HDFC Institutional Equities in a fresh note said the Indian power sector is undergoing a structural transition from a volume-led expansion phase to a reliability-driven operational model. The domestic brokerage said the shift has become more pronounced after peak power demand crossed 270 GW in May 2026, increasing the need for assured or "firm" power delivery. 

NTPC Ltd and CESC Ltd remain preferred picks within the space due to attractive valuations in relation to their renewable expansion trajectory and financial visibility from the regulated return mechanism. The brokerage suggested a base target of Rs 366 and a bull target of Rs 400 on NTPC. For CESC, it suggested a base case target of Rs 210 and a bull case target of Rs 221.

HDFC Institutional Equities said renewables are likely to remain the main driver of incremental capacity addition, with annual additions expected to stay strong over the medium term. 

At the same time, thermal generation is expected to continue playing a critical balancing role by managing intermittency and supporting reliability during periods of peak demand.

HDFC Institutional Equities has 'Buy' recommendation on Tata Power Company Ltd and Power Grid and 'Hold' on JSW Energy Ltd and NHPC Ltd. 

On Tata Power, the base target stands at Rs 430 and bull target at Rs 460. Power Grid's base and bull targets stand at Rs 305 and Rs 325, respectively. HDFC Institutional Equities offered only bull targets for JSW Energy (Rs 639) and NHPC (Rs 85).

HDFC Institutional Equities said the sector is entering a more visible capital expenditure upcycle, with transmission commissioning improving and evacuation-related investments remaining elevated to support renewable integration. 

The brokerage said sector performance will remain dependent on the timely commissioning of transmission assets, execution discipline in project delivery, and a pick-up in renewable and transmission tendering momentum in FY27. It added that grid bottlenecks, sustained DISCOM payment discipline, and the pace of BESS/FDRE project deployment will remain key monitorable factors in assessing how effectively the current tailwinds convert into earnings growth and return accretion.

"We remain constructive on the Utilities, supported by sustained electricity demand, a strong policy thrust, and an ongoing CapEx upcycle across generation and transmission. Despite the phased impact of El Niño, power demand has remained resilient, which should translate into higher generation, improved realisations, and better financial performance for power generation companies," HDFC Institutional Equities said.

It said the rapid expansion of power infrastructure, ongoing commissioning of transmission assets, and capacity addition across renewables, thermal, nuclear, and transmission should continue to serve as key growth catalysts for sector participants. 

"That said, while our stance remains bullish, we believe investors should remain selective, with execution, demand sustainability, and regulatory developments acting as key monitorables," it said.