What's in a story? Sometimes, Rs 4,500 crore

We found a stock. A real gem. As of February 2024, it was up 72x in three years. It is basically the kind of green energy story that fund managers say "you'll wish you'd bought at Rs 100." Its market cap had soared past Rs 4,000 crore. Profits went up 20x over FY21-24, powered by robust order inflows in the core solar EPC business. The growth narrative was irresistible. It was the right sector, at the right time, with the right tailwinds—and a valuation that only made sense if you believed in magic.

And we're going to tell you exactly what this stock is. Just not yet. Throughout this article, I have planted clues about this stock. It can be in the turn of a phrase, hidden in bold letters, peeping at you from the edge of your vision, or rather, staring at you in the face while you look right through it. You need to work a little for it, because to understand why this stock soared, you need to understand something deeper: It's not just the stock you want, it's the story.

Economist Robert Shiller writes, "Economic behaviour is driven by contagious narratives." And in India, we have no shortage of them—"green gold rush," "sunshine sector," "clean energy revolution." The twist appears when you apply Daniel Kahneman's theory to Robert Shiller. Daniel Kahneman, the world-famous Israeli-American psychologist and economist, presented two simple systems—System 1 and System 2—in his book, 'Thinking Fast and Slow'. System 1 is the fast, emotional, instinctive part of our brain. System 1 loves a good rally. System 1 believes in momentum. System 1 loves a good story.

The real question then isn't what this stock we found is. It's why you already want to own it. Let's try to figure it out.

The psychological power of narratives

Most of us want to believe we're rational thinkers, that we're driven by data and discipline. But when we hear phrases like "India's Tesla supplier," "the only listed player in solar glass," or "government-backed monopoly in a sunrise sector," something just shifts. Our pulse quickens. Our mind fills in the blanks. We don't need details—we already feel the opportunity.

That's the thing about narratives. They don't just inform, they entice.

A good story entices by simplifying complexity. Our brains are constantly looking for shortcuts. As psychologist Susan Fiske explains through schema theory, we use mental shortcuts and connections to make sense of the world. We hear "animal + meow", we immediately think: cat. We hear "green + tall", we immediately think: tree. We hear "solar + capacity expansion + Gujarat," we immediately think: Ah, the next Adani Green. Our brain constantly plays Taboo with the information it receives. Never mind that the numbers don't quite match. The story feels familiar, so we let it in, no questions asked.

After the shortcut comes social proof, a term made famous by Robert Cialdini. When everyone—from fund managers on TV to friends on WhatsApp—is talking about the same stock, it starts to feel like a sure thing. We mistake popularity for validation. If others are buying, how wrong can we be? Never mind that the term 'herd mentality' is not often used in a positive light.

Then, once the emotional hook is in, we do exactly what behavioural economist Dan Ariely warns us about—we stop thinking critically and start defending our decisions. "Sure, the company isn't profitable yet, but look at the tailwinds!" "Yes, the P/E is high, but growth stocks always look expensive early on." This is called predictable irrationality: we act first, then rationalise later.

So, being enticed by a story is not related to a lack of intelligence, it's human nature. It's also human nature to work on our mistakes. If we can recognise the script, we can stop letting it write our portfolios.

Are you getting closer to knowing what the hidden stock is? You'll get there. Now, let's talk about what happens when stories don't just entice, they mislead.

When stories mislead

When a story starts to crack, it's rarely quiet.

Think of Zomato's 2021 IPO. The story was delicious: India's first new-age tech listing, a pure play on Gen Z consumption, a bet on "eating habits becoming digital." Investors couldn't get enough. It listed at Rs 76, shot up to Rs 169, and was hailed as 'India's Amazon moment'. But then Daniel Kahneman's System 2 made an appearance—the slower, more thoughtful, more careful, more responsible sibling to System 1. System 2 noticed a Rs 1,000 plus crore quarterly loss and a valuation of Rs 1.2 lakh crore on just Rs 2,100 crore in revenues. Basically, the company was reporting a loss every quarter and yet investors had given it a very high valuation based on pure belief.

Even PSU turnarounds have their own genre of fiction. Remember when IDBI Bank was reborn as a "strategic asset," and LIC stepped in? The stock rallied over 100 per cent in a year. But the NPAs didn't disappear, provisioning stayed high, and profitability limped along. Eventually, reality caught up. And as it always does, it asked for receipts.

The reasoning behind why we stick to these stories, even when the facts start to unravel, is just as important. Cognitive dissonance, as Elliot Aronson famously described it, is that mental discomfort we feel when we're wrong, but would rather not admit it or face it due to our pre-existing beliefs. We would rather be rid of the trigger than change something in ourselves. So, we double down. We tell ourselves, "It's a long-term game," or "The market doesn't get it yet."

Add confirmation bias to the mix, and it's a full house. We start actively seeking headlines that support our thesis—"EV sector to grow 10x!"—and filtering out anything that might contradict it—like, say, a 92 per cent drop in quarterly profits.

If any of this feels familiar, you're not alone. Even seasoned investors fall for a good story now and then. The difference is learning to press pause, asking better questions, and most importantly, knowing when to stop trying to be right and start choosing to be disciplined.

Now, what if I told you that's exactly what we did with the mystery stock?

We audited the story. And that's what we're going to show you next.

How to audit a good story

Rely on both systems simultaneously. Use System 1 to find what excites you, what makes you want to put your money into it and then use System 2 to figure out whether you're right or not. At Value Research, we've developed a mindset to audit narratives—not just a method. Here's how you can also do it.

Step 1: Name the narrative

Every hot stock has a story it's selling. Is it "India's EV revolution"? "Make in India success"? "Next digital disruptor"? Give it a name. If you can't name it, you can't test it.

Step 2: Separate hype from history

Do you know what the company has actually done? Not what it's planning—what has the company actually managed to execute? Planning is exciting and easy but sustainable delivery is not.

Step 3: Watch the 'but'

Listen closely to how the stock is being pitched. "It's not profitable yet, but..." "It's expensive now, but..." These "buts" are usually where reality is hiding. Pay attention to what's being brushed aside in the name of potential. To do this, you must know more about the company. Go through their website, develop a feel for the work they do.

Step 4: Ask yourself—Would you buy this if no one else was?

Would you be excited about this business if nobody on social media was talking about it? If no one promised "10x returns"? If the price didn't double last month?

Because that's when you move from being part of the herd to thinking for yourself.

Now, about the stock that we promised, the name of the company is Gensol Engineering. Remember the 72x ride we mentioned earlier? Well, it's now down nearly 90 per cent (as of April 9, 2025) from its February 2024 high!

The signs were there: Gensol's rapid debt build-up, unrelated diversification, and misleading revenue guidance pointed to deeper structural weaknesses behind its growth story. Add to that the allegations of stock manipulation and frequent promoter stake sales, and the red flags became impossible to ignore for any vigilant investor.

Final takeaway

Stories move markets, but understanding sustains wealth. It's okay to be drawn to a narrative—just don't invest in it blindfolded. The story should be able to invite you in, but only facts should dictate if you stay.

Also read: The wallet is where the worry is

This article was originally published on April 10, 2025.