After hindenburg report, there has been a free fall in adani stocks from the last few trading days. This free fall might continue next week as well based on the ongoing sell off.
Though, one might not be invested directly into Adani stocks, there are many observations that are critical to know for any Indian DII or FII. These observations will help one understand the scale, magnitude and the catastrophic effect drifting of Adani stocks can have on Indian investors and markets.
Although, a lot of strong points have already been put forward by the hindenburg report along with 88 questions asking clarifications from Adani group, our key focus in this article will not be around whether Adani stocks will slide more or not, but how significantly this downfall can impact us.
To start with, let’s try to recollect what all industries are Adanis into
Apart from the flagship Adani Enterprises, they are into Air ports, Sea ports, Green energy, Power & Gas, Transmissions and auto ancillaries… to name a few. Not to forget the most recent acquisition of cement companies. Again, to put forward the magnitude, 2 of the most prominent giants in the cement industry in India Ambuja Cement and ACC (who’s name you must have heard if you are Indian) are now part of Adani Group. So, if the wounds keep getting deeper, so will the pain.
Keeping this aside for the moment, let us discuss the key contributors to Indian market indices. IT, Auto, FMCG, along with Financials/Banks are few of the top contributors to Indian indices. Now one critical point in extension to this is that Adani companies are highly debt ridden with majority of them having a current ratio <1 (whether they are or will be able to generate enough ROI on that is whole another discussion). Incase Adani stocks keeps getting more stressed, that can lead these debts or liabilities turn into stressed assets and eventually bad debts. A knee jerk reaction of this could be felt with Nifty Bank falling approximately 3% in the last trading day.
For the investors, surely it is a scenario of being careful with their investments. Though, one must also discount the factor that all these assumptions are based on ‘what if it all goes bad’. Whether it will go bad or not is something that will unfold soon, but we hope that things turn out to be well.
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