Power generation increased 11.2% YoY in July 2014 driven by strong growth across the coal segment that was partially offset by lower YoY generation across the hydro segment due to poor monsoon.

Accordingly, plant load factors (PLFs) improved across coal based plants while declining across the hydro segment. While base deficits remained flat, peak deficits deteriorated slightly as demand increased due to weak monsoons. However, the merchant rate declined slightly MoM in July 2014 but was significantly up YoY.

"While the sector continues to face constraints in terms of fuel availability and pricing, environment clearances and SEB's financials, the formation of a stable government may lead to strong and timely reforms and easing of key policy logjams for the power sector," said ICICIdirect.

"This would address sectoral concerns. The top picks in our coverage universe are CESC, Power Grid and NHPC," it added.

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