S&P cuts credit outlook of some Adani group firms

While S&P Global Ratings revised the rating outlook of Adani Electricity and Adani Ports to negative from stable, Moody’s said the adverse development could impact the group’s ability to raise capital to meet committed capex or refinance debt over the next 1-2 years. is likely to decrease. , and Fitch Ratings said there is no immediate impact on the rating of rated Adani entities and their securities following the short-seller report alleging misconduct and no significant change to its forecasted cash flows is expected.

S&P said in a statement that there is a risk that investor concerns about the group’s governance and disclosures, which are currently included in the ratings or that new scrutiny and negative market sentiment could increase the cost of capital and Access to money may be less for them. two companies. It affirmed the issuer and issued ratings on the entities because the fundamentals of their business are intact, short-term liquidity is adequate, and debt maturities over the next 12 months are manageable.

“The negative outlook reflects downside risks to the credit profiles of Adani Ports and Adani Electricity Mumbai due to governance risks and funding challenges for the larger Adani Group,” S&P said.

Meanwhile, easing selling pressure on Adani Group shares led to a correction in the broader markets on Friday and ended with over 1% gains.

Deepak Jasani, head of retail research at HDFC Securities, said after falling heavily by 35% in morning trade, Adani Enterprises ended in the green after rating agencies showed confidence in Adani’s ability to repay loans. Analysts also linked the rise in Adani shares to positive comments on the group from French energy major Total.

Investor sentiment was weighed down in the morning by the flow of news about Adani Enterprises shares being removed from the Dow Jones Sustainability Index. Adani Enterprises shares closed at the lowest level 1,017.45 before rebounding to end the day 1,531.

Adani Ports, another Adani group stock that is part of the Nifty index, rose 5.61%. Besides, two more group cement stocks, ACC Ltd and Ambuja Cements, climbed 4-5.56%, supporting the markets.

However, selling pressure continued on other Adani group firms, with most of them halted trading due to tripping of circuit breakers. Overall, the total market capitalization of the group declined by an additional 34,000 crore, taking the total market cap loss to approx. 9.10 trillion in charges against the Adani group since the Hindenburg report.

The sharp jump in Adani Enterprises was visible in active futures contracts with a 23% decline in active futures contracts following comments from rating agency Fitch and major PSU banks such as State Bank of India and Bank of Baroda. Open positions here refer to the outstanding short positions.

This means that speculators were squeezed on this counter, as a result of which they were covering their bearish bets at higher levels, due to which the stock rallied 35% from the intraday low. Adani Enterprises reported trading volumes 5,946 crore, about one-tenth of the total exchange volume 63,056.34 crores. After this comes the number of Adani Ports 4,013 crores. Overall, these stocks account for 16% of the total exchange volume.

Adani Ports also saw shorts get squeezed by 21% intraday with a price range of 21%.

In a separate move, NSE reduced the price band of Adani Total Gas to 5% from 10%, with the stock down 58% over the last week.

The broader market was also supported by favorable global cues and key events like rate hikes by the US Fed, Bank of England and European Central Bank. Sensex rose 1.52% and Nifty 1.38%.

Vinod Nair, head of research at Geojit Financial Services, said markets are bullish on the belief that we are in the last leg of the rate hike cycle as indicated by the Fed statement. Besides, Adani Group shares improved after a confident statement from French energy major Total Energies, which boosted market sentiment.

Analysts believe that Adani Group shares may remain volatile.

Foreign portfolio investors remained net sellers in the markets. net already sold 27,407 crore worth of equity in the year to February 2; were net sellers of 932.44 crore shares on Friday.

Analysts said India’s overvaluation relative to other emerging markets is the root cause of its weak performance, mainly driven by continued selling by FPIs, and the ‘Adani stock crisis’ has further contributed to the negative sentiments.

Joseph Thomas, head of research at Emkay Wealth Management, said the market would expect further indications of a possible softening in the RBI’s policy stance next week and also with regard to the policy with regard to liquidity management. Although some volatility is expected on both sides in the coming weeks, Thomas said, the market will eventually settle at levels dictated by fundamentals.