Are Indian Stocks Immune to Adani Stock Meltdown?
(This
is not a recommendation for trading in any stocks discussed here. The
author has a vested interest in stocks and other financial instruments.
Please consult your own financial adviser before acting).
Since the release of Hindenburg Research report on Adani group of companies on 24Jan2023, there has been a massive sell off in Adani group listed stocks in Indian market.
Though some of the Adani group stocks recovered slightly in the past two days, the group has lost 45.8 percent or Rs 8.78 lakh crore (USD 106 billion) market capitalisation since 24Jan2023.
(in the past one week, I've written two related blogs, please check below)
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Related Blogs:
Meltdown in Adani group Listed Stocks
Why the Divergence Between Sensex and Nifty 50 in Today's Trade?
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The Adani group stocks had a share of 6.8 percent of the total market cap of all BSE listed firms as on 24Jan2023. This has shrivelled to 3.9 percent of total BSE market cap as on today. The damage to the Adani group stocks as well as to its reputation is big in the past two weeks.
But the Indian markets, including the stock, bond and foreign exchange, seemed to be resilient to the turmoil in one of India's biggest conglomerates.
Table showing the changes in key metrics between 24Jan2023 and 08Feb2023:
Even though the Adani group has lost 45.8 percent of its market cap, the BSE market cap declined by only 4.2 percent in the past ten trading days. This is remarkable.
India's two benchmark indices, Sensex and Nifty 50, have lost only 0.5 and 1.4 percent respectively in the same period. This indicates some resilience of Indian stocks for the time being.
Even mid- and small-cap stocks, represented by BSE Midcap and BSE Small cap indices, have not reacted negatively to the Adani group rout. But Nifty PSU Bank index decreased by 6.8 percent (see here, for more on this). In comparison, Nifty Private Bank index fell by only 2.1 percent.
LIC of India suffered a market cap loss of 13 percent or Rs 58,200 crore, due to its exposure to Adani group stocks and bonds.
Based on some rumours of connections to Adani group promoters, stocks like Patanjali Foods and Monarch Networth Capital Ltd have suffered big sell-off.
Foreign portfolio investors (FPIs) sold Indian stocks worth Rs 9,200 crore since the beginning of February 2023. There seems to be no unusual selling by FPIs in the past two weeks. For comparison purposes, it may be added FPIs sold Indians stocks worth Rs 28,900 crore in Jan2023.
Whether Indian financial markets will continue to remain resilient to the Adani stock meltdown is not clear. Much will depend on the future news flow from and about Adani group. But the hangover is likely to continue for some time.
It is hoped India will come out of the current situation in the next six to 12 months, provided the regulators do a good job in protecting investor interest and the Adani group coming out with better transparency in its affairs.
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Read more:
Meltdown in Adani group Listed Stocks
JP Morgan Guide to Markets
Why the Divergence Between Sensex and Nifty 50 in Today's Trade?
Global Market Data: 2012 to 2022
Indian Stock Market Moves Fully to T+1 Settlement
NSE Indices Comparison 31Dec2022
BSE 500 vs S&P 500 Indices Compare 31Dec2022
Nifty 50 Index Yearly Movement 31Dec2022
India Up the Ladder in MSCI EM Index
New Rules on Ex-date and Record date
Mutual Fund Asset Class Returns 31Dec2022
BSE Broad and Sector Indices Market Cap 31Dec2022
Global Market data 31Dec2022
BSE Broad and Sector Indices Returns 30Dec2022
Crisil Report - Big Shift in Financialisation
Weblinks and Investing-------------------
Disclosure: I've vested interested
in Indian stocks and other investments. It's safe to assume I've interest in the financial instruments / products discussed, if
any.
Disclaimer: The analysis and
opinion provided here are only for information purposes and should not be construed
as investment advice. Investors should consult their own financial advisers
before making any investments. The author is a CFA Charterholder with a vested
interest in financial markets.
CFA Charter credentials - CFA Member Profile
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He blogs at:
https://ramakrishnavadlamudi.blogspot.com/
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Twitter @vrk100
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