Adani Group stocks in trouble again! What should investors do now?

Adani Group stocks experienced a rollercoaster trading session on November 22, rebounding sharply after falling by around 10% in early trades. Adani Green Energy spiked over 6 per cent, Adani Enterprises rallied nearly 4 per cent, Adani Power gained more than 3 per cent, and Adani Ports added over 2 per cent.

This recovery followed a sharp 23 per cent decline on Thursday, November 23, driven by intensified controversies surrounding the group. U.S. prosecutors indicted Adani Group Chairman Gautam Adani, his nephew Sagar Adani, and others on charges of orchestrating a $265 million bribery and fraud scheme to expand the group’s solar energy business.

Adani Group's Compounding Troubles

The U.S. allegations claim that the Adani Group conspired with executives from a former New York-listed company to bribe Indian officials and secure business contracts. Adani Group strongly refuted these charges, calling them “baseless,” while Indian government officials have yet to comment.

Adding to the group’s challenges, Kenyan President William Ruto announced the cancellation of two major projects involving Adani Group companies. These include a procurement process for expanding Nairobi’s main airport and a $700 million project for building power transmission lines.

Investor Sentiment and Expert Opinions

Adani Group faces a challenging road ahead as it deals with mounting legal troubles and a deteriorating perception of its governance standards. While some of its stocks showed resilience during the day’s trade, the long-term implications of the allegations could weigh heavily on investor sentiment and the group’s operational prospects.

The near-term outlook remains uncertain, with experts urging caution. Investors are advised to closely follow legal proceedings and evaluate the group’s financial health before making any investment decisions.

The controversies have cast a shadow over the group’s stocks, raising concerns about governance and regulatory scrutiny. Market experts shared mixed views on the outlook for Adani stocks:

Ajit Mishra - SVP, Research, Religare Broking

Mishra observed that most Adani Group stocks have experienced a sharp decline and are now trading near their 52-week lows. Among them, Adani Energy Solutions and Adani Wilmar appear particularly weak and most susceptible to further correction. Investors are advised to exercise caution and avoid taking positions until there are clearer signs of stability in the stocks.

Jathin Kaithavalappil - Assistant Vice President, Choice Broking

Kaithavalappil highlighted that the bribery accusations have damaged investor confidence, potentially restricting the group’s access to financing and further weakening market sentiment. He noted that heightened scrutiny and unresolved governance issues could result in sustained pressure on Adani Group stocks.

“These issues could deplete investor confidence, restrict financing options, and dampen market sentiment. With heightened scrutiny and unresolved uncertainties, the group's stocks are likely to remain underperformers in the near term and increase risks for the stakeholders,” he said.

Atul Parakh - CEO, Bigul

Parekh stated that after the recent downfall seen in the Adani group stocks followed by the ongoing legal issues with its directors, it's essential to monitor ongoing legal developments and evaluate the financial health of the companies involved. The outcomes of these legal battles will be crucial for the group's future stability. Diversifying investments can help mitigate risk, while looking for entry points may provide opportunities for long-term gains. It is advised to be cautious about such group stocks to avoid risk.

The allegations against the Adani Group have introduced significant challenges for the conglomerate, with its stocks facing sustained pressure. Governance concerns, regulatory scrutiny, and heightened uncertainty add layers of complexity for investors. Experts unanimously recommend caution, advising investors to closely monitor legal outcomes and evaluate broader market conditions before making any decisions. While opportunities for long-term gains may arise, the near-term risks call for a prudent and diversified investment approach.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.