Wild swings may persist in Adani counters, in a smaller way

High volatility in two Adani Group companies—Adani Enterprises and Adani Ports—which are part of the Nifty 50 could persist despite the two stocks shedding 60% and 27%, respectively in value since the Hindenburg Research report surfaced a month ago, analysts said.

Adani Group flagship Adani Enterprises’ stock could trade over a 50% price range while Adani Ports could move over a 24% range in the coming month. That translates into a price range of ₹1,042-1,758 for AEL from its current level of around ₹1,400. Valuation guru Aswath Damodaran, who teaches at New York’s Stern School of Business, pegged the fair value of AEL at ₹945 in his blogspot on 5 February.

Adani Ports could trend between ₹484 and ₹616 from current market price of ₹550.

AEL has tanked 60% to ₹1,383.60 over 21 trading sessions through 23 February. Adani Ports has fallen 27% to ₹552.10 .

The Hindenburg Research report alleges accounting fraud and stock price manipulation against the Adani Group, which strongly denies any wrongdoing .

The persistence of high volatility in these stocks is borne out by traders who sold options on the NSE as of Thursday, which coincided with the monthly expiry of the derivatives.

“The high volatility may persist, but going by provisional data it could be lesser than what we saw in February as funds typically reduce their cash holdings during such crises,” said Manoj Vayalar, VP (derivatives), Religare Broking. Vayalar cited provisional data on Thursday which showed that traders rolled over 84% of their outstanding positions in AEL to the March series of derivatives against 90.6% rolled over at the end of the January series. On Adani Ports, rollover from February to March stands at 80% against 97.2% from January to February series. Rollover refers to traders or hedgers closing out their outstanding buy-sell trades ahead of the expiry of a contract and moving them over to the next month to avoid giving or taking delivery.

“Rolls in the Adani stocks still suggest high levels of anticipated volatility, although price swings would be lower than those seen in the February series,” said Kruti Shah, quant analyst at institutional brokerage Equirus Securities.

“It’s likely that some stability would emerge in these counters in the coming sessions.”

Derivatives are contracts that derive their value from underlying securities such as shares and indices. Traders who don’t have cash shares can speculate on them while hedgers , who own the stocks , could take an offsetting positions on such contracts to protect themselves against uncertainty.

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