International Journal For Multidisciplinary Research

E-ISSN: 2582-2160   •   Impact Factor: 9.24

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Power Sector in India: An Application of Monte Carlo Simulation and Gordon Growth Model

Author(s) Dr. Akash Kumra, Ms. Sejal Maheshkumar Gohil
Country India
Abstract The power sector plays a very crucial role in the economic development of the country therefore the present paper attempts a quantitative framework for equity analysis and investment selection of the Indian power sector stocks, by integrating Multi-Criteria Decision-Making (MCDM), Monte Carlo Simulation (MCS), and the Gordon Growth Model (GGM).
The six selected companies namely NTPC, Power Grid, Tata Power, Adani Power, NLC India, and Torrent Power are examined using historical price data over two-year horizons (from 2023 to 2025). Geometric Brownian Motion is used to simulate 10,000 stochastic price paths per stock, generating probabilistic performance metrics including expected return, probability of price appreciation, and the Sharpe ratio. These outputs, combined with fundamental financial indicators, are integrated into a weighted MCDM composite ranking framework evaluated across multiple weighting scenarios to ensure robustness in stock selection. Top-ranked stocks are subsequently subjected to intrinsic valuation using the Gordon Growth Model, allowing for a systematic assessment of overvaluation or undervaluation relative to prevailing market prices. The findings indicate that the two-year horizon yields more stable and reliable investment signals, and that the combined MCS–MCDM–GGM framework offers a structured, replicable, and sector-adaptable approach to quantitative investment decision-making.
Keywords Multi Criteria Decision Making (MCDM), Monte Carlo Simulation and Gordon Growth Model.
Field Mathematics
Published In Volume 8, Issue 3, May-June 2026
Published On 2026-06-06
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E-ISSN 2582-2160
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CrossRef DOI prefix of IJFMR is 10.36948/ijfmr

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