Could power stocks witness a rally like defence stocks in 2024?

livemint.com:

Defence stocks were among the top performing stocks of 2023. Investors and traders alike were extremely bullish on them for the short term and long term. This sentiment hasn’t changed but it wouldn’t be wise to expect the same kind of market-beating performance from defence stocks every year.

It’s perfectly reasonable to assume that these stocks may take a breather this year or at least slow down their rapid rise. In that case which sector will take up the mantle of the hottest sector of the year? Could the power sector step up to this challenge? Let’s examine this… The Indian economy has bounced back strongly from the recession of 2020 due to covid. With rapid economic growth comes a rapid increase in electricity consumption.

In fact, so sharp was the recovery in power demand, there was a time when coal plants were struggling to keep up. The government’s direct intervention was needed to solve that problem. Now, most power plants in India are running close to full capacity and fuel supply is not a big challenge anymore.

Thus, growth will come from an increase in capacity. India’s biggest power firms along with their suppliers have already begun this process. They’re rising to the challenge of meeting steadily growing demand.

India’s electricity consumption is expected to grow at about 7% for the near future. So, we can expect the sector as a whole to grow at this pace. Capacity addition will likely grow at an even faster rate.

And of course, some firms will grow faster than others. Therein lies an opportunity for investors. Most of India’s electricity is coal-based thermal power.