Adani  stocks continue to roil mkts despite a favourable  budget

“The continuation of sell off in Adani group stocks despite withdrawal of FPO hampered the positive vibes from the budget and Fed outcome,” said Siddhartha Khemka, head – retail research, Motilal Oswal Financial Services. Nifty swung between gains and losses throughout the day and sectorally it was a mixed bag, added Khemka .

The US Federal Reserve’s interest rates hikes of 25 basis points came on expected lines remains supportive for global markets and its signal that only a few more might be needed in its inflation fight boosted global market sentiments further. The investor confidence was catalysed by Fed Chair Jerome Powell statements, where he said that the financial conditions had tightened significantly over the past year and for the first time also acknowledged that “the disinflationary process has started.” The Dollar index softened and so did the US Bonds.

The cues remained positive as most analysts considered the budget proposals being positive for the markets. However, the Adani group stocks continued to put pressure on domestic markets with Adani Enterprises seeing steep corrections of 26.5% yet again following the FPO being called off. Most other group stocks corrected between 5% and 10% with exception of ACC Ltd. The Adani group stocks saw market cap erosion of ₹132,764 crore on Thursday itself.

Meanwhile, Reuters reported that NSE placed Adani Enterprises, Adani Ports and Ambuja Cements under additional surveillance mechanism that will require 100% margin to trade in their shares.

The banking and IT stocks supported the markets with some buying. The appetite for IT stocks was supported by the Fed’s inline rate decision and bounce back in Nasdaq stocks as the index had closed at the highest levels since mid-September. However, the metals, energy, oil and gas, etc, also saw steep selling amid prevailing weak investor sentiments.

Shrikant Chouhan, head of equity research, Kotak Securities, too said, “The rout in Adani stocks continued to play havoc as benchmark indices gyrated sharply intra-day before recouping lost ground and more than external factors, investors’ sentiments have been hurt by domestic mood”.

“Nifty has closed in a narrow 58-point band (17,604-17,662) over the last 5 sessions, reflecting the tug of war between the bulls and bears on an intraday basis. 17,445-17,670 could be the band for the Nifty in the near term” said Deepak Jasani, head, retail research, HDFC Securities.

Vinod Nair, head- research at Geojit Financial Services said, “The premium valuation of India continues to weigh down the performance compared to other emerging markets which are expecting upside in the economy. The global markets are positive in assumption of being in the last phase of the rate hikes.”

The foreign portfolio investors continued selling equities. Having net sold about ₹27,407 crore worth of equities till 1 February, they were net sellers of ₹3,065.35 crore worth equities on Thursday. The continued FPI selling is putting pressure on the rupee.

On Thursday, there was a sell-off in the US Dollar Index but the impact was not felt on the rupee. The rupee closed 25 paise weaker at ₹82.18 to a dollar. Anindya Banerjee, VP – currency derivatives and rate derivatives at Kotak Securities Ltd said that this is highest level since 9 January and the FPI outflows and demand from importers pushed dollar-rupee spot above 82.00.

With the fall in dollar index the Rupee got support, said Banerjee, who feels that over the near term, Rupee remains vulnerable and can trade within a range of 82.00 and 82.45 on spot.’

Moving forward though global cues are gradually turning positive; however, domestic factors and increase in volatility in the last couple of days are likely to keep the market sideways in the near term, say experts. Stock specific action will continue as the result season progresses.

The 3QFY23 earnings so far suggest increased revenue growth with some pressure on the margin front. Mitul Shah Head of research at Reliance Securities said that, a full-fledged recovery and pre-pandemic levels is still in progress.