Renewable Energy: Stocks of the Future

Update: This article was also published on the business and investing page of Reuters.

It was another day for the Nifty within the range. Volatility of the Nifty is now very low. Now the range is only 120 points wide between 4680 and 4800. We should see a breakout soon enough. A breakout out of this contracting rectangle should take the Nifty back within the broader range of 4620-4950. A move outside this broader range will give us a real movement. There is no use of making predictions about the direction of the breakout. The market will tell us which side it will break out towards. We shall position ourselves to buy in case of a breakout on the upper side.

Since the long term trend of the Nifty remains up, we should plan to buy on every dip. A dip is a rare occasion in a bull market. Luckily, we are getting these opportunities every third day now.

Yesterday, we had discussed that the fundamentals of the economy are still strong and that the markets have essentially crashed because of low liquidity, heavy speculation and problems in the USA and not because of any fundamental reasons of our country. And as the problems in the USA settle down, we should see some recovery in our markets too.

Today we shall discuss about the energy sector. Let’s start with oil. We know that oil is present only in limited quantity and there are only finite sources of oil available. There are sources which tell us that the production of oil has already peaked out or is likely to peak out in this decade. And also that for the last several years the world oil consumption has been more than the oil production and the demand is still growing. With growing demand (approximately at the rate of 1.4% per annum) and reduced production, we are eating into our reserves and according to the NATIONAL CENTER FOR POLICY ANALYSIS (NCPA) the oil available shall only last till the year 2056, but with better conservation and the use of substitutes we may actually scrape through to the year 2100.

To protect our future generations from going back into the stone age, we shall have to look for alternative sources of energy. A lot of countries are now taking steps to shift to alternative sources so that we could reduce the consumption of oil and make it last longer. Warren Buffett once said that If a business does well, the stock eventually follows. Alternative energy is one of those concepts which will continue to do well, at least in our lifetime. So, it may make sense to buy stocks which are into renewable energy like Suzlon (wind power), NTPC (thermal power), JP Hydro (Hydro and thermal power), Neyveli Lignites, Webel SL (Solar energy) etc. Buy them today and hold for long term. Your children could become crorepatis with these stocks some day.

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