Renewable stocks are likely to give up gains again after having recovered since March, but financially strong companies such as SMA Solar and SolarWorld will be hit less harder than others, according to fund firm Swisscanto.

It is possible that we will see a further downward move in the renewable sector, said Pascal Schuler, manager of the company's Equity Fund Climate Invest B, with a volume of 189.5 million Swiss francs ($178.3 million).

The solar industry in particular has been hit by a toxic mixture of tighter credit conditions, a lack of project funding and overcapacities, driving down prices for silicon, wafer but particularly modules and cells.

But solar stocks have seen a massive recovery, with the FTSE50 clean tech index of the world's biggest renewable firms up 60.5 percent since hitting a 2009 low on March 9.

In the long-term it is important that you make an investment in the solid companies that do suffer in a downturn, but less than their weaker peers, Schuler said, citing companies with strong balance sheets such as SMA Solar, Phoenix Solar and SolarWorld, the fund's biggest position.

Schuler's fund has gained 46 percent in the same period, and is up 14.1 percent year to date, outperforming its benchmark index -- the MSCI world equity index, up 39.6 percent and 11.3 percent, respectively.

Despite the surge, analysts have pointed to the fact that the fundamentals in the industry have not changed significantly.

The (renewables) sector strongly relies on external funding and tighter credit conditions have made it more difficult to secure it, Schuler said.

In addition, small and mid-cap stocks -- of which renewables are a part -- tend to lose significantly in bear markets, while rising above average in bull markets, making them vulnerable to any further market deterioration.

However, in the mid to long term, renewable energy can't be ignored, Schuler said, adding that the European Union aims to produce 20 percent of its total energy from renewable sources by 2020.

The industry will remain volatile, but the political commitment gives some assurance.

($1=1.063 Swiss Francs)

(Reporting by Christoph Steitz; editing by Mike Nesbit)