As the country moves towards its net-zero targets, renewable energy stocks have emerged as one of the most promising investment themes in the Indian stock market. With the rise of solar parks, expansion of wind corridors, and large policy initiatives by the government, the interest of investors has increased in renewable energy stocks.
In this blog, we are going to discuss what drives growth in renewable energy stocks: government policy or project wins?
Government policy
Long-term structural support of the renewable energy stocks comes from government policies. In the absence of a supportive framework, even the most well-thought-out projects may face difficulties in execution or in securing financing.
Fiscal incentives
The financial incentives, such as accelerated depreciation, Renewable Purchase Obligations (RPO), and waiver of interstate transmission charges, have made the clean energy projects lucrative. These have made financing costs cheaper and strengthened the internal rate of return (IRR) for new ventures, which is a key stock driver for listed players such as Adani Green, Tata Power, and NTPC Renewable Energy.
Government objectives and reforms
During the last decade, India’s renewable energy capacity has expanded from 35 GW in 2014 to around 200 GW in 2025 due to favourable government reforms. Policies such as the National Green Hydrogen Mission, PM-KUSUM, and Green Energy Corridor Phase III have made investment pipelines scalable, improved power evacuation, and created incentives for private participation.
Policy as a market signal
Reform announcements tend to be a sign of the influx of institutional and foreign investors. For example, the government’s investment blueprint in the renewable infrastructure of Rs. 2.4 lakh crore, sparked off a good re-rating across the sector, even for execution-driven companies like NTPC.
Project wins
While policy sets the narrative, project wins transform that narrative into financial performance. Investors value execution, order book expansion, and consistent visibility of cash flows, all of which are direct results of project wins.
Operational efficiency and margins
Investors put great emphasis on the efficiency of project wins, translating into operational profits. The ability to effectively manage debt, have good EBITDA margins, and Return on Equity (ROE) is the outcome of timely execution and cost management.
Companies like Tata Power with integrated solar cell manufacturing and EPC capabilities highlight how execution synergies can improve both margin expansion as well as stock performance.
Earnings visibility and order book growth
Companies that receive regular orders tend to have higher values because they can show they handle projects well.
Suzlon share price increased after the company won a 170MW wind energy order across the country. This shows how project success affects how the market feels about the company.
Diversification across energy segments
Investors’ confidence in a particular stock is also increased with project wins in new trends in the energy space, including hybrid (solar + wind) parks, storage systems, and green hydrogen. These diversifications help in reducing the dependence of revenue of companies on a specific revenue stream and help companies to earn more while making them less vulnerable to the cyclical changes in one segment.
The reality is not “policy versus projects,” but “policy enabling projects.” Government initiatives are direction; projects are a demonstration of capability. For example, the Green Hydrogen Policy led to a bullish market sentiment, but market rallies were only observed when the top developers were able to get actual projects landed under this policy, and execution is the key to valuation.
To wrap up
India’s renewable energy stocks are driven by a blend of strong government policy and successful project execution. While policy sets the stage for market expansion and investor confidence, it is concrete project victories and operational performance that provide high returns and increase stock valuations.
