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Top Energy Stocks in India (2024): Power Sector Shares for your Portfolio

Top Energy Stocks in India (2024): Power Sector Shares for your Portfolio
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Energy stocks in India are gradually becoming a popular choice for investors. Over the past few years, India has connected hundreds of millions of its citizens to electricity. This has prompted the adoption of highly efficient LED lighting in most homes and encouraged the expansion of renewable energy sources.

As India recovers from a Covid‐induced slump in 2020, it is re‐entering a very dynamic period in its energy development. Well, thanks to rising incomes and improving living standards, the country consumes a large amount of energy. As a result, India has been ranked as the third-largest energy-consuming country. Consequently, the Indian energy market is huge! This means with increased demand and supply, the power stocks India is set to rise. 

Considered the fastest-growing economy in the world, business leaders and investors in India are backing up the top energy sector stocks in India effortlessly. Therefore, in the blog, we will discuss some key insights about India’s energy sector, a power sector share list and why you should consider investing in them.

What are Energy Stocks India?

According to the International Energy Agency, India is the world’s third-largest energy consumer after China and the United States. 

In 2019, the country’s total energy consumption was around 6% of the global total, with Oil, Coal, and Natural Gas accounting for over 80% of the total energy consumed. Renewable sources, including hydroelectric, wind, and solar power, generated the remaining 20%.

Energy sector stocks include companies operating in the energy industry. Such as oil and gas exploration and production companies, energy utilities, and renewable energy companies. These best energy stocks India are an essential part of the stock market, as they play a crucial role in meeting the energy needs of individuals, businesses, and entire economies. Energy stocks, therefore, provide investors with the opportunity to participate in a sector that is essential to the economy.

The importance of the best energy stocks in India lies in the fact that the energy sector is critical to economic growth and development. The energy sector also significantly impacts the environment, with fossil fuels being the primary source of greenhouse gas emissions. With increasing global awareness of the need to transition to renewable energy sources, the importance of investing in clean or renewable energy stocks NSE is also gaining momentum. 

Now that we know what are energy stocks in India, let us look at the energy stock list that we have curated for educational purposes. 

Best Energy Stocks in India

Best energy stocks in India are likely to perform well in the medium to long term, particularly those focused on renewable energy and natural gas. Therefore, let’s look at some of the best energy sector stocks in India along with their market capitalization.

Stock NameSub-SectorMarket Cap (in Cr)Share Price
Reliance Industries LtdOil & Gas - Refining & Marketing₹18,51,022₹2,657.15
NTPC LtdPower Generation₹2,90,221₹302.6
Adani Green Energy LtdRenewable Energy₹2,51,583₹1,680.9
Indian Oil Corporation LtdOil & Gas - Refining & Marketing₹2,04,051₹138.95
Adani Total Gas LtdGas Distribution₹1,08,122₹996.35
Disclaimer: Please note that the above list is for educational purposes only, and is not recommendatory. Please do your own research or consult your financial advisor before investing.

Note: The share price data in the energy sector stocks list is from 23rd January 2024.  However, for real-time updates on stock prices and market trends, visit the smallcase stocks collection today!

with a potential for high returns
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with a potential for high returns

Why Invest in Energy Stocks in India?

Investing in the top energy stocks in India can be a lucrative option if you have the financial capacity to handle their inherent volatility. While these stocks may exhibit price fluctuations, they have the potential to deliver substantial returns. This is primarily due to their sensitivity to changes in supply and demand dynamics. Leading to increased demand or reduced supply can lead to rapid price appreciation, thus enhancing their investment appeal. If you seek higher returns and are comfortable with some degree of volatility, the best power stocks in India and energy stocks in India might align with your investment objectives.

Top Energy Stocks in India: An Overview

Let’s review the top energy companies in India from our green energy share list and why they are considered top energy sector stocks in India. These are the best power sector stocks, which are among the top 10 energy stocks in India: 

Reliance Industries Ltd

Dhirubhai Ambani founded Reliance Industries Ltd in 1966. The company operates in petrochemicals, refining, oil, gas exploration, retail, and telecommunications. It is one of the largest energy stocks in India, and it operates in more than 50 countries worldwide. Additionally, it is one of the best energy sector companies in India. 

NTPC Ltd

NTPC Ltd is India’s largest power utility company and was established in 1975. The company’s main products are electricity and power generation. They have operations in India and some neighboring countries. NTPC Ltd stocks are listed under energy stocks India. They can be one of the best power stocks to buy in India. 

Adani Green Energy Ltd

Gautam Adani founded this renewable company in 2015 in India. The company produces renewable energy through wind and solar power plants. Adani Green Energy Ltd is a significant cheap green energy stocks player in the renewable sector in India and operates in various states. 

Indian Oil Corporation Limited

Indian Oil Corporation Limited refines and sells petroleum products and petrochemicals. The company operates in segments such as the Sale of Petroleum Products, Sale of Petrochemicals, and Other businesses.

Adani Total Gas Ltd

Adani Total Gas Ltd actively builds city gas distribution networks, delivering piped natural gas to industries, businesses, homes, and compressed natural gas to the transportation sector.

