Investment Outlook for the Energy Sector

One of the most effective diversification strategies for investors is to choose stocks from different sectors of the economy. While some sectors like information technology, financial services and consumer discretionary goods have consistently held the focus of investors, the energy sector is rapidly gaining investor interest across the country.

If you are eager to tap into the potential growth value that this sector holds, it’s pivotal to understand the newest developments in this market segment. This information, coupled with knowledge of the top stocks in focus, can help you make informed investment decisions in the energy sector in 2024.

To help investors identify the top stocks in any given sector, Samco Securities has integrated an ingenious feature in the Samco trading app — namely stock ratings. Let’s take a closer look at the investment prospects that the sector presents in the new year and how Samco stock ratings can help you make smart investments.

Rising Investments in the Energy Sector

While the infrastructure sector may have been prominently considered for massive investments in the earlier union budgets, the energy sector was highlighted in the interim budget in 2024. Addressing the audience during the India Energy Week (IEW) earlier in February, Prime Minister Narendra Modi reiterated the importance of the energy sector as India races ahead to become the 3rd largest economy in the world.

With the country’s energy demand expected to double by 2045, the time is right for additional investments in this pivotal sector. In the next 5 to 6 years, India’s energy sector is expected to receive investments worth $67 billion.

Growing Focus on Renewable Energy

A vast majority of the investments earmarked for the energy sector are expected to be utilised specifically for the development of renewable energy sources. Across the world, sustainability is now echoing as the new mantra towards a more environment-friendly future. India is not far behind in the race to achieve carbon neutrality, and the renewable energy sector is pivotal to this goal.

A recent EY-CII report pegs the expected investments in this sector at $250 billion. These investments are expected to accelerate the transition from conventional fossil fuel-based energy sources to sustainable green energy sources like solar, wind and hydroelectric power.

In January last year, the Union Cabinet gave the go-ahead for the National Green Hydrogen Mission, which has a budget of over ₹19,000 crores. In July 2023, the Solar Energy Corporation of India (SECI) received bids for incentives to produce 4.5 lakh tonnes of green hydrogen annually. In addition to these developments in the renewable energy sector, wind energy is also taking centre stage, with a particular focus on Suzlon Energy.

Renewable Energy Stock in Focus: Decoding Suzlon Energy Share Value

With its origins tracing back to 1995 in India, Suzlon Energy Limited is a leader in the global renewable energy sector. Founded by Tulsi Tanti, the company began its journey with a vision to address the energy security and environmental challenges prevailing at the time. In the years since then, Suzlon Energy has established itself as a key player in the wind energy industry. Today, the company designs, develops and maintains wind turbine generators.

With the growing focus on sustainability, Suzlon Energy’s share value has been on investors’ radar for a few years now. While it may now be one of the most speculative penny stocks in the market, Suzlon Energy’s share value wasn’t always in the single and double digits. Before its massive fall in 2008, the company’s share price peaked at over ₹400 that year. However, the financial crisis of 2008 dealt a significant blow to the company’s business from the European and American markets, resulting in losses of over 300%.

Along with its profits, Suzlon Energy’s share value also dipped rapidly to ₹50 and then much lower, making it a penny stock — a status that the company retains to this day. Simultaneously, the company was also burdened with mounting debts that it found increasingly hard to service. Despite weak recoveries in the intermittent years, Suzlon Energy’s share value did not make a breakthrough from 2008 to early 2023.

In recent years, the renewable energy leader has succeeded in shrinking its debt book. Long-term debt, in particular, fell from ₹6,027 crore in FY21 to ₹5,592 in FY22 and dipped to ₹1,517 in FY23. This rapid debt reduction coupled with India’s growing focus on renewable energy has positively impacted Suzlon Energy’s share value.

Investors now appear to view the stock with cautious optimism because of the multi-bagger returns it delivered over the past few years. In the six-month period from June to December 2023, Suzlon Energy’s share value rose by over 270%. Looking back further, the company’s stock has risen by over 500% in the last two years and by over 1,100% in the last three.

Other Top Renewable Energy Stocks to Watch in 2024

In addition to Suzlon Energy’s share value, investors interested in India’s energy sector also have other stocks on their watchlist. If you’re interested in diversifying your portfolio to include stocks from the energy sector this year, here are some of the top companies that hold investors’ interest.

• SG Mart

Previously known as Kintech Renewables Limited, SG Mart Limited focuses on power generation using renewable energy sources such as wind and solar power. The company has shown significant growth in recent years and its stock price has risen by over 5,800% since November 2021.

• Tata Power

Tata Power, a cornerstone of the Tata Group, is India’s largest integrated power company. The renewable energy leader is at the forefront of India’s energy transition movement, with a diverse portfolio that includes solar and wind power generation. The company’s most recent share price rally came after the interim budget 2024 discussed the rooftop solar scheme.

• Indian Renewable Energy Dev Agency Ltd (IREDA)

IREDA is a government-owned agency instrumental in advancing renewable energy development in India. Its efforts are key to achieving India’s ambitious renewable energy targets and promoting the growth of green energy infrastructure. Like most renewable energy stocks, IREDA also rose by 5% in the aftermath of the interim budget 2024.

• Websol Energy

Websol Energy is a prominent player in the solar energy sector that specialises in the manufacture and sale of high-efficiency photovoltaic cells. The company is dedicated to harnessing the power of the sun to provide sustainable and eco-friendly energy solutions in India. In the days following the interim budget, Websol led the renewable energy stock rally.

Make Informed Stock Selections with Stock Ratings from Samco

While it may seem tempting to invest in select stocks based on the market’s fervour alone, you should not discount the importance of carrying out further research and forming your own opinion on the stocks you’re eyeing. Samco Securities can help with this — with the unique stock rating feature that’s integrated into the Samco trading app.

By analysing over 20 million data points, Samco Stock Ratings assigns 1 to 5 stars for each stock based on 50+ technical and fundamental parameters. This is coupled with detailed research observations that outline the pros and cons of each company. Together, these insights help you make informed decisions about investing in the energy sector in 2024.