Heatwave alert: Rising temperatures could drive a surge in power demand. Analysts see opportunities in select power stocks like NTPC, Tata Power, JSW Energy, and Adani Power.
Heatwave, harsher summer prediction 2026: Should you buy power stocks now?
An early and intense summer is acting as a key catalyst for India’s power sector. With rising temperatures expected to drive a sharp surge in electricity demand, analysts are increasingly constructive on the near-term outlook of power generation and distribution companies. They, however, advise a selective approach rather than a broad-based investment strategy.
The India Meteorological Department (IMD) has projected above-normal temperatures and a higher number of heatwave days during March-May 2026.
This, analysts said, is expected to keep electricity demand robust, largely driven by cooling requirements and support the near-term outlook for the sector.
“Stronger demand could lead to higher plant load factors for thermal generators and improve power offtake, potentially supporting earnings momentum in the first quarter of the new financial year 2026-27 (Q1Y27),” said Arun Kailasan, research analyst at Geojit Investments.
Investors, he said, should focus on utility companies with regulated returns, integrated generation-distribution exposure, fuel security, and a clear cost pass-through mechanisms.
Power demand to heat up
Weather forecasts suggest that India could be heading into a supply-demand mismatch during peak summer months. Peak power demand, which has already hit 240-244 gigawatts (Gw) during the day time in recent weeks, is expected to rise sharply in months ahead.
According to analysts at JM Financial Institutional Securities a potential reversal towards El Niño in the second half of CY-2026 (H2CY26), coupled with a 50-60 per cent probability of above-normal temperatures and a likelihood of below-normal precipitation during March-August, could take the peak demand 275-285 Gw during the day and 260-270 Gw in the evening this year.
Against this, analysts foresee incremental power generation likely falling short of peak demand, especially during evening hours, leading to a power deficit.
“There is a high probability that India may face power supply deficit during upcoming hot and humid evenings,” JM Financial analysts noted.
As per them, hydro power has played a key role in recent years, along with thermal and solar power generation, in meeting evening peak power demand.
Reservoirs-dependent hydropower constitute 33 per cent of the total hydel installed capacity and generated 37 per cent of the total hydel generation during FY25.
While storage-based reservoirs in the Himalayan region (Indus, Ganga, Brahmaputra basins) currently have adequate levels, a severe “snow drought” (weak winter precipitation) in early 2026 is expected to adversely impact summer discharge and hence generation.
Every 1°C increase in the average daily temperature above 24°C drives a 2 per cent rise in electricity demand as per IEA. Maximum temperature has already exceeded normal temperature in by up to 6.5 °C in northern India, reports suggest.
Where to invest?
Given this, analysts said power companies with strong balance sheets and exposure to merchant power markets could benefit more from peak-season pricing. Besides, thermal generation companies could see better plant load factors (PLFs), while merchant tariffs could firm up during peak demand periods.
That said, Kailasan of Geojit Investments cautioned that the upside in power stocks may remain moderate as a substantial portion of the expected demand growth appears to be already factored in market expectations.
“Overall, adopting a selective approach that prioritizes structurally well-positioned utilities rather than broad sector exposure appears to be a prudent investment strategy,” he said.
ACE Equity data shows that shares of NTPC, Power Grid, Torrent Power, Adani Power, JSW Energy, NTPC Green Energy, Acme Solar, Tata Power, and NLC India have surged between 2.7 per cent and 16 per cent so far in CY-2026. By comparison, the Nifty50 index is down 10.4 per cent year-to-date.
JM Financial prefers Adani Power, Adani Green, Tata Power, Torrent Power, and JSW Energy in this and has ‘Buy’ ratings to all but Torrent Power (‘Reduce’ rating).
For JSW Energy, NLC India, and Coal India, a sustained high-demand environment translates directly into higher PLFs, improved revenue visibility, and potential upside to consensus earnings estimates, Axis Securities with ‘Buy’ ratings on all the stocks.
Disclaimer: Moneywealth research provides stock market news for informational purposes only and should not be construed as investment advice. Readers are encouraged to consult with a qualified financial advisor before making any investment decisions.
SEBI registered research analyst
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