Lookback: How India's power-sector revival traded from late 2024 to early 2026

The 17-month rerating that turned thermal dinosaurs into momentum darlings, then quietly stopped paying.

The power sector entered September 2024 carrying a quiet thesis that almost nobody on the sell-side was willing to put their full weight behind. India's peak demand had crossed 250 GW that summer, the grid had wobbled in three states, and the Ministry of Power had begun circulating drafts of what eventually became the revised electricity rules around timely payment to generators. By the close of the 4 September 2024 session, the Nifty Energy and the BSE Power index were both trading roughly 12 percent off their July highs, and the consensus desk note read like a polite eulogy. Capex was peaking, the renewable transition was a multi-decade story, and the PSU generators were already up four-fold from their COVID lows. Why chase.

What followed over the next 17 months was a textbook second-leg sector cycle. Not the explosive 2023 PSU rerate, but a slower, more discriminating wave that ended up separating the genuinely re-rated balance sheets from the ones that had simply been swept along by liquidity. By the time the window closed on 26 February 2026, the verdict had written itself on the tape, and the leadership composition at the end of the period looked almost nothing like the leadership at the start.

Caption: The full 17-month weekly arc, with the September-to-March 2025 accumulation base, the April-to-September 2025 mark-up leg, and the November 2025 distribution shoulder visible as three distinct regimes.

The trigger, in hindsight, was a sequence rather than a single event. The first leg came from the late-2024 budget signals around the National Electricity Plan revision, where the planning horizon for thermal additions was openly extended. That single line, buried inside an otherwise routine policy document released in the December 2024 window, did more for NTPC, NHPC and the supply chain around BHEL than any sell-side upgrade could have. The second leg was the December 2024 tariff order cycle, where state regulators in the western belt cleared long-pending true-up petitions that had been overhanging Tata Power and Torrent Power for nearly six quarters. Receivables on the discom side, which had been the perennial bear case, finally began to compress.

The accumulation phase ran from early September 2024 through late March 2025. During this stretch, the sector index drifted in a tight range with declining weekly volume, and the relative strength against the broader Nifty was actually negative until the third week of January 2025. Anyone reading only the price would have missed it. The tell was inside the ownership data. NSDL's monthly FII custody breakdown for the power-utility bucket, which had been net negative for most of 2024, turned mildly positive in October and stayed positive for five consecutive months. DII flows, which had been the dominant marginal buyer through 2023 and most of 2024, eased their pace but did not reverse. That handover, foreign money quietly accumulating into domestic distribution, was the single most reliable signal that a cycle was building rather than ending.

The mark-up leg ignited in the first week of April 2025, and the catalyst was almost mundane. Q4 FY25 earnings, reported through April and May, came in with a sector aggregate operating margin expansion of roughly 180 basis points year-on-year, driven less by tariff increases and more by the disappearance of the fuel-cost-pass-through lag that had crushed FY24 numbers. Once two or three large generators printed clean numbers and guided to similar Q1 dynamics, the broker community capitulated in waves. Between mid-April and the end of June 2025, at least 14 sell-side upgrades hit the tape across the top eight names in the sector, with target prices on the larger PSU generators getting revised up by 25 to 40 percent in some cases. The index added a substantial chunk of its eventual 17-month gain in those 11 weeks alone.

Leadership inside the sector during the mark-up phase was the part most retail participants got wrong. The instinct, conditioned by the 2023 cycle, was to chase the PSU generators. The actual leadership rotated three times. From April to roughly mid-July 2025, the heavyweights, NTPC and Power Grid, led on absolute moves but lagged on relative strength because they had already done their work in 2023 and early 2024. The genuine outperformers in this phase were the transmission and EPC plays, where order books had finally translated into revenue visibility. Then, from late July through September 2025, leadership shifted to the integrated private utilities, with Tata Power and Torrent Power running hard on the back of solar EPC order wins and the rooftop scheme acceleration. The final rotation, from October 2025 onwards, was into the pure-play renewable independent power producers, which had been the laggards through most of the cycle.

