All the Stocks of the Adani Group hit the lower circuit remarkably on Monday 14th June 2021 in the morning session. What were the possible reasons behind the fall in the stock prices and what lessons could be learned from this kind of scenario? To know more about this in detail, read this article.
Introduction:
As of now, the NSDL has informed that 3 Foreign Portfolio Investors (FPI) Accounts worth Rs. 43,500 Cr. has been frozen. This freezing of accounts has been done under the PMLA Act of 2019. The company was asked to clarify their ownership details, which have not been responded to on due time.
Reasons behind fall in Adani Group Stocks:
- National Securities Depository Limited (NSDL) has frozen 3 Foreign Portfolio Investors (FPIs) Accounts worth Rs. 43,500 Cr.
- These 3 FPIs are Albula Investment Fund, Cresta Fund, and APMS Investment Fund.
- All these FPIs together own over Rs. 43,500 Cr. in the following Adani Group Stocks: Adani Enterprises, Adani Green Energy, Adani Transmission, and Adani Total Gas.
- NSDL has frozen these FPIs accounts on or before 31st May.
- Prime reasons behind these freezing of FPIs accounts is due to insufficient disclosure of information on beneficial ownership as per the Prevention of Money Laundering Act (PMLA).
- The identity of these FPIs is now being searched by the Securities Exchange Board of India.
Source: The Economic Times
Concerns with Adani Group Stocks:
- There has been always a concern regarding the Institutional Holdings in the Adani Group Stocks, as the Domestic Institutional Investors (DIIs) were not taking much stake in this group stocks, while Foreign Institutional Investors (FIIs) were more interested in the stocks of the Adani Group and hence were increasing the stake.
- In many of the Adani Group Stocks, DIIs have participated in Adani Group Stocks because these stocks are part of Indices like Nifty 50 or Nifty Next 50. And due to this reason, Index Funds needs to invest in them.
- The freezing of a such whoopie amount i.e., Rs. 43,500 Cr. of FPIs raises an issue of Corporate Governance.
Lessons Learnt:
- If the financials of the stock is not supporting the stock performance of the company, then one should be cautious.
- There should be no comparison of upside and downside. From an upside viewpoint, a stock can travel as much it can, as per its base effect. But from the downside viewpoint, as per the base effect, a stock can fall up to a maximum of 100%, it cannot fall more than that, else it will become zero.
Conclusion:
The exponential rise in the stock price of Adani Group Stocks and now the raising issue of Corporate Governance in the stocks of the group is an important thing to watch for every investor. The inspection of the Corporate Governance of the company is one of the initial steps for screening the company before investing. Hence, one should follow their due diligence before investing in any stock and should check all the parameters before investing in any stock.
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