Why power utility stocks are likely to underperform going forward

Impact on JSW Energy, Torrent Power the highest due to sharp rise in fuel costs

The spike in the prices of fossil fuels will obviously impact energy-intensive industries. Thermal power generators and by extension, power utilities could be placed under pressure for instance. But this is a complex value-chain and understanding the impact of higher fuel prices means delving into different categories of pricing models.

Power tariffs are largely controlled, and in some cases, utilities may lack the ability to pass on escalating costs to many of their consumers. However, power producers could perhaps receive higher realisations from merchant power sales since those rates have been running higher recently.

Assuming the economy continues to recover,