Motilal Oswal initiated coverage of the power sector, calling it a “colossal multi-decade investment opportunity”. The brokerage covered five stocks in its research note: Power Grid, Tata Power, NTPC, JSW Energy and IEX.

What Happened: The brokerage house’s analysis of the Indian power sector outlines a substantial investment opportunity of ₹40 lakh crore over the next decade. This figure includes ₹34 lakh crore in firm capital expenditures and an additional ₹8 lakh crore in optionality.

The investment is driven by three key factors: accelerating power demand at a 7% compound annual growth rate, the need for upgrading or replacing aging infrastructure, and India’s transition to renewable energy to meet its target of 500 gigawatts of renewable energy capacity by 2030.

The report highlights that power demand in India is expected to grow faster than previously projected. At a 7% annual growth rate, compared with 5% earlier, the sector could mirror China’s rapid rise in the early 2000s, where power consumption compounded at 8% annually for two decades.

Given India’s robust economic outlook and the emergence of new demand drivers such as electric vehicles (EVs), data centres and electrification of various energy demands, the Indian power sector is poised for long-term expansion, according to the brokerage.

Motilal Oswal added that Power Grid, Tata Power, NTPC, JSW Energy and IEX are key players poised to benefit from this trend.

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Power Grid is seen as a bellwether play in transmission, where the company's established track record in high voltage direct current projects positions it favourably. With a strong pipeline and a 3.5% dividend yield projected by FY27, the brokerage initiated coverage on the stock with a “buy” rating and a target price of ₹425.

JSW Energy is another standout as it is expected to grow its capacity by 2.4 times in the next two-and-a-half years. JSW’s prudent capital allocation, strong execution and ability to turn around underperforming assets, like Mytrah Energy and Ind-Barath, make it a compelling choice for investors seeking growth in the renewable energy space, the analysts added. The brokerage gave the stock a “buy” call with a target price of ₹917

Tata Power is undergoing a transformative phase, with nearly half of its capital expenditures between FY23 and FY27 allocated to renewable energy projects, the brokerage said.

This shift is expected to increase the share of core earnings from 40% to 90%, making Tata Power a key player in India’s energy transition. The brokerage initiated coverage with a “buy” rating and a price target of ₹530.

On the other hand, NTPC’s renewable energy arm, NGEL, is expected to go public by mid-2025. While this could boost NTPC's valuation, Motilal Oswal believes that much of the upside may already be priced in, making the company's thermal business appear less attractive in comparison. The brokerage initiated coverage with a “neutral” rating with a price target of ₹450.

Finally, IEX stands to benefit from rising power consumption and new product launches but faces regulatory risks, including market coupling, which could challenge its dominant market position. Taking the risks into account, the analysts initiated coverage on NTPCwith a “neutral” rating with a target price of ₹226.

Price Action: Tata Power’s share price was up 0.34% to trade at ₹456. NTPC’s share price was up 0.30% to trade at ₹429.65. Power Grid’s share price was up 1.19% to trade at ₹345.20.

IEX’s share price was up 1.46% to trade at ₹242.86. JSW Energy’s share price was down 0.37% to trade at ₹789.10 as the market opened on Tuesday.

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Disclaimer: This content was partially produced with the help of Benzinga Neuro and was reviewed and published by Benzinga editors.