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Sensex, Nifty tumble amid sell-off in Adani Group shares, banks; all eyes now on next week's budget

8 listed companies of the Adani conglomerate lost more than Rs 3 lakh crore

bear-market (File) Representational image

Stock markets crashed on Friday, with the benchmark BSE Sensex plunging around 1.5 per cent and NSE Nifty 50 declining 1.6 per cent. It all started with sell-off in shares of Adani Group companies, but it soon spread to other sectors like banks and insurance, over worries of their exposure to the group.

At its day's low, the Sensex was down 1,230 points. Eventually, it closed 874 points, or 1.45 per cent lower at 59,330.90 level. The Nifty 50 ended over 287 points or 1.61 per cent down at 17,604.35 levels.

Adani Group stocks led the losers on stock markets on Friday. Earlier this week, US-based forensic financial research firm Hindenburg Research released a report, claiming the Adani Group had “engaged in a brazen stock manipulation and accounting fraud scheme over the course of decades.” It also pointed to sky-high valuations of Adani’s listed companies as well as their substantial debt.

The report had sent shares of the listed companies of Adani Group tumbling on Wednesday. The sell-off only intensified on Friday with several companies hitting their lower circuit levels.

“Indian benchmark equity gauges Sensex and Nifty hit their over three-month lows on Friday, dragged by massive selling mainly in Adani Group and banking stocks,” said Devarsh Vakil, deputy head, retail research, at HDFC Securities.

He noted that eight listed companies of the Adani conglomerate lost more than Rs 3 lakh crore in market capitalisation today.

The flagship Adani Enternprises closed 18.52 per cent lower at Rs 2,762.15. Adani Ports and Special Economic Zone declined 16 per cent to Rs 598.60, Adani Transmission ended 20 per cent lower at Rs 2,009.70 and Adani Total Gas also closed 20 per cent down at Rs 2,934.55.

Elsewhere, Adani Wilmar and Adani Power closed down 5 per cent to Rs 517.30 and Rs 248.05 respectively, and ACC and Ambuja Cement slumped 13 per cent and 17 per cent respectively.

Banking stocks were also under selling pressure as investors were worried over their exposure to debt of Adani companies. While State Bank of India fell 5.03 per cent, ICICI Bank was down 4.4 per cent, IndusInd Bank declined 3.4 per cent and Axis Bank, Kotak Bank and HDFC Bank all fell around 2 per cent.

The fall came despite at least two brokerages stating there was no material risk arising to the banking sector. For instance, Jefferies said from a banking sector’s perspective, debt to Adani Group group formed 0.5 per cent of total loans, 0.7 per cent for PSU banks and 0.3 per cent for private lenders.

Life Insurance Corporation of India also tumbled 3.45 per cent to close at Rs 665.55 on Friday. The country’s largest insurer held 4.23 per cent stake in Adani Enterprises at the end of December quarter, stock exchange data showed.

Other major losers today included tech stocks like Infosys, Tech Mahindra, Wipro and TCS, construction giant Larsen & Toubro, Reliance Industries, Titan and Maruti Suzuki.

Vinod Nair, head of research at Geojit Financial Services said the cautious stance of foreign institutional investors ahead of the Union budget and FOMC (Federal Open Markets Committee) meetings of the US Federal Reserve also fuelled the collapse.

Tata Motors was among the few notable gainers on Friday. The stock accelerated more than 6.3 per cent to close at Rs 445.55, after it reported a profit after seven quarters.

“We expect Jaguar Land Rover to ramp up its production as supply issues further subside. On the domestic side, commercial vehicle demand outlook remains strong, especially for medium, heavy CVs and passenger carriers. Passenger vehicle market share remains strong at 14 per cent and electric vehicles at 85 per cent,” said Himanshu Singh, research analyst at Prabhudas Lilladher.

As we look ahead into next week, all eyes will be on the Union budget that Finance Minister Nirmala Sitharaman will announce on February 1. This will be her last full budget before the national elections in 2024. With several key states also going to polls this year, the expectation would be that the budget will focus on giving rural consumption a lift, even as Sitharaman may look to get the fiscal consolidation path back on track.

The Reserve Bank’s monetary policy committee meeting is also scheduled between February 6-8, which will also be closely eyed by investors.

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