Will Adani shares survive the bear market this week? FPO, Hindenburg case in focus

Last week, on Friday, most Adani The group’s shares hit their lower circuit, which meant that many sellers were present but no buyers.

Three stocks namely Adani Transmission, Adani Green Energy and Adani Total Gas closed at 20% lower circuit on January 27. Whereas Adani Power and Adani Wilmar also had difficulty in locking in 5-5% lower circuit. Besides this, Adani Ports also struggled towards the end of the day and fell over 16%.

Meanwhile, Adani’s flagship company, Adani Enterprises, which launched its FPO on Friday, closed down at least 20%. 2,762.15 on BSE at Rs.

Gautam Adani’s net worth improved drastically due to the massive crash in Adani’s shares. Asia’s richest man had a net worth of $92.7 billion as of January 29, ranking seventh on the Bloomberg Billionaires Index.

According to the index, Adani’s net worth declined by $20.8 billion in the latest. However, year-on-year Adani’s wealth has decreased by $ 27.9 billion.

Not just that, with the benchmark Sensex and Nifty 50 falling over 2% each on Friday, the sell-off in Adani’s shares also weighed on the broader market performance. By the end of the day, the Sensex ended at 59,330.90, down 874.16 points or 1.45%, while the Nifty 50 declined 287.60 points or 1.61% at 17,604.35.

Ajit Mishra, VP – Technical Research, Religare Broking said Adani Group shares were hit hard and banking sector faced maximum pressure. Participants were already facing challenges due to mixed global cues and caution ahead of the Union Budget and this downgrade has added to the worry.

In the week between January 23 and 27, Adani Wilmar and Adani Total Gas stocks have declined around 7% each. The weekly decline of Adani Power is around 10 per cent. Shares of Adani Enterprises have fallen by around 20 per cent this week. Worst-hit Adani Transmission stock fell nearly 27% in the week, followed by equity shares of Adani Green Energy and Adani Ports, which fell nearly 25% and 23%, respectively, on Dalal Street.

The turmoil in Adani shares comes after a New York-based investment research firm. Hindenburg The investigation accused Adani of stock manipulation and fraud schemes.

Hindenburg’s January 24 research report stated, “We reveal the findings of our 2-year investigation, presenting evidence that 17.8 trillion ($218 billion) Indian conglomerate Adani Group has been engaged in a brazen stock manipulation and accounting fraud scheme for decades.”

However, Adani’s top management had denied Hindenburg’s allegations, calling the latter’s research report a “maliciously mischievous, unrefined report”. The management has also cited the Hindenburg report as the main objective to harm Adani. 20,000 crore FPO, which is one of the largest follow-on public offering in India. Also, Adani has given detailed clarification on Hindenburg’s allegations.

Read here: ‘Myths of short sellers’: Adani gives point-by-point reply to Hindenburg’s allegations

Will the sell-off in Adani shares continue this week?

According to Nirav Karkera, Head of Research, Fisdom, Adani Group shares are challenging investor sentiment through a range of concerns. From rising debt structures to rich or bizarrely expensive valuations depending on the institution and valuation methodology employed, these concerns have pushed investors to the edge of their seats. However, the latest reports seem like the straw that broke the camel’s back.

Adani’s FPO will also be in focus. As per BSE data, on the first day of the issue, Adani Enterprises registered bids for only 4,70,160 equity shares against the offered size of 4,55,06,791 equity shares. Price band has been fixed for FPOs from 3,112 3,276 per FPO equity share for all categories of investors.

Adani has ruled out making changes to its FPO despite weak demand on the first day due to heavy selling following the Hindenburg allegations. The group has said that Adani Enterprises will continue with its FPO as per schedule and at the declared price band. So there will be no change in FPO.

Karkera clarified that with the FPO running at a premium to AEL’s post-correction share prices and the group’s stance to continue with the FPO schedule and pricing instills confidence, but the reflection of the same in investor sentiment is questionable .

Apart from this, Adani’s stand on Hindenburg’s allegations will be closely watched. Reports say that Adani is likely to file a legal suit against the US-based research firm.

Further, Karkera said, “The initial and sharp decline appears to be mainly led by individual investors, some domestic institutions and trading entities. Majority of the ownership in most of the entities belonging to the group is held by select domestic and foreign institutions and other promoter groups.” Institutions. Such a sharp decline has already taken effect and there is little chance of selling by institutional entities at this point, prices may move largely within a range unless further developments are otherwise triggered. Don’t be.”

Going forward, the Fisdom expert believes that Adani shares will continue to remain in a narrow range with limited upside downside and strong surprises on the upside.

Meanwhile, Adani shares are likely to continue under pressure due to the Hindenburg report findings, said Dr VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services. The high valuation of Adani shares is a matter of serious concern.

Further, Manish Chowdhary, Head of Research, Stocksbox, said, “With a lot of noise around Adani Group shares in the last two days, investors are advised to stay away from them till there is clarity on various controversial US-based comments.” Does not come. Hindenburg Research.”

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.