Indian Market Drops as Adani Group’s Alleged Bribery Case Roils Shares

It was when the Indian market was trying to recover from recent sell-offs that the Adani Group's alleged bribery case in the US pushed the market down, leading to the selling of Adani group shares, PSU banks, and a few cement stocks. The fragmented pressure pushed the headline index to an intraday low of 23,263; however, it managed to recover some ground due to gains in a few private banks, UltraTech, Power Grid, and Hindalco shares. At the time of writing, the NIFTY index traded near the 23,340-350 range, down 0.74% since the previous session's close. The headline index made a smart comeback towards the 23,800-resistance area recently, but fresh tensions from Russia-Ukraine and today's Adani-specific event have kept bulls away from the market.

Adani Group's listed firms suffered a market cap loss of around 2.2 lakh crore today, as shares of Adani Ports, Adani Energy Solutions, Adani Green Energy, Adani Enterprises, Adani Total Gas, and Ambuja Cements fell by up to 20%, while Adani Power and ACC dropped 14% and 12%. Adani Wilmar and NDTV also declined by 10% each. As per US prosecutors, Adani and other executives have violated federal law and bribed Indian officials to secure solar energy contracts worth billions. However, later today, the group said in a statement that the bribery charges are baseless and they shall take all possible legal recourse.

In today’s trade, SBI shares dropped over 5% intraday, though they recovered marginally later due to exposure to Adani group companies. A few other NBFCs and banks, such as Punjab National Bank (PNB), Bank of Baroda, REC, and PFC shares, dropped significantly due to exposure to the group. BoB dropped over 7% intraday, while PNB slid around 5% intraday. The state-run REC shares plunged 9%, and PFC shares slid 8% intraday.

At the time of writing, the broader market sentiment is weak; however, it recovered some ground midday. At the time of writing, the NSE AD ratio was 643/1,814.

Index Outlook

NIFTY: The index seems oversold as of now, and if the market holds the support of the 23,250-300 range, then a short-term bounce towards the 23,500-600 range is likely. It's better to avoid shorting the index at this oversold zone.

Bank Nifty: The index is slightly volatile due to PSU banks; however, a recovery can be on the cards, tracking headline private banks. The index has strong support at the 49,800-500 range, and if the level is held, some recovery is possible, with immediate resistance at the 50,900-1,000 range.

NIFTY Midcap Select: The index looks sideways, with possible recovery when it manages to sustain above the 12,120-140 range, with immediate resistance at the 12,260-300 range.

Trading Picks:

·         Buy Mahindra and Mahindra for a short-term target of 3,200 with stop loss below 2,850.

·         ICICI Bank: Buy at 1,245-1,248, target 1,280-1,300 range with stop loss below 1,220.

The report is being prepared by Bitupan Majumdar, an independent SEBI-registered research analyst with registration code INH30006962. Please consult your financial advisor before taking investment decisions.