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The rout in Adani shares also impacted stocks of state-owned and private lenders with an exposure to the group, fuelling the fall in the benchmark indices, Nifty and Sensex, to three-month lows.
Adani Enterprises, the flagship of the Adani Group, dismissed the report as “unresearched” and “maliciously mischievous,” which seeks to undermine the “goodwill and reputation of the Adani group and its leaders and sabotage the FPO (follow-on public offering) from Adani Enterprises,” a day after its release on Thursday.
However, six of the 10 Adani group stocks hit the lower circuits before recouping some losses on Friday, while four that don’t have price bands – Adani Enterprises, Adani Ports, Ambuja Cements and ACC – fell between 12% and 18%. The rout in Adani stocks helped rival Mukesh Ambani, chairman of Reliance Industries Ltd, reclaim the title of the richest Indian he ceded to billionaire Gautam Adani last year.
The fall in the Adani Group stocks saw investor wealth worth ₹3.19 trillion get wiped off and took the two-day loss since the Hindenburg Research report surfaced on Wednesday to ₹4.4 trillion. Adani Group stocks’ market value loss accounted for 47% of the overall ₹6.98 trillion loss of investor wealth on Friday.
Adani Ports and Adani Enterprises, part of the Nifty, crashed by 15% and 18% each. Jittery investors also offloaded bank stocks such as State Bank of India, ICICI Bank and IndusInd Bank, which fell between 4% and 5%. The 18% fall in Adani Enterprises to ₹2,768.50 apiece took it below the lower band of the FPO’s floor price of ₹3,112.
The cascading effect on the bank stocks dragged down the benchmark indices. The Nifty plunged by 1.61% to 17,604.35, while the Sensex shed 1.45% to close at 59,330.90. The 12-constituent of Bank Nifty fell 3.13% to 4,0345.30.
Investors’ nervousness was reflected in the fear gauge, India Vix, surging 18% to 17.32.
The Adani Group released a presentation through its flagship Adani Enterprises to the stock exchanges after market closing on Friday, with its responses to Hindenburg’s questions.
It said that eight of the group’s listed companies were audited by the Big 6, including Deloitte Haskins & Sells and EY.
Earlier in the day, American billionaire and hedge fund manager Bill Ackman weighed in on the matter through a tweet wherein he described the Hindenburg report as “highly credible and extremely well researched.”
Proxy advisory firm InGovern also weighed in on the issue stating, “Hindenburg, as a short seller, should be considered as just another participant who has a motivated view to release a negative report with the aim to bring down the stock price.”
A Sebi official said that the regulator would wait for the clarification by the company to the exchanges before deciding the further course of action. The official declined to be identified.
Corporate houses with heavy leverage or expensive valuations were hit the most during this selloff on Friday, said Nishit Master, portfolio manager, Axis Securities.
Foreign portfolio investors’ (FIIs) cautious stance ahead of the Union Budget and US Federal Open Market Committee meetings also contributed to the collapse in the markets. FIIs sold shares worth a provisional ₹5,977.86 crore, while domestic institutional investors purchased ₹4,252.33 crore worth of stocks on Friday. FIIs have sold ₹13,206 crore worth of equity till 25 January.
Amid the gloom, the one silver lining was India on Friday became the first country in the world to have a T+1 settlement cycle. The faster settlement cycle is expected to augur well for the Indian equity markets from a liquidity perspective, with settlements being made within 24 hours.
The shift will boost operational efficiency as the rolling of funds and stocks will be faster, said Ajay Menon, managing director and CEO of broking and distribution at Motilal Oswal Financial Services.
The same will help the investor in reducing the overall capital requirements with the margins getting released on T+1 day. Sellers will get funds in their bank accounts within 24 hours of the sale.
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