The monsoon season is usually when things cool down, both literally and for power demand. This year it hasn’t worked that way. Rain has been below average, temperatures stayed high, and people kept their ACs and coolers running much longer than usual. Add the pressure on coal supply, and power stocks are now back on every investor’s watchlist.
Government Asks Captive Plants to Run Full Tilt
The Ministry of Power has ordered 112 captive thermal power plants to run at maximum capacity from October 1 to December 31, 2026. Captive plants are the ones that mostly make electricity for their own factories, think aluminium smelters, steel makers, cement units and oil refineries. The order comes under Section 11, an emergency provision that lets the government direct power plants to operate in times of stress. The reason is simple, the government expects electricity demand to stay strong and doesn’t want the grid caught short.
There is also a separate update on Tata Power. Its 4 GW imported coal-based Mundra plant was already under a Section 11 order till September 30, 2026. That order is now extended till December 31. The ministry is also thinking about making it compulsory to blend imported coal, to help with fuel availability.
Demand Up 15%, Prices Have Doubled
According to a Jefferies report, power demand is up 15 per cent year-on-year so far in September 2026. For the year till now, demand growth is about 10 per cent, which is well above the 7 per cent the brokerage had estimated for the whole of FY27.
Weak rains linked to El Nino, a weather pattern that usually means a hotter and drier monsoon in India, have pushed up cooling needs. That has lifted prices in the merchant power market too. Merchant power means electricity sold on the open market at spot prices, not under a long-term contract. Prices in September so far are double what they were a year ago. For the July to September quarter, the average price is Rs 5.7 per unit, up 46 per cent from last year and 12 per cent from the previous quarter.
Coal Stock Is the Worry
Coal at thermal power plants has come down to around seven days of stock. More than 40 percent of the plants have less than 25 per cent of the coal they need to keep in hand. That’s a thin cushion, and it explains why the government is pushing so hard on plant operations and imported coal.
Jefferies Top Picks: Adani Energy Solutions, JSW Energy, NTPC
Jefferies expects earnings of power utilities to keep growing between FY26 and FY29, mainly as new projects get built and start running. It also says stocks can do well from project delivery alone, even if valuations don’t get any richer.
Adani Energy Solutions is the brokerage’s biggest upside call. Jefferies maintained a buy rating with a target price of Rs 2,060 from current levels. That’s an upside of 54 per cent. The brokerage expects more than 20 per cent EBITDA growth a year in the medium term. EBITDA is just the operating profit before interest, tax and some other charges.
JSW Energy has a buy rating and a target of Rs 720, so about 48 per cent upside from current levels. Jefferies prefers it at current levels because of earnings growth from project execution.
NTPC also has a buy rating. The target is Rs 425, an upside of 34 per cent from current levels. Same reasoning here, the brokerage likes the earnings visibility from projects being delivered.
What to Watch Ahead
So the view is mixed on individual stocks but positive on the sector as a whole. For the rest of FY27, demand, merchant prices, coal availability and how fast projects get executed will decide how things play out. Prices mentioned are as per the report, so check live market prices before taking any decision