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Foreign investors appear to be finding comfort in India’s power sector amid heightened geopolitical tensions and energy market disruptions, drawn by rising demand for electricity and growing data centre capacity.

They bought power stocks worth $497 million in February, according to data from the National Securities Depository Ltd. That marked the strongest inflow by foreign investors since they pumped in $517 million in April 2024.

Several power stocks delivered solid gains in February, when the benchmark Nifty 50 index slipped 0.6%. GMR Power and Urban Infra led the pack with a 19.5% jump, followed by Torrent Power, which rallied 14%, and Adani Green Energy, up 11%. NTPC climbed 8%, JSW Energy gained 6.1%, while Tata Power edged up 3%, underscoring the sector’s relative resilience in an otherwise weak market.

February inflows aren’t happening in a vacuum, said Divam Sharma, co-founder and fund manager at Green Portfolio PMS.

According to him, investors are looking at a “rare mix” of structural demand driven by AI and digital infrastructure, 100% foreign direct investment allowance, and an increasingly investor-friendly regulatory environment. With many countries facing energy security concerns, India’s power sector offers a growth story with defensive characteristics, he said.

“That’s a compelling proposition for any allocator,” Sharma said.

The ongoing Russia-Ukraine war and the US-Israel attacks on Iran have forced global capital to seriously reassess where critical energy infrastructure sits on the risk spectrum, he said.

“What investors have realized is that energy is no longer just a commodity play. In an AI-driven world, it’s becoming the foundational infrastructure layer. You cannot run a data centre without reliable, scalable power. Period,” Sharma said.

The data centre industry in India is growing steadily, the ministry of electronics and information technology said on 13 March. It said total data centre capacity in the country rose fourfold to about 1,500MW by 2025 from about 375MW in 2020, adding that the government is aware of the infrastructure needs of the data centre ecosystem, including electricity and water.

“The expected electricity demand from the growth of AI and other large-scale data centres is factored into the planning process of the government. As per information available with the ministry of power, electricity demand from data centres is estimated to reach 13.56 GW by 2031-32,” the ministry said.

According to Lokesh Manik, a senior analyst at Vallum Capital, global AI trade is attracting capital worldwide, and in India, given the absence of listed AI companies, the power sector has become a natural beneficiary. Besides, with summer setting in early and manufacturing reviving, market participants expect peak power demand to rise, improving utilization levels.

Power equipment manufacturers are benefiting from global AI and grid infrastructure capex, and for companies such as those in transformers and cables, export opportunities have also opened up, he said.

Investors are betting on both segments—renewable power companies and traditional utilities—that are growing, Manik said, but noted that renewable exports are fraught with tariff risks and rising input prices of silver, a key component in making solar cells.

Most investors are of the view that inflows into the power sector are not merely tactical amid global uncertainty but also reflect a long-term structural bet on India’s rising power demand. India’s electricity sector continues to show strong underlying demand, according to an Axis Securities report dated 13 March.

Peak power demand during the April 2025-February 2026 period (11 months) touched 245GW in January 2026. This compares with the 250GW peak recorded in May 2024, which was driven by an intense heatwave, making it an unusually high summer demand, Axis Securities pointed out.

“But underlying demand remains firm, supported by rising industrial activity, appliance penetration, and urbanization,” the firm said.

Peak electricity demand in the country is projected at 277.2GW for FY27, according to the National Electricity Plan 2022-32.

Energy consumption in February stood at 133 billion units (BU), up 1.45% from 131 BU in February 2025. Daily generation rose to 5,152 million units (MU) on 11 March from 4,705 MU on 1 March, indicating an early build-up in summer power demand, according to the Axis Securities report.

From a valuation standpoint, NTPC, Tata Power, JSW Energy, SJVN, Adani Power and NHPC are currently trading at price-to-earnings multiples that are significantly higher than their five-year historical averages.

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