Now that we have explored what is Indian energy sector stocks in detail, let’s see how to invest in them. 

How to Invest in Energy Stocks via smallcase?

We understand how scary it might sound to deal with challenges alone. Therefore, at smallcase, popular SEBI-licensed financial professionals from Windmill Capital have introduced an easy way to invest in the best energy stocks in India. Introducing Energy Tracker smallcase

The Energy Tracker smallcase enables investors to track the performance of the top energy sector stocks in India. An energy tracker is an exchange-traded fund (ETF) or index fund that invests in a basket of energy-related stocks or other securities.

This smallcase consists of the top energy stocks in India, including companies in Coal, power transmission & distribution, power trading, gas distribution, power generation and oil & gas. 

However, if you’re confused about which stocks to pick, you can explore smallcases:

  1. smallcases are readymade portfolios of stocks/ETFs, that are based on a theme idea or strategy
  2. They’re created and managed by SEBI-registered experts
  3. smallcase.com offers over 200+ stock portfolios, created by 180+ managers
  4. Some of the popular smallcases among new investors are as follows:

Equity & Gold smallcase by Windmill Capital

Top 100 Stocks smallcase by Windmill Capital

All Weather Investing smallcase by Windmill Capital

Disclosures for aforementioned smallcases

Green Energy smallcase by Niveshaay

Electric Mobility smallcase by Windmill Capital

Energy Tracker smallcase by Windmill Capital

Disclosure for Green Energy smallcase

Factors Affecting the Top Energy Sector Stocks in India

The growing demand for renewable energy has primarily influenced by the top energy stocks in India. Therefore, before investing in an energy stock in India, let’s understand some of its factors. 

Global Oil Prices

Global oil prices have a significant impact on energy sector stocks. As energy companies are involved in oil exploration, production, and distribution, oil price fluctuations can directly impact their revenues and profits. Higher oil prices can lead to higher profits, while lower oil prices can lead to lower profits.

Government Regulations

Government regulations also affect energy sector stocks. As most of India’s energy sector companies are regulated by the government, this affects stock performance a lot. Governments regulate the energy sector to ensure the environment and consumers’ safety. For example, if the government imposes stricter regulations on carbon emissions, the best energy stocks may have to invest more in technology to comply, which can reduce their profitability. 

Weather Conditions

The weather can also affect energy sector stocks, particularly in the renewable energy sector. For example, solar power generation can be impacted by the amount of sunlight received. While wind strength and consistency can impact wind power generation. Extreme weather events such as hurricanes and droughts can also affect the energy sector stocks, particularly in terms of energy supply and infrastructure damage.

Political Factors

Political factors such as geopolitical tensions, trade policies, and taxation policies can also impact energy sector stocks. For example, instability in oil-producing countries can lead to higher oil prices, which can benefit energy companies. On the other hand, if there are trade restrictions imposed on energy imports or exports, it can limit the growth potential of the top energy stocks.

Advantages of Investing in Energy Shares in India

The energy sector stocks encompasses a wide range of industries from traditional oil and gas companies to emerging renewable energy companies. Let’s explore some of the prime advantages that have been listed below: 

  • High Dividend Yield: Energy shares in India typically offer high dividend yields, making them attractive to investors looking for regular income. Many energy companies have stable earnings and cash flows, which allows them to pay consistent and growing dividends over time.
  • Potential for High Returns: The best energy stocks have the potential to deliver high returns. This happens especially during periods of economic growth and rising demand for energy. As energy demand increases, companies may experience higher revenues and profits, leading to potential capital appreciation for investors.
  • Diversification: Stocks in energy can provide diversification benefits to an investor’s portfolio. Investing in a mix of energy companies across various sub-sectors. Such as oil and gas exploration, refining, petrochemicals, and renewable energy, can reduce the overall risk of an investor’s portfolio.

What is the Nifty Energy Index?

Pumped by the brand names, we all can add a list of the best energy stocks in India. However, that doesn’t mean these best power stocks in India will offer returns according to our expectations. Therefore, we use the Energy Nifty Index, to evaluate the performance of every energy stock India. 

The Nifty Energy Index is a stock market index that measures the performance of 10  companies operating in the energy sector in India. The National Stock Exchange of India (NSE) designed the energy sectoral index. The Index reflects the performance and it is one of the indices in the NSE.

The Nifty Energy Index formula:

Nifty Energy Index = Summation of (Weight of Stock x Closing Price of Stock) for all stocks in the index.

The Nifty Energy Index is helpful for investors as it provides them with a benchmark to measure India’s energy sector stocks performance. By tracking the index’s performance, investors can gain insight into the overall health of the energy sector stock in India. 

Additionally, the Nifty Energy Index enables you to invest in the energy sector stocks in India through exchange-traded funds (ETFs). The index’s administrators rebalance it on a semi-annual basis, using January 31 and July 31 of each year as the cut-off dates. 

Energy Sector Stocks in India-Synopsis

The energy sector stock in India has undergone significant changes over the last decade. With a shift towards renewable energy sources and an increased focus on energy efficiency.