Caption: Daily candles showing the April 2025 breakout, the July consolidation, the September gap-up after the renewable PPA announcements, and the November distribution top with declining momentum on each subsequent rally attempt.

The renewable IPP leg was where the cycle started to look frothy, and where the post-mortem becomes most instructive. Names like Adani Green and the smaller listed renewable platforms moved 40 to 60 percent between early October and mid-November 2025 on the back of a single policy expectation, which was the rumoured acceleration of the PPA renegotiation framework. When that framework was eventually notified in the third week of November, the actual terms were tighter than the market had priced in, and the stocks topped almost to the day. The 19 November 2025 session saw the highest single-day delivery volume in the sector for the entire window, and it was distribution, not accumulation. The bhavcopy that evening showed bulk-deal exits from at least two well-known domestic mutual fund houses in three of the top renewable names.

The cross-sector comparison through this window was equally telling. The same 17-month period saw banking deliver a forgettable performance, with the Bank Nifty actually trading lower in real terms by the end of the window after adjusting for the late-2025 NPA scare in the unsecured retail book. IT, which had been the consensus overweight at the start of the period, gave up most of its gains after the Q2 FY26 results in October 2025 reset expectations on the FY27 growth trajectory. Capital goods and defence, both of which had been part of the same PSU-and-policy narrative in 2023, broadly kept pace with power but did not lead it. The sectors that genuinely outperformed power on a 17-month basis were narrow, namely pharma-CDMO, select chemicals, and the new-age platform names that had completed their de-rating and started compounding again from a lower base.

The historical analog that came up repeatedly in desk conversations through this period was the 2003 to 2007 power and capital goods cycle, where the combination of demand growth, a long capex tail, and a regulatory reset produced multi-bagger returns across a wide bench of names. The analog was imperfect. The 2003 cycle had the benefit of a global commodity bull market and a near-zero starting base in private participation. The 2024 to 2026 cycle had neither. What it did have, and what made the rerating sustainable for as long as it was, was the demand-side certainty. India's peak demand had grown for 11 consecutive summers, the data centre buildout had added a structural new tier of base load, and the EV transition had begun to show up in evening peak shaping. The qualitative story was as strong as 2003. The valuation starting point was simply higher, which capped the eventual upside.

By February 2026, the sector index had completed a measured pullback from its November high, the 30-minute intraday structure had stopped making higher highs on each rally attempt, and the breadth had narrowed sharply. On 26 February 2026, only three of the top 15 power names closed above their respective 50-day moving averages, against 13 of 15 in early October 2025. That breadth deterioration, more than any single price level, was the cleanest evidence that the cycle had moved from mark-up into a genuine consolidation or early markdown phase.

Caption: The intraday rally attempts of January and February 2026 each printed lower highs on declining volume, a classic pattern of supply quietly absorbing demand without dramatic distribution candles.

What the cycle ultimately rewarded was balance-sheet quality, and what it punished, eventually, was narrative without numbers. The transmission utilities and the integrated private players, which entered the cycle with declining net debt and improving return on capital, ended the window with the cleanest charts and the smallest drawdowns from peak. The pure-play renewable IPPs, which entered with stretched balance sheets and were rerated on PPA optimism, gave back the largest share of their cycle gains in the final three months. NTPC and Power Grid, which had done most of their work in the prior cycle, behaved like dividend compounders rather than momentum leaders, which was actually the most rational outcome given their stage of corporate life.

For anyone who held the sector basket from September 2024 through February 2026, the absolute return was respectable but the variance inside the basket was enormous. The top quartile of names delivered multi-x returns. The bottom quartile barely beat the broader index. That dispersion, more than the headline sector move, was the actual lesson of this cycle, and it is the lesson that tends to get repeated whenever a sector moves from being unloved to being consensus over an 18-month horizon.

VERDICT

Stance: NEUTRAL Horizon: 3mo Rationale: As of 26 February 2026, the cycle had completed its mark-up, breadth had narrowed to three of fifteen, and the renewable sub-segment had begun a clear markdown, leaving the sector in a digestion phase where quality balance sheets could compound modestly but the broad basket trade was over.