Adani bulls cut positions before news of US indictment

Mumbai: Two days before a US court indicted senior officials of Adani Green Energy for allegedly bribing Indian state government officials to secure lucrative power contracts, bulls on two of the group companies' derivatives counters slashed their long positions, saving them from massive losses that hit the group shares after the news broke.

A report of the allegations, dismissed as "baseless" by the Adani Group, surfaced early on Thursday morning, leaving investors with a ₹2.24-trillion hole in their pockets at the end of the day.

Interestingly, certain traders holding futures positions of Adani Enterprises and Adani Ports, squared off or closed out a substantial part of these on Tuesday, two days ahead of the carnage. Wednesday was a holiday for assembly elections in Maharashtra.

On Adani Enterprises' active futures contract, traders squared off 16.27 lakh shares on Tuesday, reducing outstanding positions—open interest (OI)—by 8% to 1.78 crore shares with the contract price closing down 0.25% to ₹2,819.55 a share, National Stock Exchange (NSE) data shows.

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On Thursday, post the news, the contract, which takes cues from the spot price, tanked 23% to ₹2,178.55. The crash was driven by bulls further liquidating their outstanding positive positions by 22.92 lakh shares or 13% to 1.55 crore shares.

A fall in share prices accompanied by a decrease in open interest (OI) indicates long liquidation.

"I wonder whether it's a coincidence that before the publication of news reports, OI fell significantly," said a broking official requesting anonymity. "If it is, it's an amazing coincidence."

Also read: Adani bribery case: US SEC summons Gautam Adani, Sagar Adani

A similar pattern played out in Adani Ports, though the liquidation was not as sharp as in Adani Enterprises.

On Tuesday, OI of the active contract dropped by 3% to 2.55 crore shares as the price settled flat at ₹1,288.70. On Thursday, the OI fell by 4.6% as the contract price slumped 13.6% to ₹1,113.15.

"The prices of the group company stocks will react to emergent news flows, and until further clarity emerges, traders might like to keep away from the counters," said Rajesh Palviya, head derivatives & technical research at Axis Securities.

Also read: Mint Explainer: The Adani bribery charges and the US legal process