Obscure stk’s 36x rise shows something’s wrong | Economic Times

MUMBAI: While many have scoffed at the valuations being commanded by online food aggregator Zomato given its lack of profit track record, the Indian stock market is riddled with even worse examples that may make the fence-sitters wonder if the ongoing bull market is getting out of hand.In the darkest alleys of Dalal Street, a different kind of bull market is unfolding that defies generally accepted logic or precedence. Here ability to corner market, low free-float and price momentum are drivers, not a story of growth or earnings prospects.Gita Renewable Energy, a BSE-listed entity, is one such story.Shares of the renewable energy company have risen 3,600 per cent in the past year aided by a puny free-float of 1.1 million shares and a 10,600 per cent surge in turnover. The stock has not dropped a paisa in 104 consecutive sessions and is on a streak of hitting its upper circuit limit in 64 straight sessions.Such has been the demand for the stock that it has seen a down day in only three out of the past 162 sessions.“This just shows that there are fly-by-night operators in the market taking advantage by creating stories that are in vogue,” said independent market expert Ambareesh Baliga.It is difficult to ascribe reasons to the monstrous rally seen by Gita Renewable over the past 12 months. Some would say the mere presence of the “renewable” word in the name has attracted investors given the market’s new found love for all things “green”.Gita Renewable has not reported annual profits for the past four consecutive years, while its net sales have remained stagnant during that period. To the company’s credit, it did manage to break its streak of reporting net losses for 10 straight quarters in the previous quarter.In the quarter ended March, Gita Renewable reported its first quarterly profits in several years aided by a surge in revenues. Some would say investors are betting on a turnaround story given the increasing focus of the government on renewable energy sources, a tailwind that could brighten the company’s prospects.Others would point to the large buying by corporate, Hindu Undivided Family offices and non-resident Indians on the counter since the end of the September quarter. Corporate bodies held more than 15 per cent stake in the company as of June 30; it was zero back in September 2020.Similarly, NRIs and HUFs held 1.1 per cent 0.3 per cent stake in the company respectively at the end of June quarter from zero holdings three quarters ago.Gita Renewable is one among many similar stories in India’s stock market that defy conventional logic and also epitomize the animal spirits that have percolated throughout the market since the crash of March 2020.“In a market like this where there is exuberance, people just look at the name and price action without thinking about what the company does or why,” Baliga said.