Friday’s relief rally after Adani shock makes investors ₹7.27 trillion richer

Mumbai: Indian markets quickly recovered from the shock of the Adani group’s bribery allegations, rising to a nearly six-month high and snapping a two-week dip on Friday. Investors became richer as a result ₹7.27 trillion during Friday’s relief meeting.

The recovery was largely marked by short-covering and some buying of large-cap stocks in sectors such as oil and gas, banking, information technology and fast-moving consumer goods, ahead of the election results in Maharashtra on Saturday. Analysts said an extended period of short-covering could push the indices higher.

Adani Group shares outperformed Thursday as the conglomerate lost ports to renewables ₹2.24 trillion in market capitalization after US prosecutors charged Chairman Gautam Adani and other executives in an alleged $250 million bribery scheme. On Friday, Adani group companies saw relatively lower market capitalization erosion ₹10,365 million.

The Adani group has termed the allegations as ‘baseless’.

The Nifty 50 gained 2.39% or 557 points to close Friday’s trade at 23,907.25, while the Sensex rose 2.5% to 79,117.11.

Stocks driving the relief rally included Reliance Industries, Infosys, ICICI Bank, ITC and Tata Consultancy Services, which contributed to more than two-fifths of the Nifty’s gains.

However, Sunil Singhania, founder of asset manager Abakkus, says sectors that look promising may not perform well in the short term, and vice versa.

“For example, despite strong fundamentals, the banking sector has underperformed, although we remain optimistic about this. On the other hand, while the IT sector’s results are disappointing, the sector has performed exceptionally well, all things being equal,” he said.

The Adani heavyweights

Index constituents Adani Enterprises and Adani Ports closed 2% higher ₹2,229.16 and ₹On Friday, Adani Green Energy, the company at the center of the US allegations, ended the day 8.2% lower at 1,137.5 per share. ₹1,052.4 per share.

Bonds of Adani Ports maturing on August 4, 2027 traded 11 cents higher at $92.16, and those of Adani Green Energy UP were up 24 cents at $86.4.

The shorting of the market on Friday was underlined by relatively lower preliminary buying ₹1,722.15 crore by domestic institutional investors. Foreign institutional investors continued to sell and unload ₹1,278.37 crore worth of shares.

Besides the insignificant net buying figure among the institutional investors, Nifty’s active futures contract lost 6.09% in open interest (outstanding trading positions) as the market recovered.

A drop in open interest, accompanied by a price increase, indicates short covering.

“The short covering comes a day ahead of the (Maharashtra) state poll results, indicating that those covering their shorts probably did not want to be caught out,” said Andrew Holland, CEO of Avendus Capital Public Markets Alternate Strategies. .

However, amid Friday’s recovery, which followed a nearly 10% decline from September’s record highs for the benchmark indices, market watchers expect selective bottom fishing in key stocks.

“In recent months we felt that a correction was necessary. But I am positive about a period of one to two years,” says Devina Mehra, founder of investment firm First Global. “But you have to be careful in the frothy parts of the market because with every correction there are stocks that never reach their peak again.”

When asked about buying the dip, Mehra said that after the current correction, investors might consider buying, but on a calibrated basis, “selecting stocks and sectors very carefully.”

Top investor Vijay Kedia said on the sidelines of the Mint Money Festival in Mumbai on Friday that the market is in uncertain territory and it may take another three to four months to recover.