Adani Group market cap plunges 18.77% as investors reassess risks after election results

Indian indices plunged on Tuesday as voting trends indicated results were falling short of the exit polls. Both BSE Sensex and NSE Nifty 50 saw their biggest single-day fall in four years after trends showed the incumbent Bharatiya Janata Party was struggling to secure a clear majority. The unexpected outcome of the Lok Sabha polls triggered panic selling across the board, raising concerns about political stability and policy continuity. At close, the Sensex plunged 4,389.73 points, or 5.7%, to 72,079.05, while the Nifty 50 slumped 1,379.40 points, or 5.9%, to 21,884.50.

While the Modi-led National Democratic Alliance (NDA) is still likely to form the government, It is noted that the Bharatiya Janata Party (BJP) winning fewer seats could impede the government’s ability to pursue an aggressive reform agenda.

Against this backdrop of market volatility, the Adani Group of companies witnessed a severe bloodbath. The group’s market capitalisation fell by 18.77% in a single day, resulting in a loss of Rs 3.61 lakh crore. This significant drop underscores the fragility of investor confidence in the group amidst broader market turmoil.

Market Cap Falls Dramatically

The Adani Group witnessed a significant market capitalisation decline on June 4, resulting in a substantial financial loss for investors. The combined market cap of the ten Adani Group companies fell by Rs 3,61,324.02 crore, a decrease of 18.77% in a single day. This drastic fall saw the group’s overall market capitalisation dropping from Rs 19.24 lakh crore on June 3 to Rs 15.63 lakh crore on June 4. The adverse market reaction was largely attributed to the weakened mandate for the BJP-led NDA coalition, which raised concerns about the future performance and regulatory scrutiny of the Adani Group.

Individual Company Performance

Adani Ports and Special Economic Zone Ltd. experienced a 21.15% decline, with its share price falling from Rs 1583.95 to Rs 1248.95. The market capitalisation decreased by Rs 72,364.65 crore, from Rs 3,42,155.21 crore to Rs 2,69,790.55 crore.

Adani Energy Solutions Ltd. saw its share price plummet by 20%, from Rs 1221.95 to Rs 977.6. This decline led to a market capitalisation loss of Rs 27,257.06 crore, bringing it down from Rs 1,36,307.63 crore to Rs 1,09,050.56 crore.

Adani Enterprises Ltd. suffered a 19.31% decrease in its share price, falling from Rs 3645.25 to Rs 2941.25. Consequently, the company’s market capitalisation decreased by Rs 80,256.08 crore, from Rs 4,15,558.91 crore to Rs 3,35,302.83 crore, marking one of the largest declines within the group.

Adani Green Energy Ltd. recorded a 19.23% drop in its share price, declining from Rs 2038 to Rs 1646. This resulted in a market cap loss of Rs 62,094.07 crore, with the market capitalisation falling from Rs 3,22,825.82 crore to Rs 2,60,731.75 crore.

Among other group companies, NDTV lost approximately Rs 321.69 crore, equivalent to an 18.93% decrease in its market cap. Adani Total Gas saw a reduction of Rs 23,173 crore, or 18.82%. Meanwhile, Adani Power experienced a 17.33% drop in its market cap, amounting to Rs 58,451.91 crore.

Factors Contributing to the Decline

The decline in the Adani Group’s market capitalisation was primarily influenced by the depleted mandate for the BJP-led NDA coalition. Opposition parties have alleged that the Adani Group has benefited significantly since Prime Minister Modi assumed office in May 2014. Investors are now concerned that a weaker mandate for the NDA may lead to the group losing its advantageous position. This uncertainty has negatively impacted investor sentiment, leading to the sharp decline in stock prices.

Market Reactions and Implications

The market’s reaction to the weakened political mandate was immediate and severe. On June 3, bolstered by strong exit poll projections for the BJP-led government, the Adani Group’s market cap had breached its pre-Hindenburg report level to hit a 16-month high. However, the subsequent market crash on June 4 reflected investors’ nervousness about the future prospects of the group’s companies amid the political shift.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. The information is based on various secondary sources on the internet and is subject to change. Please consult with a financial expert before making investment decisions.