at 46.8 Gw, 235.8 Gw and 1

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First Published: Feb 28 2023 | 7:57 PM IST

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