Adani Green, Adani Energy Solutions jump after F&O inclusion

The inclusion of Adani Green Energy and Adani Energy Solutions in the futures and options (F&O) segment of the National Stock Exchange drew huge participation from traders and investors, sending these two stocks soaring.

Friday’s outsized gains helped the shares of Adani Green Energy (up 21%) and Adani Energy Solutions (up 13.4%) contribute the most to investor wealth creation within the eleven Adani group’s listed companies.

Against a total increase in Adani group’s market capitalization of ₹628 billion to ₹13.7 trillion on Friday, Adani Green accounted for three-fifths of the rise, as its market value soared by ₹375 billion to ₹2.09 trillion, while Adani Energy Solution’s followed with a jump of ₹136.5 billion to ₹1 trillion.

Taken together, investor wealth on both the counters rose by ₹512 billion, contributing 81% to the group’s rise in m-cap to ₹13.7 trillion as of Friday. The group m-cap before the US court indictment stood at ₹14.28 trillion on 19 November. On 21 November, after the news of US indictment surfaced, the m-cap plumbed to ₹12.04 trillion. After Friday’s positive close, the m-cap was just ₹580 billion away from last Tuesday’s level.

“The introduction to the F&O segment saw traders sell their cash holdings and take leveraged positions on Adani Green and Adani Energy Solutions, while those holding a negative view, given the recent US legal case, took negative positions and sold to the buyers,” said Rajesh Palviya, senior vice-president research (head technical & derivatives) at Axis Securities.

Third to be included

Adani Total Gas was the third Adani Group company to be included in the F&O segment on Friday, but the stock witnessed relatively muted interest, rising a mere 1.06% to ₹812.35.

The growing interest in the stocks of Adani Green Energy and Adani Energy Solutions came after news surfaced recently that founder Gautam Adani and other senior officials of Adani Green were not indicted under the Foreign Corrupt Practices Act (FCPA), though they are alleged to have committed securities and wire fraud in the bribery scheme related to securing lucrative power contracts from Indian states.

On Friday, the stocks got a further boost after Bloomberg reported that Japanese lenders would continue to maintain their ties to the tycoon despite the US’ bribery charges. Also, affirmation of credit ratings by Crisil added to the positive sentiment.

Soon after the news of US indictment surfaced, the Kenyan government cancelled proposed deals worth a reported $730 million with the Adani Group, and the conglomerate pulled a $600 million bond offering in the US as a fallout from the case. The Adani Group has termed the charges as “baseless”.

Zero-sum game

F&O is a zero-sum game wherein no new wealth gets created but where money moves from the loser’s pocket to that of the winner’s.

On the futures counter, traders added 4,271 contracts on the front month Adani Green contract (26 December expiry) while on Adani Energy Solutions, 2,128 contracts were added as the spot contracts jumped almost 22% to ₹1,323.9 apiece for Adani Green and 15.6% for Adani Energy Solutions to ₹840.5.

While Friday was the first day for the F&O inclusion, the open interest build-up in both the counters suggested bullish sentiment, per brokers.

Uttam Bagri, director, BCB Brokerage, said that inclusion in F&O segment would result in an increase in participation on the Adani Counters.

Flagship Adani Enterprises, Adani Ports, ACC and Ambuja Cements are already part of the F&O segment. To be included in F&O, stocks must have been in the top 500 stocks by market capitalization and daily traded value for the last six months. The stock’s marketwide position limit over the last six months should be at least ₹1,500 crore and its median quarter sigma order size over the same period should be at least ₹75 lakh. This parameter refers to the the amount needed to move a stock’s price by a quarter of its standard deviation (dispersion from mean) over the past six months.