ONGC to Adani Power: Morgan Stanley names top 6 energy sector picks
Its assessment points to a combination of demand growth and supply constraints. India’s LNG consumption has remained firm despite higher prices, power demand has grown strongly, while global refining capacity additions have lagged earlier expectations. At the same time, government-backed programmes are supporting domestic exploration, compressed biogas, coal gasification and biofuels.
| Morgan Stanley preferred picks | Key theme |
| HPCL | Refining margins and resilient fuel demand |
| BPCL | Refining cycle and domestic fuel demand |
| ONGC | Offshore exploration and upstream reforms |
| Oil India | Domestic exploration and production |
| Adani Power | Rising electricity demand and power generation |
| Adani Energy Solutions | Growing power and grid infrastructure needs |
Morgan Stanley said it was positive on HPCL, BPCL, ONGC, Adani Power, Adani Energy Solutions and Oil India.
India’s energy demand is proving resilient
Morgan Stanley’s India energy assessment points to stronger-than-expected demand across several parts of the energy chain.
“India’s energy demand resilience, pricing power for producers (gas/power/chemicals), quality of capital allocation pivot by corporates and increasing nimbleness beyond the supply shock appear set to surprise,” Mayank Maheshwari, Equity Analyst at Morgan Stanley, and his colleagues wrote.
The brokerage said coal, LNG and renewables are interacting more closely across India’s power and energy markets. Grid limitations, air-conditioning requirements, data centres, rising gasoline demand and greater use of CNG are supporting consumption across the supply chain.
Morgan Stanley expects underlying energy consumption in Asia to grow at a 2.7% CAGR between 2026 and 2030, supported by industrial activity and AI-related demand.
HPCL and BPCL get support from the refining cycle
Refining is one of the main pillars of Morgan Stanley’s energy view. The brokerage expects Asian gross refining margins to remain above mid-cycle levels as gasoline and diesel cracks settle at higher levels after the Middle East conflict ends.
“Underinvestment in refining, slippages in capacity adds and overdone concerns on long-term demand have set the stage for the refining up-cycle to inflect into a golden age until 2030,” Morgan Stanley said.
The brokerage expects refinery operating rates to move higher as fuel demand remains resilient, new capacity additions lag and near-term supply disruptions constrain availability.
That backdrop supports its positive view on HPCL and BPCL. Both companies are positioned within the refining and fuel-marketing parts of the energy chain, where Morgan Stanley expects demand and margins to remain supportive.
India to remain a major source of fuel demand
Morgan Stanley estimates India will account for 192,000 barrels per day of incremental refined-product demand between 2025 and 2029. Total incremental demand across the markets in its analysis is estimated at 538,000 barrels per day.
The brokerage expects Asian fuel demand to keep growing despite rising electric vehicle penetration, with transportation and industrial consumption remaining important drivers.
India is also one of the few markets still looking to add refining capacity. Morgan Stanley said the cost per unit of new refining capacity has nearly doubled, which it expects to support higher refining margins.
ONGC and Oil India get support from domestic exploration
ONGC and Oil India are among Morgan Stanley’s six preferred energy and power names, with the brokerage seeing support from government efforts to increase domestic energy production.
The government has announced about $16.9 billion of support across offshore exploration, compressed biogas, coal gasification and biofuels, according to Morgan Stanley.
The largest component is an $8.9 billion offshore exploration programme under Samudra Manthan. The programme includes seismic surveys, exploration acceleration and infrastructure for deepwater production.
Morgan Stanley said this could lead to larger drilled acreage, additional reserves and multi-year order books for offshore services and EPC companies.
The brokerage also pointed to upstream fiscal reforms, including a seven-year royalty holiday for deep and ultra-deep blocks, lower royalty rates, changes to revenue sharing in Category II and III basins and expanded CBM acreage. ONGC and Oil India are among the companies identified as beneficiaries.
LNG demand stays strong despite higher prices
One of Morgan Stanley’s notable observations is the resilience of India’s LNG consumption.
The brokerage said India’s LNG demand has remained firm despite LNG costing about 2.5 times more than alternative fuels in some power-sector applications.
