MUMBAI: Market expert Siddharth Kuanwala on Friday said the stock markets are expected to stabilise by next week when regulator Securities and Exchange Board of India (SEBI) comes out with a report on the fall experienced in the equities this week.
“A scrutiny has already been initiated by SEBI. Let us wait for its report that will make it very clear what is what,” the expert told ANI.
Asked about the sweeping sell-off across stocks of the Adani Group triggered by a Hindenburg Research Report, he told ANI, “A foreign agency had submitted a report which says there were some manipulations and they have issues of debt levels of the group. And, they had taken a short position in the market.”
The Adani Group has accused the New York-based investing firm of “stock manipulation and accounting fraud.”
“Basically, when there were more selling pressures than buying, the share price has to go down. That is why the Adani Group went down and the overall sentiments of the market went down,” Kuanwala said.
The market expert pointed out that this had triggered panic among investors over the last few days and following the close of market’s session on Friday, the SEBI had ordered more scrutiny into the matter.
“Let us see, by next week, the market should stabilise,” the expert said.Over the last two trading sessions on Wednesday and Friday the Adani Group has lost Rs 4.17 lakh crore in market cap.
According to Kuanwala, markets generally are impacted by news. “Now, this is some serious news that is why the markets reacted — the big (investors), the small, everybody reacted. When there is negativity, the reactions are sharper and that is why selling pressure and reactions are heavy. Buyers just move out and the share price is not able to sustain.”
Shares of several Indian banks and the Life Insurance Corporation of India also plunged on Friday amid concerns about their exposure to the Adani Group.
On asking why stocks of the LIC had also fallen, the market analyst said the country’s largest insurer had bought some stake in Adani Group of companies. “So again, it is a cascading effect. The investors thought why this company had taken a stake in the company,” he said.
“Because LIC has a wonderful name and a leading brand and I would say the returns of the investors over the company say a lot. It has a good presence and goodwill.”
The expert said the investors are wondering why LIC took a share in Adani Group of companies. He said, “Selling pressures have hit LIC, too. But LIC as an individual company is a strong, robust company and the largest one in life insurance.”
KK Mittal, a stock market expert, said, “Sell-off in Adani Company shares is after publishing the report by Hindenburg group. They (Hindenburg group) are basically short-sellers and they speculate on the stock market by selling short. This report also is published just a day before when the Adani Group was coming with its FPO (follow-on offer). So, definitely, there is some mischievous bet on this.”
Mittal said, “If we talk about LIC holdings in Adani Companies and the losses of investors people were talking about LIC are notional… I’m sure that LIC must have acquired the shares long way back at a very low cost. So, it’s a notional loss for the time being, but they must be sitting on a huge profit as far as Adani stock is concerned. And they must have booked even profit because their cost of acquisition is low. And, whatever we are talking about is a notional loss.”
He said, “The market capitalisation of Adani group has come down. So there is a notional loss but it is not a booked loss.”
As an advice, he said, “I think investors should wait. Don’t sell the stock in panic because Hindenburg in the past also have done this against other companies. They published reports and short-sell into the market. There are ulterior motives.”
He said, “In this way, they are earning a lot of money in the stock market by speculating and betting on stocks. So ethically, I don’t know to what extent it is correct that before publishing such reports they initiate their sell position in the market and based on that they try to manipulate the market.”
Stock market expert DK Mishra said, “Because of this report of the research, Sensex and Nifty had crashed. It has impacted particularly Adani because it has got overall market share in the common Nifty and Sensex indices. Impact is quite high temporarily for a day or two trading session.”
Mishra said, “A lot of money has been wiped out. I don’t foresee much downwards now because within these two-three days which is market’s off, people will get time to study analyse and then take a proper, considered call.”
He said, “Due to our Indian share market regulatory authorities, everything is very intact — the market is very intact and the growth story of country is intact. So at this level, I feel there is nothing to panic as the market will be stabilising.”
Mishra said, “As far as LIC (Life Insurance Corporation of India) is concerned, it is a systematic investor group. LIC is not the kind of institution which has invested suddenly or at a high price. Institutions like LIC enter the market on a very sustained basis regularly.”
So far as their exposure to Adani Group of companies is concerned, Mishra said, “Whatever has been invested, they are sustained over a period of time. As the company grows the valuation of shares also goes at a very high level.”
He added, “So, any corrections in the Adani Group are definitely going to hit the investment, but currently it is a notional loss for the time being. But any loss to the sales can only be counted once the shares are sold or realised.”
He said, “Till then I don’t think the investors need to panic. Gradually the market is stabilising, share price of Adani Companies is going to stablise. And this notional loss is going to be recovered to some extent partly or fully.” (ANI)