Mumbai: Volatility is considered the lifeblood of battle-hardened traders, but many of these market participants chose to err on the side of caution when it came to punting on Adani Group stocks amid the sharp swings of late. Several short sellers in the domestic market mostly stuck to intra-day bets on Adani derivatives since the sell-off began on January 25 triggered by the adverse report by Hindenburg Research. This suggests many traders played it safe in Adani Group stocks rather than take bold wagers that could have helped them make bigger money in this period.
Traders usually hold on to their bets overnight when they are more certain that there wouldn’t be an event after market hours that could backfire. Though shares of Adani Group companies have fallen on most days since January 24, making them ideal targets for short sellers, the confidence to hold on to bearish positions overnight has been low.
Analysts and traders said trading conditions in Adani stocks have been tricky and the smallest of the news events could result in bets going awry.
“F&O traders have mostly preferred intra-day trades because they wouldn’t want to take overnight risks even though the momentum was pointing to lower levels,” said Chirag Kabani, a Mumbai-based professional trader and technical analyst.
A Broking study of the daily trading volumes and open interest – total outstanding positions at the end of every day – in futures contracts of , , and since January 10 showed this trend.
In Adani Enterprises, the average daily total outstanding positions in its futures contracts after January 24 – when Hindenburg released the report – was over 59,000 contracts as against roughly 62,000 in the 11 days prior. But, the average daily total volumes from January 25 was 11.64 lakh contracts as against the 11-day average of 34,000 contracts. The absence of change in outstanding positions at the end of the day after January 24 and a spike in the daily volumes suggests a jump in intra-day trading.
“The market anxiety over corporate governance has made it difficult for investors and traders to take a long-term view on the group’s stocks,” said Siddarth Bhamre, research head at Religare Broking. “Investors are waiting and watching how the events will play out over the next few days before taking a call, while traders have also been playing it cautious, going by the data.”In Adani Ports, the average daily total outstanding positions in its futures contracts after January 24 was over 112,000 contracts as against the 11-day daily average of roughly 103,000. The average daily total volume from January 25 was 90,632 contracts as against the 11-day average of 27,000 contracts.
Brokers said those who held on to futures positions bets overnight in this period are those holding Adani Group shares or proprietary desks and knowledgeable high net-worth traders who have created complex trading strategies using a mix of futures and options contracts. For investors holding shares, short selling in the futures market is a hedge and helps make a quick buck in the near term.
The NSE’s decision to put Adani Enterprises, Adani Ports and Ambuja Cements under additional surveillance measures (ASM) on Thursday forced several traders – including short sellers – to cut their bets on Friday. Specifically, in Adani Enterprises, a large purchase prompted short sellers to rush to cover their positions.
“Many HNI traders squared off their positions on Friday because of the exchange’s ASM decision that resulted in margins doubling,” said Kabani. “Short sellers also cut their positions intra-day on Friday after there was a big block trade at lower levels that was perceived to be a serious buyer.”
On Friday, Adani Enterprises spiralled as much as 65% from the day’s low of ₹1,017.45 – a level last seen on March 31, 2021 – before ending at ₹1,584.20 on the BSE, up 1.25% over the previous day and 57% above the day’s low. The stock had fallen as much as 35%.
Since January 24, shares of
, Adani Enterprises, , and have plunged between 50% and 58%, whereas , , and Adani Ports lost a little over 30%.
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