Green Stocks July 30- Stocks Continue To Drift Seeking Direction

It was a meandering day at the markets for our green pack, as most stocks that had jumped yesterday took a pause, and actually slipped. Other than the two solar manufacturers, which rose on positive news of project commissionings and consistent demand yet. The news of further US action should be public tomorrow, which might explain the lack of any direction for the broader markets as well, with a tendency towards weakness.

One suspects bets are being placed on only the most domestic focused themes for now, and that means solar pump manufacturers might see interest before the rest of the solar pack does. In any case, Oswal Pumps has held up quite well since its IPO, and it might be time for the major player in the segment, Shakti Pumps, to make a move as well. Shakti Pumps will declare Q1 results on Friday, August 1. 

So, what would be the impact on stocks in case of higher-than-expected tariffs on Indian exports? While the actual direct impact on green stocks should be limited, with just solar manufacturers directly impacted, one can't discount the broader impact on sentiment. A fall in many other sectors might have a definite impact on green stocks as well, as fears rise over future commitments to green energy if margins shrink, and the US pushes back globally against the green transition as well. That would be the worst-case scenario, however. 

A more normal scenario would probably be a compromise as usual, which is certainly in the interest of the largest player in the game, China. With a protracted dispute with China off the table due to its huge impact on the US consumption basket, chances are that China will see it in its interest to ensure that the rest of the world does not get turned off from green energy on security concerns. Having made its point, the Chinese should and probably will look to normalise disruptions they have caused quickly in areas like rare earth magnet exports and more, as they seek to protect the vast manufacturing ecosystem they have built. 

What they will probably seek to do is take more harsher measures internally to tamp down on overcapacity and ensure that the flag bearers of the new industrial revolution there, namely, the green energy industries, do their work at a profit, and not losses as they threaten to do lately.

For Indian firms, that simply means a need to pick their markets for exports well, hope for a tariff advantage over Chinese competition, or focus harder on faster expansion of the domestic markets. We believe the logic of the last option remains the strongest, so we look forward to significant measures in the power sector to free up firms to move faster.

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