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Moody's Investors Service has changed India's power sector outlook from negative to stable on generation growth.

Accordingly, on February 6, India's Central Electricity Authority reported a 3.1 per cent year-on-year growth for the country's power generation in January, the fifth consecutive month of power generation growth after six months of decline driven by coronavirus pandemic.

"We have changed the outlook for the Indian power sector to stable from negative, recognising the better prospects for the sector as a result, amid an improved macroeconomic backdrop," Moody's Investors Service said in a statement.

"Sustaining growth in power generation indicates a stabilisation of the operating environment, which was severely impacted by the lockdowns to contain the pandemic."

As per a statement, the expectations of a rebound in India's real GDP growth to 10.8 per cent in fiscal year ending March 31, 2022 after a sharp contraction in fiscal 2021, further underpins the potential for improving growth in power demand and a more stable picture for the sector.

"We do not expect any further material deterioration in the cash conversion cycle for the power companies from current levels, which also supports the change in outlook."

"Furthermore, we expect that our rated issuers can absorb a degree of increased delays in payments from their consumers."

The first 10 months of fiscal 2021, saw power generation growth decline to 2.9 per cent on a year-on-year basis.

"Renewable energy generation (excluding hydropower) reported 4.3 per cent year-on-year growth for the same period."

"Wind generation was weak and will adversely affect those power companies with a high volume of wind generation in their portfolios - namely ReNew Power Private and Greenko Energy Holdings."