Morgan Stanley expects India’s LNG demand to increase by about 2 million tonnes per annum over the next three years, driven mainly by city gas and refiners rather than fertiliser demand.
Power companies, gas midstream operators and refiners are looking to secure additional LNG, although the brokerage said long-term supply availability before 2029 remains limited.
City gas demand has been an important contributor to recent gas consumption, while power, fertiliser and industrial demand continue to form part of the overall LNG requirement.
Adani Power benefits from rising electricity demand
Adani Power is one of Morgan Stanley’s six preferred names as electricity demand rises across India.
Morgan Stanley said electricity spreads for coal- and gas-based generation are rising as the cost of serving the grid through renewables has increased. It also noted that large oil and gas companies are producing renewable power for their own use while showing limited interest in expanding into grid power sales.
India’s power demand grew 10% year-on-year in FY27 year-to-date, according to Morgan Stanley’s data, even as fuel demand declined 4%.
The brokerage also sees data centres becoming an increasingly important source of electricity demand across Asia.
Adani Energy gets support from rising grid needs
Adani Energy Solutions is the sixth name on Morgan Stanley’s preferred list.
The brokerage’s broader power thesis is based on higher electricity consumption, data-centre requirements and the need for reliable grid infrastructure. Morgan Stanley estimates that Asia’s data-centre power demand will grow at about 24% CAGR between 2023 and 2030.
The brokerage also expects energy-security investment across Asia to rise substantially. Average annual energy investment is estimated at $1.12 trillion during 2026-30, compared with $660 billion during 2015-25.
The spending covers oil and gas, storage and fuels, power and renewables, creating a larger pool of capital expenditure across the energy and electricity value chain.
AI adds to electricity demand
Morgan Stanley sees artificial intelligence as another source of rising electricity consumption.
The brokerage estimates Asia’s data-centre power demand will grow at about 24% CAGR between 2023 and 2030, faster than the growth expected in the US and Europe.
Its analysis says a ChatGPT query requires 10 times as much energy as a Google search, while each new generation of an AI model requires roughly 10 times more computing power to train.
For power companies, this adds data centres to existing demand from industry, cooling and broader economic activity.
Government support adds to the domestic energy push
Morgan Stanley has identified four major government initiatives supporting domestic energy production.
The offshore exploration programme carries announced support of $8.9 billion. The National Unified CBG Scheme accounts for $2.5 billion, the coal gasification mission and viability-gap funding programme for $4.8 billion, while ethanol and biofuels initiatives account for $0.7 billion.
Morgan Stanley estimates that the offshore exploration programme could eventually displace 11% of crude import requirements. It also estimates that 5% CBG blending could displace 1% of gas imports, with coal gasification and biofuels providing additional import substitution.
Energy companies are changing capital allocation
Morgan Stanley also sees energy companies spending more on trading operations, fuel storage, their own tanker fleets and securing energy reserves.
It said companies are allocating capital across thermal power, renewables and storage, with greater emphasis on reliable and dispatchable electricity.
“Being more nimble is structural, with energy trading to manage price risks a new normal,” Morgan Stanley said.
The brokerage expects energy companies, particularly state-owned enterprises, to become more flexible through trading desks, shared resources and efforts to address gaps in existing processes.
Six preferred stocks across three energy themes
Morgan Stanley’s six preferred names cover three broad parts of India’s energy story. HPCL and BPCL are linked to refining margins and fuel demand,. ONGC and Oil India are associated with the domestic exploration and production, while Adani Power and Adani Energy Solutions are tied to rising electricity consumption and power infrastructure.
The common factors are higher energy demand, constrained supply additions and rising spending on domestic energy capacity. Morgan Stanley’s view brings together the refining cycle, LNG demand, upstream exploration, power generation and grid investment rather than relying on a single commodity or business trend.
Disclaimer: This article is based solely on Morgan Stanley Research documents covering India’s energy, power and refining sectors. The views, company preferences, estimates, forecasts and industry assessments attributed to Morgan Stanley and its analysts are their own and have not been independently verified by the publication. Forecasts and projections are subject to changes in commodity prices, demand, government policy, capital expenditure, project execution, currency movements and other business and market conditions. This article is intended for informational purposes only and should not be construed as investment advice or a recommendation to buy or sell any security.