Green Stocks Jan 6: Green Stocks Roll Over as Broader Market Slumps

In possibly one of the toughest market days in the past 12 months, all green energy stocks in our basket faced pressure today, with most coming out badly from the selling spree. With a majority belonging to the small-cap and mid-cap space, which was particularly hard hit, the damage is all too visible. And so is the pressure of holding on to elevated valuations.

The question for investors as always is, what has changed? Optimists would argue that not much has, and be it order books, tender pipeline, or future demand, these firms are as well placed as they were a month back. Contrarians on the other hand will point to the risk of action from a Trump presidency (clampdown on imports from India), the risk of price pressures from China for raw material inputs, or even the pressure from regulators in India, as saw recently in the case of SEBI’s first storage tender where CERC refused to adopt the winning tariff. While the CERC cited some good reasons, the fact remains that India has some way to go to ease the process of renewable energy additions, from the proposal to the commissioning stage. In a weak market, all these issues, be it land, regulators, pricing or supply disruptions can become a handy tool to beat down the process with.

And then there is the real risk of a large supply of green energy firms seeking a public market presence as well. With just about two weeks before the first results start coming in, believers would be hoping that the market doesn’t correct so far as to make a significant price recovery that much more difficult. Failure on performance will have a wide-ranging impact on more than the erring firm.