Goldman Sachs initiates coverage on Indian power companies with a "buy" rating on Power Grid Corp of India Ltd shares, saying the sector could benefit from recent reforms, although the magnitude of power tariff hikes could be the biggest risk.
Power Grid is up 1 percent, outperforming a 0.6 percent gain in the NSE index.
Goldman says recent reforms including higher coal availability and a debt restructuring of distribution companies could help support shares in the sector.
Goldman expects state-run companies to generate higher returns compared with independent power producers in the near term, but returns on equity could remain under pressure due to tighter regulation.
Goldman assigns "neutral" ratings on NTPC Ltd, NHPC Ltd and Tata Power Co Ltd.
The bank has started coverage on Reliance Power Ltd with a "sell" rating, saying the company's three ultra mega power projects could face delays and low returns.