Green Stocks May 28: Stocks In Consolidation Mode

Consolidation mode for what, you may ask? A breakout, or a collapse? We believe past performance has pretty much ruled out the possibility of the latter, leaving investors hopeful of solid returns from the green pack at some stage this year. Today, it was the green energy developers that had a good day, with all three of Adani reem Acme Solar and NTPC Green rising above the median level. An early monsoon might temper enthusiasm somewhat for the power sector, as it dampens demand for cooling, which would explain the weakness seen in diversified energy firms like NTPC and Tata Power. However, that should be a single quarter blip, as the longer-term prognosis remains high in terms of 5-6% growth in energy demand, which would augur well for green energy as well.

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The 'zero' price seen for green energy at the Indian Energy Exchange last week might also have given many some pause for thought, but keep in mind that over 90-95% of renewable energy offtake is tied up in PPAs, so the exchange processes are hardly indicative of financial pointers. In fact, the low process is also a temporary phenomenon, caused by the same early onset monsoon that has dampened broader demand.

What it has done is put the focus back on creating energy storage to absorb power generation during solar hours, besides other demand-side initiatives that will even put demand. Something that the government should be alive to do as well.

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