Retail Revels on Adani Woes

‘Greedy when others are fearful’ is a Warren Buffett adage that seems to have struck chord with a multitude of retail investors in the Indian stock market. However, unlike Buffett, these investors do not stay invested in any company for long term wealth creation.

Take, for instance, the ‘opportunity in calamity’, which the retail crowd recognised in the Hindenburg allegations that had a serious impact on share prices of Adani Group Companies.

After the publication of Hindenburg Report in January 2023, retail investors jumped at the opportunity of buying shares of Adani Total Gas Ltd. (ATGL), Adani Enterprises Ltd. (AEL), Adani Ports, Adani Green, Adani Power, and Adani Transmission, at abysmally low prices.

Excluding cement companies ACC and Ambuja, in December 2022, the total number of retail subscribers of six Adani group companies stood at 31,78,644. By March 2023, 18,75,687 new subscribers were added in these six companies. However, between March and September 2023, only ATGL and Adani Transmission added 2,79,021 new subscribers. In the same time period, cumulatively 7,28,084 retail subscribers of AEL, Adani Ports, Adani Green, and Adani Power had sold off their shares.

The total retail subscribers in these six original Adani group companies stood at 46,05,259 by September 2023. While about 21.5 Lakh new retail subscribers were added between December 2022 and September 2023, more than one-third of them also exited as quickly as possible.

The trading strategy of retail investors: It is quite obvious that a large chunk of the newly inducted retail crowd of the Indian stock market thrives on trading, as derivative trading now makes about 99.6% of daily volumes. Perhaps there is similar psychology behind delivery based trades as well. Retail subscribers of Adani Group Companies demonstrate a case in point for the short-term opportunistic psychology of the new tribe of retail investors.

In December 2022, Adani Power had 14,88,295 retail investors. By March 2023, 20% more were added, but 95% of this new crowd had disappeared by the end of September 2023, leaving a total of 15,03,347 retail subscribers. Meanwhile, in mid-January 2023, Adani Power shares were hovering around ₹270, just before the Hindenburg Report hit the headlines. And around February 2023, the shares hit their 52-week low of ₹132, a 51% downfall from mid-January prices. By the end of September, share prices had risen about 140% of the mid-January levels. It seems that a large number of retail investors bought shares at very low price and sold off by September 2023, smiling their way to the bank.

On the other hand, there is the case of Adani Total Gas Ltd. (ATGL). By mid-January 2023, ATGL was trading at its 52-week high levels of ₹4,000 and by February 2023, the shares tanked by about 87%, to ₹522. Meanwhile, ATGL retail subscribers jumped by 122% from 1,38,724 in December 2022 to 3,07,955 in March 2023. The share price of ATGL was at about 15% of pre-Hindenburg levels, trading at ₹613.25 on September 29, 2023. It seems that the low share prices had attracted even more buyers, making a grand total of 4,94,186 retail investors in September 2023.

The modus operandi of retail investors Adani Enterprises Ltd. (AEL) share prices had dropped by about 70% from pre-Hindenburg levels to its 52-week low of ₹1,017, around February 2023. However, by September 2023 the share prices had recovered to about 69% of the mid-January levels. Between December 2022 and March 2023, AEL had added about 4,93,173 new subscribers. Out of these 37% had exited by September 2023. Total retail subscribers of AEL in September 2023 were 5,66,232 after losing 1,80,373 from March 2023 numbers.

The same is the case with Adani Ports where its end of September share price was 7% more than the pre-Hindenburg price. Between December 2022 and March 2023, the company had added 3,74,440 retail subscribers, out of which 47% had exited by September 2023, leaving a total of 9,44,166 subscribers, where there were 11,20,306 in March 2023.

Adani Green’s end of September price was about 45% of the pre-Hindenburg levels. From December 2022 to March 2023, Adani Green had added 3,60,618 more retail subscribers, adding up to 7,60,513. The company lost 84,242 subscribers by September 2023.

On the other hand, Adani Transmission added 1,75,835 more retail subscribers between December 2022 and March 2023, and gained further 92,790 by September 2023. The share price of Adani Transmission was at about a meagre 29% of the pre-Hindenberg levels at the end of September. It appears that the rate of exodus of new investors is directly proportional to the price recovery of a company’s shares with respect to mid-January levels.

Of the total 18,75,678 subscribers added between December 2022 and March 2023, 39% have exited after minting profits. However, 2,79,021 more subscribers have bought shares of ATGL and Adani Transmission between March and September 2023 as they are trading much below pre-Hindenburg levels. While the Hindenburg controversy led to erosion of Adani Group’s cumulative market cap from about ₹20 Lakh Crore to ₹11 Lakh Crore within a fortnight, lakhs of retail investors are gambling to profit from the Group’s recovery, post distress.

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