Green Stocks June 6- Surprise Rate Cut Leaves Some Stocks Behind

On a day when the RBI as expected cut rates, it was the quantum of the rate cut that surprised quite a few people in the markets, the 50 bps cut along with the CRR cut indicating the quite aggressive mindset to power growth. While whether it works or not will be known only later, the good thing is that firms now have a clear window of stability to plan capex, as the central bank has also shifted its stance to neutral on future action. Basically indicating little to no movement for the next six months or more.

That should be good news for our green energy firms as well, especially the developers and EPC firms, who need significant funding and working capital support respectively for operations.

Thus, it can be considered surprising that save for a large cap firm like Tata Power with an operational scale that will always benefit from lower rates, the rest of the pack behaved as it did. NTPC Green, Acme Solar, and SJVN all moved little, with only the two EPC firms, KPI Green and Shakti Pumps making a decisive move. The latter was especially interesting as it has been languishing at previous levels for a significant period, and the latest move seems to have been the pick-me-up it needed. KPI Green of course has been steadily improving over the past two weeks, and the rate cut will add real heft to its margins possibly.

Interestingly, it is looking increasingly certain that Q1, or the April-June quarter will be a very strong one for the sector broadly, as firms rush to commission projects before June 30 for the fill 100% exemption on ISTS charges. With no word yet from the government on any extension as expected, expect to see regular headlines for the rest of this month on project commissions in both solar and wind from firms.

So with the strongest possible stimulus behind the markets, the markets have managed a 1% rise or thereabouts. Does that mean a return to growth again? We believe there remain too many uncertainties, not least of which are the India-US trade talks, the state of the monsoons, and of course, the developing issue of Chinese restrictions on specific rare earth exports that could still trip up the markets, and is possibly very understated for now. Two or three weeks from now, complacency of any sort could come back to bite investors hard. For this reason, we would still be very cautious about placing long-term funds into the market yet.

List Of Green Stocks