Adani’s stock crossed $ 111 billion in six sessions

Among group stocks, Adani Total Gas, Adani Enterprises, Adani Green Energy and Adani Transmission were among the worst losers since the release of the Hindenburg Research report on January 24 alleging accounting fraud and stock manipulation.

Nifty index member Adani Enterprises fell up to 26.5% 1,564.7 on Thursday, a day after the company withdrew its 20,000 crore follow-on public offer (FPO). In response, the stock hit a 52-week low 1,513.90, less than half the floor price of the now withdrawn issue.

Despite the bloodbath, some market veterans expect some level of buying in some of the more widely held conglomerate stocks.

“Given the loss of shareholder value, the next three days will be critical in my mind,” said the chief executive officer of the Mumbai-based brokerage. Considering that the markets have been stable after the budget, it is a bit high.”

Adani Enterprises shares heavily undervalued with options pricing up 43% in movement either side 1,600 in the next three weeks.

A senior executive of a leading mutual fund said it was difficult to predict the “course of loss” as the full magnitude of the crisis was still “unsettled”.

While Adani Enterprises and Adani Ports are Nifty stocks, ACC and Ambuja Cements have more diversified public shareholding with Adani Ports.

Market cap erosion since Jan 24 of ACC, Ambuja and Adani Ports is relatively low at 1-7.3%, while Adani Total Gas and Adani Enterprises hold 24.4-28%.

This is the second day in a row that the Adani Enterprises stock has declined by over 26%, prompting the exchange to hike trading margin to 40% or one-and-a-half times the existing margin on the stock. Which is called Additional Monitoring Measures (ASM) Short-Term Framework Stage 1. Adani Ports and Ambuja Cement have also been placed under the same framework by NSE. On the other hand, Adani Transmission and Adani Total Gas are placed under the same framework by BSE. Adani Power stock has expanded its margin to 100%.

“The increase in margin under ASM is done to prevent excessive speculation in stocks as it reduces leverage,” said Rajesh Palvia, Vice President, Axis Securities.

In addition, Adani Ports has been restricted for trading in the futures and options segment.

The restriction occurs when the outstanding client position on stock derivatives exceeds the limit prescribed by the exchange.

During the ban, a trader cannot take incremental positions. Only existing buy or sell positions can be closed

Most of the Adani group stocks have relatively low free float except ACC, Ambuja Cements and Adani Ports.

Since there are relatively few shares available to the public, many speculators in stocks such as Adani Enterprises, Adani Green and Adani Transmission are initiating intraday trades, which involve liquidating their positions before the market closes. But they have to provide a margin to trade.

Few days back, it was 28% for cash market and now it has been increased to 40%. This brings down the leverage for a day trader from 3.57x to 2.5x.

The ASM framework is a consultative process between SEBI and the exchanges to enhance market integrity and protect the interests of investors, especially in times of unprecedented volatility, as seen in the group stocks.

In the event of further volatility in the stocks under Short-Term ASM Stage 1, the stocks will be moved to Stage 2 where the margin will be increased to 80% or 2.5 times of the current margin, whichever is higher.

Only last week, the exchanges halved the price band for Adani Transmission, Adani Green and Adani Total Gas to 10% to curb excessive volatility.

The top three stocks in terms of traded value were Adani Enterprises, Adani Ports and Ambuja Cements, which together accounted for a fifth of NSE’s turnover. 68,414 crores.