Pre-Budget rally in jeopardy; more pain likely in Adani scrips -

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By S Jha

New Delhi, January 28: The much anticipated pre-Budget rally by all accounts look sacrificed on the altars of the Adani Saga. The fear of the margin call inducing more short selling in the Adani Group of stocks is seen gripping the stock market.

The Adani Group of stocks have gone into the bear claws after the revelation of the Hindenberg research. The US-based research agency, which has made name for picking up corporate frauds, is upping the ante against the Adani Group of companies by revealing details of their findings, which included auditors in their 20s signing the audit reports of some of the companies.

With the Budget session of Parliament commencing next week, the Adani Saga is likely to take political turn. Opposition parties may press for probe into the allegations into the charges made by the Hindenberg Research. Already, LIC and SBI, the two public sector behemoths, have taken major hits for their exposure to the Adani Group.

The market participants are now appearing worried that the financial institutions may begin dumping the pledged shares of the Adani Group of companies, once thresholds are breached. Even the shares of the latest acquisition by Adani – Ambuja Cement and ACC – were pledged. In the event of the short selling by the financial institutions, there could be the possibility of cascading effect, which may trigger margin money call. Since most of the Adani stocks are part of the MSCI, there is a move to take a fresh look at the credentials for them being part of the index.

With Budget being on Wednesday, there are only two days left for any rally in the market. But there are signs that the market may wait for Finance Minister Nirmala Sitharaman to give fresh cues for the direction of the equity indices. But with banking sector coming under the bear assault on account of the Adani Saga and the IT scrips not yet out of the woods, the stock markets may be without market leaders giving direction. Incidentally, the auto sector is the only outperformer even amid the secular equity rout. Tata Motors after giving a stellar quarterly result is likely to stay bullish. Bajaj Auto and Maruti have also been seen to be bullish after their quarterly results.