Why has NSE put three Adani Stocks under surveillance
Adani Group stocks have been on a recovery path after the fiasco that followed the Hindenburg Research report. Things were looking up for the conglomerate. However, the National Stock Exchange (NSE) has played spoilsport by putting as many as three Adani stocks under the short-term additional surveillance mechanism (ASM). Why did the NSE decide to do so?
Why does this story matter?
- The Hindenburg report accusing the Adani Group of accounting fraud and market manipulation resulted in the conglomerate losing over $100 billion in market value.
- However, international road shows and proactive payment of debts helped the group recover from the mess. The conglomerate's listed companies were on a rally for six days.
- However, NSE's decision could have an adverse impact on the recovery.
Adani Enterprises, Adani Power, Adani Wilmar are under surveillance
The Adani group companies that are under the ASM framework are Adani Enterprises, Adani Power, and Adani Wilmar. The order came into effect today. It is interesting to note that Adani Enterprises was first placed under the ASM framework in February. It was removed only a couple of days ago. Therefore, it is surprising to see it back under surveillance this soon.
Placing under ASM is not an adverse action: NSE
ASM framework is an initiative by the Securities and Exchange Board of India (SEBI) and exchanges to enhance market integrity and protect investor interests. It is a pre-emptive measure taken by exchanges to prevent speculative trading and short-selling. "The shortlisting of securities under ASM is purely on account of market surveillance and it should not be construed as an adverse action," said NSE.
Adani Group stocks were on a six-day rally
That brings us to the question, why did NSE place Adani Enterprises and two other group companies under ASM? Before today, Adani Group companies moved up for six consecutive trading sessions courtesy of the conglomerate's recovery measures and low-level buying from investors. On Wednesday, Adani Enterprises ended at a month high. It is this volatility that prompted NSE to place them under ASM.
Stocks under ASM cannot be pledged
When stocks are placed under the ASM framework, they are monitored and subjected to stringent rules. These stocks cannot be pledged and are forbidden from intraday leverages. They are subject to 100% margin after five days, making margin trading effectively impossible. This is to prevent traders from buying or selling stocks at a discounted price. They also have a 5% circuit filter.
Adani Enterprises' six-day streak ended today
Let's take a look at how the three Adani stocks performed today after being placed under the ASM framework. Adani Enterprises, the conglomerate's flagship company, fell 4.82% to close at Rs. 1,941.40, ending its six-day streak. On the other hand, both Adani Power and Adani Wilmar traded in the green. They gained 4.98% and 2.59%, respectively.