After a muted financial year (FY) 2025-26, weighed down by a prolonged monsoon and a high base, the power sector is regaining momentum. The improving sentiment is driven by a revival in electricity demand and increasing confidence in a multi-year investment cycle. This optimism is reflected in market performance, with the BSE Power Index emerging as the best-performing sectoral index in 2026 so far, gaining 20.5%. Comparatively, the BSE Sensex declined 10.5%. The analysis is based on 15 June 2026 closing values.Electricity demand is expected to rebound in the current financial year, supported by an early summer heatwave, rising cooling needs, a favourable base effect, and continued growth in industrial and commercial activity. Structural drivers such as the expansion of data centres and EV (electric vehicles) charging infrastructure further strengthen the outlook. ICRA, in its May 2026 note, projects power demand to grow by 5-5.5% in 2026-27, compared with a modest 1% growth in 2025-26. A Citi report also sees demand growing at 5-6% in the medium term. It sees El Nino linked tailwinds (boosting agri-pump and cooling demand) as the key drivers for demand in 2026.Analysts say India’s power sector is well placed, backed by strong capacity additions, rising electrification, and growth in renewables. Segment-wise, most experts favour transmission and distribution space as it offers a multidecade investment opportunity. The Central Electricity Authority (CEA) has identified `7.9 trillion of transmission investments through 2035-36.Aditya Welekar, Senior Research Analyst at Axis Direct, says there is a significant gap between the current transmission capacity and the 2026- 27 target, and bridging this shortfall presents a key growth opportunity. Analysts also see strong opportunities for transmission developers in the long run supported by renewable integration, new hydro projects, and international HVDC (High Voltage Direct Current) interconnections. Vishal Periwal, Research Analyst, PL Capital, believes that renewables remain the volume engine with India targeting 500 GW of non-fossil capacity by 2030. In addition, storage (pumped hydro and batteries) is emerging as the compelling opportunity.A brief lullElectricity demand was lower in 2025-26 due to weather related disruptions. The demand is expected to improve.