AEL pips RIL to become top traded stock on NSE

AEL has clocked a trading volume of ₹46,832.5 crore in the month through 27 February, accounting for a whopping 5% of the overall exchange turnover of ₹9.36 trillion over the same period. Against this, Reliance’s turnover stands at ₹13,500.54 crore or just 1.44% of overall exchange turnover.

Day traders, who take intra-day bets, flocked to the AEL counter in droves this month after US short-seller Hindenburg Research in late January alleged corporate malfeasance against the ports of a renewable energy conglomerate. Despite the strong denial by Adani Group, the AEL counter has been abuzz, becoming the third most actively traded stock by turnover at ₹25,543 crore in January, up from the eighth most traded ( ₹16,050 crore) in December.

Typically, Reliance is the most actively traded stock on India’s largest stock bourse NSE, remaining No. 1 for eight out of 12 months through February 2023. It was the top-traded stock for four straight months through January 2023. RIL, which has a 10.4% weighting on the Nifty 50, is an index mover, making it an attractive play for investors and traders.

February changed that, thanks to US short-seller Hindenburg Research’s report of 24 January, which has traders on AEL in overdrive mode despite facing higher trading margins and paucity of delivery given the very low level of shares being held at retail and HNI levels.

For one, post the Hindenburg report, NSE, in consultation with Sebi, has more than doubled AEL’s trading margin to 65% by putting it under short-term surveillance measures to deter day traders from over-speculating on the counter.

But that hasn’t dissuaded them, going by the heavy trading volumes on the stock. “Excessive volatility is to traders what honey is to bees,” said Rajesh Palviya, vice president (technical) of Axis Securities. “The uncertainty hasn’t ebbed yet, so traders will remain overactive on the counter. Respite might be had if the negative global news flows abate.”

On Monday, traders again engaged in massive intraday selling, which caused AEL to test the 10% lower circuit before closing 9.74% down at ₹1,187.55 on NSE. Day traders take positions and close them out before end-of-day trade, reflected by the higher trading volume.

Besides the high margin, which reduces trader leverage, the low free float has encouraged huge day trading.

Promoters held 72.64% of the stock as of the quarter ended 31 December, while the public held 27.36%.

But, even with the relatively low public float, very little stock is available, with FPIs holding 15.39%, LIC at 4.23%, foreign companies at 3.53%, and MFs having 1.19% as of the latest holding data available. The float with small retail investors is only 1.86%, while that with HNIs above ₹2 lakh each is only 0.23%.

“The problems for the group are valuation and leverage,” said the treasury head of a private bank.

“While a default is ruled out, the group could be shut out of the dollar bond market for a while which means refinancing from this channel becomes a challenge.”

Such has been the impact of the Hindenburg Research report that Gautam Adani, chairman of the eponymous group, has slipped to 38th position on the Forbes list of Billionaires from the 8th slot earlier this month. Mukesh Ambani, RIL’s chairman and managing director, is the eighth richest currently.

Adani’s loss of personal wealth has been led by Adani Total Gas, AEL, Adani Transmission and Adani Green Energy, which accounted for 86% of $153 billion shareholder wealth erosion in 24 trading sessions from 24 January to 27 February.

Apart from AEL, stocks like Adani Total Gas, Adani Transmission and Adani Green closed at their 5% lower circuits each.