At present, Coal is still the primary energy source, accounting for approximately 70% of India’s total electricity generation. On the other hand, renewable energy sources like wind, solar, and hydropower have significantly increased over 23% of India’s installed power capacity. Additionally, India is also investing in nuclear energy. Thus, with a plan to increase nuclear energy stocks in India with a capacity from 6.7 GW in 2021 to 22.5 GW by 2031. 

The country aims at an ambitious target of achieving 450 GW of renewable energy capacity by 2030. This target includes 280 GW of solar, 140 GW of wind, 10 GW of bioenergy, and 5 GW of small hydro projects. Considering the dire need to produce greener energy, the government has also launched various initiatives to promote energy efficiency. Such as the Perform, Achieve, and Trade (PAT) scheme and the Ujala scheme.

By 2040, renewable energy is expected to account for more than half of India’s electricity generation. With a plan to reduce its dependence on imports, the government also focuses on developing electric mobility. It aims to achieve 30% electric vehicle penetration by 2030 to achieve Prime Minister’s net zero emission target by 2070.

Types of Energy Sector Stocks

The energy sector in India derives stocks in the form of four channels that have been listed below: 

  • Thermal: Since fossil fuels dominate the energy sector, the production of thermal energy has primarily contributed to the energy sector stocks in India. Thus, as of May 2022, India has a total Thermal installed capacity of 236.1 GW. However, the rest of the power is generated from coal largely and then from Diesel, Lignite, and Gas.
  • Renewable Energy Stocks: Renewable energy refers to the energy obtained from natural resources. Such as sunlight, wind, rain, and geothermal heat. With a target of achieving 450 GW of renewable energy by 2030, the interest in renewable energy stocks in India is expected to dominate the market. 
  • Hydro: The water movement generates hydropower, also known as hydro energy, which is a renewable energy source. Hydro energy accounts for about 13% of the country’s total energy consumption in India, making it a popular investment opportunity for investors interested in energy stocks India. 
  • Nuclear: Considered as the smallest energy segment, Nuclear energy is a form of energy that is generated through nuclear energy reactions. Accounting for only 2.5% of the country’s nuclear energy stocks in India, it is generated from nuclear power plants. Therefore, consider investing in these nuclear energy stocks in India for portfolio diversification.

Are There Any Challenges?

Energy sector stocks can be a valuable addition to a well-diversified investment portfolio. However, it is critical to understand its challenges to be prepared to tackle them efficiently. Some of the primary challenges are:

  • Volatility: Energy stocks in India can be highly volatile due to factors such as fluctuations in global oil prices, changes in government policies related to the energy sector, and geopolitical risks. Investors in the best power stocks in India should be prepared for stock price fluctuations and market conditions changes.
  • Environmental Concerns: The energy sector significantly contributes to greenhouse gas emissions, and climate change. In response, energy companies are under increasing pressure to reduce their carbon footprint and invest in renewable energy due to environmental concerns. Failure to adapt to this changing landscape may result in reputational risks and regulatory challenges for energy companies.
  • Geopolitical Risks: The energy sector in India is also subject to geopolitical risks, including tensions with neighboring countries and supply chain disruptions. These risks can impact the operations of energy companies and lead to higher costs and lower profitability.

To Wrap It Up…

In conclusion, the Indian energy sector offers a variety of investment opportunities, from traditional oil and gas companies to emerging green energy stocks.

Investing in green energy stocks promotes sustainable development and offers the potential for high returns as the world moves towards a more sustainable future. With government support and increasing demand for renewable energy, green energy stocks in India are poised for growth in the coming years.

So, let’s do our bid to make India a net zero-emission country by 2070. How? You could start by investing in smallcase today! 

FAQs

1. How many years does a battery last in an electric car?

Current industry expectations project that EV batteries will last between 1,00,000 and 2,00,000 miles, approximately 15 to 20 years.

2. What are the best 3 Energy Stocks in India?

The 3 best Energy Stocks in India are:
1. Reliance Industries Ltd
2. NTPC Ltd
3. Adani Green Energy Ltd
Note: This list is for educational purposes only, and is not meant for recommendation.

3. How can I invest in Energy stocks?

You can invest in the Green Energy smallcase or any ETFs or mutual funds in that particular sector.

4.  Is it a good time to invest in Energy stocks?

Energy stocks have great potential when it comes to periods of economic growth. Recently power sector stocks may have the highest dividend yield of any stock market sector. Additionally, it is also the sector with the highest free-cash flow. However, investors must evaluate their risk tolerance and investment goals before investing.

5. Who should invest in Energy Stocks?

If you have the financial resources to support yourself, power sector stocks and energy stocks can be a great investment. If you want a safe investment with potentially high returns, then these stocks can be great. However, one must consider their investment goals and risk appetite before investing in the best power stocks in India.

6. Can Energy stocks be profitable for investors?

Yes. Energy stocks and power stocks to buy can typically have high returns. However, investors should evaluate both growth potential and challenges before investing.