As the Union Budget approaches, equity markets are not positioning for fireworks in the power and energy space. Instead, expectations are anchored around continuity – reinforcing policy direction rather than announcing headline-grabbing allocations.
Most analysts agree the Budget is unlikely to act as a near-term catalyst for power stocks. But it will matter in a different way: by signalling how firmly the government is backing nuclear energy, renewables, grid expansion and energy storage as the backbone of India’s medium- to long-term energy transition.
What the market is pricing in
The broad assumption going into Budget 2026 is that existing schemes will be rolled forward, not reinvented.
These include:
- PM Surya Ghar (rooftop solar)
- Green Energy Corridor
- Revamped Distribution Sector Scheme (RDSS)
- Small Modular Reactor (SMR) nuclear mission
- Policy support for pumped storage and battery energy storage systems
Allocations are expected to be steady, with only incremental increases in select areas. The emphasis is expected to remain on execution rather than expansion.
Where policy focus is likely to stay
Renewables and rooftop solar
Solar remains the centrepiece of India’s energy strategy, particularly rooftop installations. While growth has been strong, much of it has come off a low base, supported by consistent policy backing rather than sharp budgetary jumps.
Last year, rooftop solar received around ₹20,000 crore. Market participants expect a similar allocation this year, with modest upward tweaks rather than a step change.
Nuclear power and private participation
Nuclear energy is expected to retain strategic importance, especially after legislative changes that opened the sector to private participation and enabled small modular reactors.
However, nuclear projects have long gestation periods, typically five to seven years. Budget announcements here are viewed as directional rather than earnings-accretive in the short term.
Energy storage takes centre stage
Battery storage and pumped hydro are increasingly seen as essential to managing renewable intermittency. Analysts expect continued policy and funding support, particularly under regulated cost-plus frameworks that offer predictable returns.
This is one area where incremental allocations could be more visible, given the system-level need for storage as renewable penetration rises.
Transmission and grid expansion
Transmission remains the quiet backbone of the energy transition.
High-voltage direct current (HVDC) transmission, green corridors and grid modernisation are expected to stay in focus, supporting renewable evacuation from generation-heavy states.
Transmission companies are seen as potential beneficiaries due to higher asset utilisation and regulated return profiles.
What the industry is asking for
While large spending surprises are not expected, the sector has put forward a clear wishlist focused on improving project viability rather than expanding subsidies.
Key asks include:
- Tax and financing incentives for nuclear projects
- Accelerated depreciation and R&D credits
- GST rationalisation for renewable components
- Lower GST and tax benefits for battery energy storage systems
- Group tax consolidation for renewable companies
- Continued support for discom reform and smart metering
According to sector experts, these changes could materially improve internal rates of return without materially increasing fiscal outlay.
Capital allocation expectations
Estimates suggest total power-sector allocation could fall in the ₹45,000 – 60,000 crore range, largely directed towards:
- Battery energy storage
- Transmission expansion
- Distribution reforms
- Select hydro and SMR-linked initiatives
Large increases in conventional renewable capacity funding are seen as unlikely, given the existing pipeline and private – sector participation.
Stock market implications
From an equity perspective, most experts caution against expecting immediate stock-specific triggers from the Budget.
- Nuclear, hydro and storage projects are multi-year bets
- Budget announcements tend to reinforce visibility, not drive rerating overnight
- Regulated utilities and transmission companies offer better earnings clarity
Pure-play renewable and nuclear-linked names may attract incremental interest. Transmission financiers such as REC and PFC could benefit from higher funding requirements across the ecosystem.
Short-term trading interest may persist in names like NTPC, Torrent Power, Adani Power and JSW Energy, but valuations already reflect much of the optimism.
The bottom line
Budget 2026 is shaping up as a statement of intent rather than a shock event for the power sector.
The message markets expect is consistency: stay the course on clean energy, grid build-out and storage, while fine-tuning tax and regulatory levers to make projects more viable.
For investors, the takeaway is not about immediate gains, but about confirming which parts of the power value chain will carry visibility over the rest of the decade.