Green Stocks Feb 10: No Respite On Another Tough Day

With small caps and mid-caps coming in for some special selling, most of our green caps, which fall into either of the categories, suffered today. As we have said earlier, for some time now, the fate of these stocks is inextricably linked to the broader markets, making a revival very tough without a broader recovery. Gensol was an exception today, eking out some gains on the back of a significant order win it had announced late on Friday. For the rest, it was only a matter of how much they would lose, with some like Acme Solar ceding significant ground at over 8%, Adani Green at over 3.5%, and even KPI Green, which enjoyed a mini-recovery last week, giving up all the gains of one of those days with a 5% drop today.

The growing clamor from 'experts' that the biggest lies in small caps have played its part no doubt, affecting these stocks disproportionately. So what is the right valuation metric for small-caps or mid-caps? many would argue that the premium over large caps that these stocks have enjoyed for the past 2 years needs to go, which could mean another drop of 10% over the next quarter, assuming they maintain their growth rate to a large extent. This is mainly because of the higher risk of volatility in earnings in these stocks, despite positives like strong earnings previously or even a large order book, as almost all our green stocks boast of today. A rerating, if it follows would be very selective, considering how many retail investors who entered late in 2024 have burnt their fingers.

The big surprise of course would be a better-than-expected engagement between Prime Minister Modi and Donald Trump when they meet on Feb 13, which has the potential to make a significant change to the overall mood of the market as well.