Trader interest in Adani stocks spurted in Nov

According to a Mint analysis of Bloomberg data on the historic price and positions of the two companies, participants initiating and rolling over the bearish bets for almost three months despite suffering notional losses prior to the Hindenburg report and withdrawal of the FPO potentially raked in as much as 35-50% gains in February when AEL and Adani Ports stock prices tanked due to allegations of fraud.

View Full Image

The Securities and Exchange Board of India is reportedly examining market activity in Adani group stocks preceding and following the release of Hindenburg’s report, said news reports.

The report, alleging fraud against the ports to renewable energy conglomerate, led to market caps of 10 listed Adani Group firms to almost halve to ₹9.4 trillion since 24 January. It also resulted in AEL pulling its successful FPO in early February.

AEL accounts for almost a fifth of the group’s market cap erosion to date, while Adani Ports, which has recovered sharply from its February lows, accounts for just 2% of the total m-cap loss.

AEL and Adani Ports witnessed a spurt in traders’ outstanding positions, known as open interest (OI), detailing buy or sell positions that are open, or have not been squared off. The positions significantly reduced in February when the stocks fell.

For AEL, the daily average OI surged from 24,000-36,000 contracts a day during January-October to 47,035 contracts in November, Bloomberg data showed. The spurt in OI coincided with the average daily price rise of 18% to ₹3,863 apiece (250 shares equal one contract) in November from the previous month, indicating bullish sentiment. The OI remained above 40,000 daily average contract in January when the price averaged ₹3,666 a share. In February, AEL’s futures contract’s average daily OI fell to 37,228 while the price fell 48% on-month to ₹1,904 apiece.

The generic month average daily OI of Adani Ports rose to 96,533 contracts in November from 40,000-55000 in January-October 2022. The average daily price rose 8% to ₹872 on-month. The daily OI remained at 80,000-94000 a day for two months when the stock prices consolidated at ₹800-873. In February, the average daily price fell 29% to ₹563 and OI fell to 78,749 contracts, showing a huge gain to shorts. The stocks recovered after GQG Partners invested $1.87 billion in group firms on 8 March.