Adani Enterprises: Stock tanks 67% in 3 days, 5 reasons why Adani's flagship company is in real pain

Adani Enterprises has been on a free-fall recently as the stock has wiped out two-third of investors wealth in just three sessions. Shares of Adani Enterprises dropped 35 per cent on Friday to its new 52-week low at Rs 1,017.10 before making a partial recovery.

Adani Enterprises, the flagship company of Gautam Adani led Adani Group, has dropped 67 per cent in just three sessions from Rs 3,050-level to new low. However, it has been hit hard by Hindenburg Research's report as the stock has plummeted 75 per cent from its 52-week high at Rs 4,189.55.

Here are the five reasons which led to a sharp fall in price of Adani Enterprises, giving investors severe pain for straight three sessions:

Exclusion from Dow Jones Sustainability Indices: Adani Enterprises shares have received another jolt from the US as the stock is facing removal from the Dow Jones Sustainability Indices, effective prior to open on Tuesday, February 7, 2023. This may make the Adani group's share less appealing to sustainability-minded funds.

Entry in Additional Surveillance Measure framework: Adani Enterprises has been put under additional surveillance measure (ASM) framework by both BSE and National Stock Exchange (NSE) to curb short-selling. Along with with it, Adani Ports and Ambuja Cements under ASM framework effective February 3, 2023.

NSE, in its circular released on February 2, noted that applicable rate of margin shall be 50 per cent or existing margin, whichever is higher, subject to maximum rate of margin capped at 100 per cent with effect from February 6, 2023 on all open positions as on February 3 and new positions created from February 6.

FPO called-off: Adani Enterprises, on February 1, announced to withdraw its Rs 20,000 crore follow-on public offering (FPO) just a day after conclusion of the issue, when it was booked 1.12 times. Adani Group chairperson Gautam Adani cited moral grounds for calling off the issue said money will be returned to investors. The move was not liked much by the street.

Credit Suisse assigned zero lending value: On Wednesday, February 1, Global brokerage firm Credit Suisse assigned zero lending value to its bonds. The decision by Switzerland's investment banker to stop accepting bonds of Adani Group companies as collateral for margin loans to private banking clients triggered panic selling in the stock.

Citigroup followed Credit Suisse: The US-based investment banker Citigroup followed the path of Credit Suisse and stopped accepting securities of Gautam Adani’s group of firms as collateral for margin loans on Thursday, February 2. The move added more to the woes of beleaguered Adani Group.

On January 24, Hindenburg Research has released its report on Adani Group companies which triggered a sharp sell-off in the Adani Group companies, wiping out about Rs 10 lakh crore from investors' kitty since then. The short seller had alleged the conglomerate for malpractices and manipulation of its stock prices.

According to market analysts, it is very difficult to determine the bottom in Adani Group stocks as the stocks have turned volatile and its it is too tough to determine the support or resistance levels in these stocks.

Kranthi Bathini, Equity Strategist at WealthMills Securities said that Adani Group stocks have always been high beta stocks, suited for the high risk appetite investors. These stocks have become more volatile and riskier bets at the current juncture, not suitable for all, he said.

"An investor, who has the capacity to lose money, only those should look at these stocks as the market is moving on sentiments lately. One may pick Adani Ports or Adani Enterprises in a staggered manner," he told.

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