Is your portfolio ready for summers? As mercury rises, analysts prepare their Dalal Street playbooks

With an early arrival of the summer season, many experts and power producers have predicted higher power consumption in the coming months with some forecasts suggesting peak energy consumption during the year. Amidst all this, is it possible to make the most of the season in your Dalal Street portfolio? Meanwhile, power companies have secured deals for 10,995 MW for various long as well as short-term horizons.

However, power companies also noted that energy demand is dependent on weather conditions.

Which businesses to focus on as the mercury rises?

According to a Religare Broking analyst, increase in temperature shares a direct relationship with consumer demand. "The power sector is set to gain from heightened electricity demand during extended heat waves, which will bolster utility revenues," Ajit Mishra of Religare Broking told Zeebiz.com.

The predicted surge in consumer demand is expected to energise sectors dedicated to enhancing comfort and cooling. Consumer durables companies—especially those manufacturing air conditioners, refrigerators, and fans—are poised to benefit from a significant uptick in sales as households invest in efficient cooling solutions, according to Mishra.

FMCG, firms specialising in beverages and ice cream are well positioned to capitalise on increased consumption of cold drinks and refreshing treats amid extreme temperatures, he said.

Historically, similar weather patterns have triggered brief market rallies, points out Mishra. For example, during previous intense summer heat waves, stocks like Voltas and Blue Star experienced temporary boosts with the surge in demand for cooling appliances. However, these weather-driven themes are typically short-lived, he added.

Their sustained performance depends on a balanced demand-supply dynamic and attractive valuation, said the analyst. "In past instances, intense competition had led to muted margins for durable goods players, which later rebounded as supply stabilised and eased."

According to Mishra, while extreme heat can spark short-term optimism, long-term gains hinge on robust market fundamentals and better pricing.

What to expect in power companies' Q4 FY25 earnings reports?

Some analysts expect power generation companies to witness a pickup in demand after staging modest performances in the final three months of FY25, mainly due to subdued energy and peak demand thanks to an extended monsoon season.

Investors await the Q4 corporate earnings season to gather steam in the coming days, with projections of a muted quarter for the electricity generation segment.

"This unseasonal weather trend dampened electricity consumption, impacting overall generation volumes. Additionally, coal production and prices remained soft both in India and globally, further influencing sector dynamics," according to the brokerage

Merchant power prices saw a year-on-year decline, moderating to Rs 4.4/kWh in 4QFY25 from Rs 4.9/kWh in 4QFY24, adding pressure on earnings for players with higher merchant exposure.

Which power generators to focus on to play the earnings theme?

Among companies, JSW Energy stands out as a likely outlier, with potential topline growth driven by recent acquisitions. However, its merchant power earnings are expected to face headwinds due to the dip in spot prices, JM Financial analysts said.

On the other hand, power equipment manufacturers such as BHEL, Suzlon, and INOX Wind are poised for a growth in the quarter.

JM Financial analysts stated that energy demand and peak load for FY25 stood at 1,696 BU and 250 GW, reflecting 4.3 per cent and 2.7 per cent YoY growth, respectively—down from the stronger growth momentum seen in previous years.

Will power generating PSUs lead push forward? Here's how Religare Broking expects power generation and distribution companies to fare going forward

Religare Broking analysts are of the view that sharp corrections have made PSU power generators' valuations more reasonable.

A demand shortage typically during intense summer months typically benefits power producers like NTPC, Power Grid and REC.

"With peak power demand predicted at 9000 MW, NTPC, Power Grid, and REC companies could see improved plant utilisation and more favorable tariff conditions, potentially boosting their earnings," said Mishra, adding that their long-term performances will depend on aspects such as fuel cost management, operational efficiency and demand-supply dynamics.

Religare Broking likes Voltas, Blue Star, Havells, HUL

Anticipating strong demand for products from consumer-centric businesses, the brokerage has a positive outlook on stocks like Voltas, Blue Star, Havells and Hindustan Unilever Ltd (HUL). However, for an uptrend to persist, it is essential to carefully monitor management commentaries across these players to gain a clearer understanding of demand dynamics, according to the brokerage.

"In recent years, pre-summer optimism has often been short-lived due to subdued actual demand. Additionally, margins—which have been somewhat soft due to high inflation and weak volumes—remain a critical factor," said Mishra.

On a prima facie basis, the sector appears reasonable, but for sustained growth, close attention must be paid to volume demand and margin trends, he added.

While the overall summer season outlook remains strong, factors such as weather unpredictability and operational constraints continue to be key risks for coal and renewable energy players, Mishra concluded.

What to focus on and what to avoid?

Investors should prioritise long-term fundamentals over short-term momentum in the coal and renewable energy themes, Mishra said, adding that seasonal demand spikes can create short-term trading opportunities, but the real value lies in structural trends like the country's energy transition, policy support for clean energy, and rising corporate demand for sustainable power.