In a client note on Monday, analysts at JPMorgan said the utilities sector weakness has likely gone too far. The firm has taken this view regardless of the direction of bond yields from here.
"If yields fall, as is our core view, that should help the sector," wrote analysts. "In the opposite scenario, the overall market could weaken, and the typical low beta of Utilities could come to the fore."
The bank said its clients are concerned with the perceived elevated leverage of the sector, but analysts think this is misplaced as leverage is higher than in the past, but cash flow generation is strong and Utilities stocks are solidly investment grade.
"Power prices should not go lower from here. Industrial demand is starting to come back. Utilities have been derated to pre-Ukraine levels, but power prices are still higher than pre-Ukraine," said the bank.
Analysts also noted that "earnings relative of Utilities are continuing to move up, making the sector very attractive at present."