Virendra Pandit
New Delhi: Amid mixed global cues and periodic corrections, the shining India story continues as demonstrated by benchmark indices, Sensex and Nifty, falling over 1 percent on Thursday, but confident investors buying the Adani stocks and lifting the Group’s market capitalization by Rs 1.2 lakh crore or 10 percent in a single trading session.
While Sensex plummeted 1190.34 points to close at 79,043.74, Nifty 50 dipped 321.10 points to close at 23953.80. Market experts anticipate heightened volatility in individual stocks because of derivative contract settlements, the media reported on Thursday.
Market sentiment has, of late, been bolstered by easing geopolitical tensions, as in the Middle East, and record highs on Wall Street, alongside resuming foreign portfolio inflows after two months of selling. However, some predict potential time corrections due to high valuations, and highlight stock-specific opportunities, ahead of India potentially benefiting from US President-elect Donald Trump’s tax proposal, particularly with tariffs targeting China.
Thursday’s downturn in Indian stocks came amid a similar show in the US markets overnight where a pullback in major technology stocks led to a lower close for the markets in a thin trading session. For example, markets in the Asia-Pacific region also traded mixed, Japan’s Nikkei 225 surged 0.56 percent, and the broad-based Topix was up by 0.82 percent.
However, this market volatility did not affect the Adani Group. Reports emerged clarifying the ‘No Bribery’ charge against Gautam Adani, his nephew Sagar Adani, and Vneet Jaain giving the street sufficient reasons to jump into Adani Group shares which had corrected over the past few days.
Two of the Adani Group companies—Adani Power and Adani Total Gas—hit the upper circuit of 20 percent, while shares of other group, companies including the group’s flagship company, Adani Enterprises, ended 11.6 percent higher over the previous day’s close. Other major companies, Adani Green Energy and Adani Energy Solutions, also closed at upper circuit limits of 10 percent each.
Adani Ports & SEZ, India’s largest ports player, closed 5.9 percent higher. The stocks of the group’s cement businesses Ambuja and ACC closed at 4.55 percent and 4.05 percent each.
The Gujarat-based Adani Group has a total of 11 listed companies—spread across the energy and power, transport and logistics, and metal and material sectors. The conglomerate, which is India’s largest infrastructure player, is at the forefront of building a world-class infrastructure for the South Asian country.
In the recent past, it has ventured overseas in Israel, Africa, Bangladesh, and Australia, among others, to create some footprint for India and directly compete with the US and China. However, the group has been consistently targeted, including the recent indictment by the US Department of Justice.
On Wednesday, the narrative reversed after renowned lawyers, such as Mukul Rohatgi and Mahesh Jethmalani, clarified that there are no ‘bribery’ charges against the Adani Group or any of its officials. It started changing the narrative.
According to reports, Abu Dhabi’s International Holding Company (IHC), one of the largest sovereign funds that manages assets close to USD 100 billion, has reaffirmed its support to the Adani Group, saying its outlook on investments in the group remains unchanged despite the US indictment of the conglomerate’s founder-chairman Gautam Adani.
“Our partnership with the Adani Group reflects our confidence in their contributions to the green energy and sustainability sectors,” IHC, one of Adani Group’s key foreign investors, said in a statement, according to a media report.
“As with all our investments, our team continues to evaluate relevant information and developments. At this time, our outlook on these investments remains unchanged.”
IHC had, in April 2022, invested about USD 500 million each in the renewables arm Adani Green Energy and power company Adani Transmission and another USD 1 billion in the group’s flagship Adani Enterprises. Later, it sold its 1.26 percent stake in AGEL and 1.41 percent in ATL, now called Adani Energy Solutions Ltd, but hiked its stake in Adani Enterprises Ltd to over 5 percent.
The IHC statement came soon after Adani Group emphasized that its chairman and his aides have not been charged under the US Foreign Corrupt Practices Act but faced three other charges, including securities and wire fraud that are punishable with monetary fines.
The US Department of Justice’s (US DoJ) indictment filed in a New York Court last week does not mention Gautam Adani, his nephew Sagar, or Vneet Jaain in any count related to conspiracy to violate the FCPA, AGEL – the firm at the heart of allegation of USD 265 million bribes allegedly being paid to Indian officials to secure solar power sale contracts that could bring in USD 2 billion worth of profits over 20 years to the firm.
The AGEL officials have only been charged with securities fraud conspiracy, wire fraud conspiracy, and securities fraud, the company said. In general, the penalties for such charges are less severe than bribery.
Gautam Adani and Sagar also face a civil complaint over violation of sections of the Securities Act and aiding and abetting Adani Green to violate the Act, the company had said.
The Adani Group last week denied all allegations as baseless and said it would seek legal recourse to defend itself.
Meanwhile, other global partners also expressed their continued support. The Sri Lanka Ports Authority has expressed its ongoing confidence in its partnership with Adani, as the Indian group plays a vital role in expanding the island country’s port infrastructure. With a USD 1 billion investment in the Colombo terminal, the project is poised to be the largest foreign direct investment in Sri Lanka’s port sector.
Sri Lanka Ports Authority chairman Admiral Sirimewan Ranasinghe (Retd) has reportedly stated that there are no discussions regarding the project’s cancellation. The project will be operational in the next couple of months.
Also, the Tanzanian government has reaffirmed its commitment to its agreements with Adani Ports, as it feels that there are no concerns regarding the ongoing projects and that all contracts fully comply with Tanzanian law. In May 2024, Tanzania and Adani Ports finalized a 30-year concession agreement to operate Container Terminal 2 at Dar es Salaam port. Adani Ports also acquired a 95 percent stake in Tanzania International Container Terminal Services, a state-owned entity, for USD 95 million.
Global investors say that worries of a wider spillover from bribery charges against the Adani Group might temporarily hurt sentiment in India but not the long-term outlook.
Foreign investors, although cautious, pointed to a nearly 3 percent rise in the Nifty 50 index since the Adani news broke as signaling confidence. In the same period, USD 14 billion was wiped off the value of shares in companies owned by Adani.
Foreigners are relatively small players in India’s over USD 5.5 trillion equity space with a share of less than a fifth but are sensitive to the mood and performance of a market seen as increasingly attractive while China’s economy and stock market stalls.
India’s benchmark Sensex has more than doubled from its pandemic lows in 2020, outpacing even the S&P 500, something money managers say can’t be derailed by one company, the media reported.
“We consider it (the Adani indictment) as a stock-specific event. We don’t see any negative sentiment at all towards India as a result,” Mike Sell, head of global emerging market equities for London-based asset manager Alquity, was quoted as saying.
“Clients are continuing to seek higher allocations in India.”
“I don’t think that an isolated case will have any impact on client demand,” said Tareck Horchani, head of prime brokerage dealing at Maybank Securities in Singapore.
“For me, India is like the China market 15 years ago: it’s booming, there is huge infrastructure spending, and wealth has spread in all the country.”