Markets remain nervous on Adani saga; IT, FMCG saves the day

On Thursday, Sensex jumped by 224.16 points or 0.38% to end at 59,932.24. The benchmark touched its psychological 60,000 mark in the early trading session during the day, however, corrected eventually. Sensex climbed for the fourth day straight this week.

On the other hand, Nifty 50 inched lower by 5.90 points or 0.03% to close at 17,610.40. Nifty struggled to keep a steady pace and had even dipped to below 17,450 during the day. This would be the second consecutive drop in this benchmark.

Adani has called off its ₹20,000 crore FPO after the issue was fully subscribed. This led to further havoc in Adani stocks and bonds.

In an aftermath of Hindenburg Research’s allegations report, Adani Enterprises, Chairman, Gautam Adani on Wednesday, said, “given these extraordinary circumstances, the Company’s board felt that going ahead with the issue will not be morally correct.”

Adani announced to return of the money of investors in the FPO.

Adani shares have been in an intense selloff since January 24th when Hindenburg’s report accused the Group of fraud and stock manipulation. On Thursday, Adani Enterprises stock dipped by 26.5%, and Adani Ports dropped by 6.13% post-market hours. Other Adani stocks such as Adani Wilmar and Adani Power closed at 5% lower circuits, while Adani Total Gas, Adani Transmission, and Adani Green Energy ended at 10% lower circuits.

Shrikant Chouhan, Head of Equity Research (Retail), Kotak Securities said. “the rout in Adani group stocks continued to play havoc as benchmark indices gyrated sharply intra-day before recouping lost ground on buying in IT and banking stocks. However, power, energy, oil & gas, and utility stocks were plundered as investors continued to exit in view of dampening sentiment. More than external factors, investors’ sentiments have been hurt by the domestic mood.”

Also, Vinod Nair, Head of Research at Geojit Financial Services said, “Despite a growth-oriented budget, drop in crude prices and upside in the global market, the domestic market is not able to gain because of the Adani saga having a ripple impact on the investors. In addition, 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.”

Among the top gainers on Sensex were — ITC up 5%, followed by IndusInd Bank higher by over 3%. HUL, Infosys, Wipro, HCL Tech, and TCS were also in the list soaring by 1.5% to 2.5%.

The top bears in percentage terms on Sensex were — NTPC, HDFC, Titan, Tata Steel, Power Grid, Bajaj Finance, and HDFC Bank shedding 1.5% to 2%. Titan and HDFC announced their Q3 earnings today.

In terms of sectoral indices, FMCG and IT outperformed on BSE by around 2% upside each. Bankex also contributed by advancing nearly 209 points. Bank Nifty was up over 155 points. On the contrary, the oil & gas and utilities index dipped by 2% and 4% respectively, while the metal index on BSE also shed over 187 points — becoming top laggards.

Ajit Mishra, VP – of Technical Research, at Religare Broking, said, “It turned out to be a muted session on Thursday as the Nifty index oscillated in a narrow range and ended almost unchanged. Meanwhile, a mixed trend on the sectoral front kept the participants occupied wherein FMCG and IT posted decent gains while metal and energy majors were on the back foot.”

Meanwhile, at the interbank forex market, the Indian rupee weakened to over a 3-week low on Thursday as equities remain jittery over the Adani crises. Also, the rupee dropped despite the weakness in the dollar index. The local unit closed at 82.1725 against the dollar compared to its previous day’s print of 81.92 per dollar.

Going ahead, Mishra said, participants were anticipating some respite after the dovish tone from the US Fed however continuous decline in Adani group counters combined with the scheduled weekly expiry kept the tone negative for most of the session. Indications are pointing towards further consolidation in the index thus we recommend maintaining a sector/stock-specific approach. Among the sectors, IT, FMCG, and select auto look positive to us while others may continue to trade mixed so plan accordingly.

Technically, Chouhan said, the Nifty hovered between the 17450 to 17650 range and also formed an inside body candle on daily charts which indicates the continuation of a range-bound activity in the near future. However, a pullback rally is possible if the index trades above 17500. Above the same, it could move up to 17700-17750. On the flip side, a fresh selloff is possible only after the dismissal of 17500 and below the same, the index could retest the level of 17380-17350.

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