Do it yourself

One sector that is inflicting extreme pain to the investors in Indian equity is ‘power'. The stock prices of almost all companies present in the power sector value chain have corrected 25-50% from their 2024 high levels. The correction in stock prices has been particularly pronounced after the declaration of ‘energy emergency’ by the president of the United States. In my view there are three factors responsible for this correction, viz., technical, fundamental and sentimental. Technical: The stocks of companies in the power sector value chain had seen a sharp runup in the past three years. Reasons for enhanced investor’s interest in the sector was underperformance of a few years showing bottom formation on charts; exciting announcements by the government relating to the sector; state electricity board reforms to reduce transmission & distribution losses; power demand growth picking up; and electric mobility and climate control commitment of several governments etc. The enh...

One small cap solar PV module manufacturer stock has yielded a return of 100x in less than two years, since its IPO listing in October 2022. There are many other “clean energy” stocks which have witnessed 5x to 20x rise in their stock prices. In most of these cases, the improvement in business and financial fundamentals of the concerned company is not commensurate with the rise in the stock price. Sustainability has emerged as one of the major investment themes in the post Covid-19 period. Businesses engaged in the activities related to renewable energy and electric mobility have received substantial massive investments and have seen massive rise in capacity building. Nonetheless, the astronomical rise in the stock prices of companies engaged in basic manufacturing like solar PV cells, EV battery modules, electric scooters, etc., may not be sustainable. This reminds me of my favorite instance from the Hindu mythology. I have narrated this instance many times before. Let me do it ag...