According to a recent report by Citi Research, India's power sector is on track for a 5-6% CAGR growth, supported by a multi-vector capital expenditure upcycle that includes investments in thermal, renewable energy, transmission, and grid storage. This marks the first time India is experiencing such a broad-based investment phase, driven by factors like increasing electrification, data centers, and cooling loads. The report emphasizes that the regulatory environment is evolving from merely adding capacity to ensuring system reliability and flexibility, aided by favorable policies such as the Central Electricity Authority (CEA) resource adequacy guidelines.

Citi forecasts a significant ramp-up in generation capacity, with GENCO capacity additions expected to be 2.3 to 2.5 times higher between FY26 and FY32 compared to FY19-FY25 levels. This increase is necessary to meet the evolving demand-supply dynamics, particularly during non-solar hours. The report also highlights potential tailwinds from El Niño in 2026, which may increase demand for agricultural pumps and cooling systems. Despite recent stock market re-ratings in the power sector, Citi believes there remains upside potential as the sector adapts to these changes.