Rout in Adani Group stocks triggers panic sell-off in PSU banks

Shares of Adani group stocks took a beating on the bourses on Wednesday following a Bloomberg report that Credit Suisse Group AG has stopped accepting bonds of Gautam Adani’s group of companies as collateral for margin loans to its private banking clients, a sign that scrutiny of the Indian tycoon’s finances is growing after allegations of fraud by short seller Hindenburg Research.

According to the report, the Swiss lender’s private banking arm has assigned a zero lending value for notes sold by Adani Ports and Special Economic Zone, Adani Green Energy and Adani Electricity Mumbai Ltd. It had previously offered a lending value of about 75% for the Adani Ports notes. READ HERE

Following the news, Adani Enterprises crashed 34.3 per cent, while Adani Ports (down 25 per cent), Ambuja Cements (down 20 per cent) and Adani Total Gas (down 10 per cent) from the Adani group were other stocks that bled the most.

Since last week, a sharp fall in Adani group and banking shares has been witnessed after US-based investment research firm, Hindenburg Research, alleged that the Adani group had engaged in “a brazen stock manipulation and accounting fraud scheme”. It also accused the conglomerate of improper use of offshore tax havens, and flagged concerns about the group’s high debt. Adani has denied the short seller’s allegations. CLICK HERE FOR RELEASE

Credit Suisse’s move triggered panic selling across financial stocks with shares of public sector banks taking the sharpest knock. The Nifty PSU Bank index tumbling over 9 per cent.

Nifty PSU Bank index tanked 9.4 per cent to 3,628 on the National Stock Exchange (NSE) in today’s intra-day trade. At 02:54 pm, Nifty PSU Bank index, the top loser among sectoral indices, was down 6.7 per cent, as compared to 1.2 per cent decline in the Nifty 50 index.

State Bank of India, Bank of Baroda (BoB), Canara Bank, Punjab National Bank, Union Bank of India, Indian Bank and Indian Overseas Bank were down in the range of 5 per cent to 10 per cent.

That said, global broking and research firm CLSA said last week that the Adani Group poses no “significant downside risk” to Indian banks. It said that the total exposure of Indian banks is less than 40 per cent of the group’s total debt. READ HERE