India's power demand is poised for another significant surge in August-September 2026, driven by intensifying El Niño conditions, according to a recent report by JM Financial. Despite peak daily demand reaching a record 271 GW during solar hours and 252 GW during non-solar hours on May 21, the brokerage believes the season's highest demand has yet to be met.
JM Financial highlights a strong correlation between power demand and wet-bulb temperature, which accounts for both heat and humidity. A rise in this metric sharply increases cooling loads. Drawing parallels with the 2023 El Niño event, the brokerage noted that peak demand was pushed to September that year, exceeding May levels by 9%, demonstrating El Niño's capacity to both elevate and prolong high-demand periods.
Current Demand and Supply Dynamics
In May 2026, extreme conditions saw peak demand hit 271 GW during the day and 252 GW at night on May 21, representing year-on-year increases of 23% and 17% respectively. This period also recorded a 2.6 GW non-solar deficit and numerous reported outages. While demand moderated slightly in early June, it quickly rebounded to over 260 GW during solar hours and 252 GW during non-solar hours later in the month. June 2026 also set a new record for energy met, reaching 167 billion units, an 11.6% increase from the previous year.
Looking ahead, JM Financial projects non-solar peak demand could reach 260-265 GW from mid-July to end-August, with potential for widening shortages. Supply-side constraints are anticipated, with wind generation expected to seasonally weaken to about 10 GW by August-September from current levels of 15-18 GW. Hydro generation is also limited, with reservoir energy content down 50% year-on-year, while thermal capacity is already operating at over 90% plant load factor. Gas support for incremental peak demand is expected to be modest.
Brokerage Revisions and Outlook
The S&P BSE Power Index has recently underperformed broader indices like the S&P 500 and Nifty 50, partly due to expectations that FY27 power demand may have peaked. However, JM Financial disagrees, citing the August-September 2023 El Niño period when record demand of 240 GW helped the Power Index outperform the Sensex and Nifty by 7%.
Based on their updated outlook, JM Financial has revised its pecking order and ratings for several power sector stocks:
- Upgrades to 'Buy': Adani Power (Target Price: Rs 253), Adani Energy Solutions (Target Price: Rs 1,968), JSW Energy (Target Price: Rs 642).
- Upgrades to 'Add': Torrent Power (Target Price: Rs 1,515), Vikram Solar (Target Price: Rs 219).
- Upgrades to 'Reduce': SJVN (Target Price: Rs 67).
- Downgrades to 'Add': Power Grid (Target Price: Rs 310).
- Downgrades to 'Reduce': NHPC (Target Price: Rs 80), ACME Solar (Target Price: Rs 367).
- Ratings Unchanged: NTPC (Target Price: Rs 411), Coal India (Target Price: Rs 253), Adani Green (Target Price: Rs 1,622), Tata Power (Target Price: Rs 450), CESC (Target Price: Rs 207), IEX (Target Price: Rs 253), BHEL (Target Price: Rs 481), Suzlon Energy (Target Price: Rs 64), Inox Wind (Target Price: Rs 92), Waaree Energies (Target Price: Rs 3,296), Premier Energies (Target Price: Rs 1,324), Emmvee Photovoltaic.
The brokerage's revised pecking order now favors Adani Power, NTPC, BHEL, Tata Power, and Emmvee, reflecting their confidence in the sector's performance amidst anticipated high demand.