Has the mega block deal in Adani firms brought back the bulls in the market?

Adani shares have been under pressure since January 24 following the Hindenburg report, which accused the group of stock manipulation, fraud and tax evasion. While Adani is under investigation regarding these allegations, however, the mega block deal has turned the tide on Adani’s shares for now.

Last week, GQG Partners, one of the leading US-based global equity investment boutiques, bought equity shares of four Adani companies at a premium. 15,446 crore in a series of secondary block deals. Other foreign investors have also invested in Adani’s shares. These four companies are Adani Enterprises, Adani Transmission, Adani Total Gas and Adani Ports.

Last week on Friday, on the BSE, the stock of Adani Enterprises was up by nearly 17% and Adani Ports by nearly 10%. While stocks like Adani Transmission, Adani Power, Adani Wilmar, Adani Green Energy and Adani Total Gas hit upper circuit of 5%. The share price of NDTV also went up by around 5%. Meanwhile, ACC climbed over 5% and Ambuja Cements climbed nearly 6%.

after a strong rally in Adani Stocks, the overall markets also witnessed the best single-day performance for the current year. On Friday, the Sensex closed at 59,808.97, up 899.62 points or 1.53%. While the Nifty 50 closed at 17,594.35, up 272.45 points or 1.57%. During the trading session, both the benchmarks registered gains of around 2% each.

Overall, the Sensex has gained 1.3% and the Nifty 50 about 0.9% between February 27 and March 3. Bank Nifty also jumped 2.3% or 944.25 points. PSU banks saw maximum buying after block deals in Adani firms. smelly PSU Bank It rose over 326 points or about 8.95% on the week.

Between February 27 and March 3, Adani Enterprises stock gained nearly 44%, Adani Ports gained over 20%, Adani Green Energy gained over 21.5%, Adani Total Gas Adani Power jumped over 9%, Adani Power gained nearly 18%, Adani Wilmar gained nearly 17% and Adani Transmission gained nearly 10%. In the cement business, Ambuja Cements gained 14% and ACC by around 10%. In media business, NDTV jumped at least 18.5% on BSE.

Naveen Kulkarni, Chief Investment Officer, Axis Securities, said after Friday’s strong gains last week, “After the investment of around USD 2 billion by GQG Partners in Adani Group, the stock market has taken a breather, creating a kind of the floor is made for Adani group stocks because a marquee investor has invested in them at these prices.”

Kulkarni is of the view that “the promoters can use the funds raised through the transaction to infuse capital into any group company that requires funds through warrants, rights issue or any other means.” Is.”

According to him, this development will also lead to better sentiment for the market and increase in retail participation, which was down due to uncertainty.

He further added, “The investment also gives confidence that Adani Group shares have stabilized and can raise capital if they so desire at current prices.”

They are of the view that this growth in Adani firms should support banks, especially PSU banks, which were hit hard earlier despite good performance due to Adani group’s risk aversion.

Some banks declared their exposure to Adani companies after the Hindenburg report, most of them from PSU banks. These banks were also under pressure following allegations of short sellers against the Adani group.

In February, SBI said that they have a risk 27,000 crores in Adani Group which is less than 1% of their total loan book. While Bank of Baroda had disclosed that their exposure to Adani does not figure in the top 10 of exposures, and also said that around 30% of the bank’s exposure is backed by joint ventures with PSU companies. Further, PNB had mentioned that it has approx. 7,000 crore exposure to Adani, of which 6,300 crore was invested. In addition, PNB has Rs 2,500 crore exposure in the airport business of the group.

While Axis Bank said that its exposure to the Adani group stood at 0.94% of its net advances. Further, the bank disclosed that the fund-based exposure stood at 0.29% and the non-fund-based outstanding loan exposure at 0.58%.

Also, IndusInd Bank’s exposure to Adani was around 0.49% of its total book. In addition, LIC, the largest life insurer in India, also has some exposure to Adani, but it accounts for less than 1% of its total book. LIC said, it is done 35,917 crore under equity and debt at the end of December 2022.

Even DBS Group Holdings disclosed that they have investments in Adani firms to the extent of $1.3 billion ($976 million) — of which — $1 billion is from cement business acquisition while $300 million in other Adani firms Is. This showed that they are not worried about this risk in Gautam Adani’s firm.

Major rating agencies such as Fitch and Moody’s had earlier said in February that the exposure of Indian banks to the crisis-hit Adani is not high enough to pose a substantial risk to the credit profile of these lenders. RBI deputy governor Mahesh Kumar Jain also said in a press conference during the month that the exposure of domestic banks to Adani is not significant.

Has the mega block deal in Adani firms brought back the bulls in the market?

Kulkarni said, “We expect Market For a short-term bounce back due to increased optimism, but still concerned about global interest rates and higher valuations, which could lead to increased medium-term volatility.”

“We advise investors to maintain investment discipline and invest regularly in equities for long-term wealth creation, especially when markets are volatile in the short to medium term,” he added.

Last week, Nirav Karkera, head of research at Fisdom, told Mint that the recent rally in Adani shares needs to be sustained before one sees it entering a new range, the beginning of a new rally, or At least easily recognizable as recognizable. a dead cat pounce.

Karkera added, “Stocks are still highly sensitive to reported developments. Some counters are seeing some bounce on account of block buying, but this is really indicative of little more than the firm belief of the buying entity in the company’s growth prospects.” Can’t be. At this time.”

GQG Partners Which made the biggest purchase through the block deal, it said, believes in Adani’s long-term growth prospects.

According to Rajeev Jain, President and CIO of GQG Partners, a key reason behind investing in Adani firms would be that these companies “own and operate some of the largest and most important infrastructure assets across India and across the world.”

Rajeev said, “We believe the long-term growth potential for these companies is substantial, and we are pleased to invest in companies that will help advance India’s economy and energy infrastructure, including their energy efficiency over the long term. change is included.

Disclaimer: The views and recommendations given above are of individual analysts or broking companies and not of Mint. We advise investors to do due diligence with certified experts before making any investment decision.