Why do Adani stocks show such a volume surge? Sandip Sabharwal explains

“The panic in Adani bonds is largely driven by what is happening to their global bonds. The yields of some of their bonds have gone up to as high as 30%. That is effectively a default kind of bond yield that would normally not happen. I don’t really know what is happening out here,” says Sandip Sabharwal, asksandipsabharwal.com.

What explains this extraordinary volume surge in Adani stock? I can understand that the stock is down but retail investors hardly own it. It’s a stock institutional investors or whoever owned have decided to throw away but the stock today in the NSE cash market, has traded six-seven times more than the volume of Reliance!
I think volumes keep on happening in such stocks because of arbitrage etc. Also, that is not so important but it is very well owned among retail investors. The entire Adani Group because I know as I get so many portfolios people sent to me to see, everyone has their own share of Adani stocks in their portfolios but it is not enough to create the kind of panic which is there and which is largely driven by what is happening to their global bonds. The yields of some of their bonds have gone up to as high as 30%.

Now 30% is effectively a default kind of bond yield that would normally not happen, so that has happened, because most of the banks in India are saying that the repayments are on schedule and it is well covered. I don’t really know what is happening out here.

The casualty from this year’s Budget is the insurance sector. The government wants to move to a new tax regime, take out whatever is giving you exemption and insurance has been a big industry which in a sense has given tax benefits for years now. In the light of what has come in the Budget, how do you see life insurance companies moving now?
There will be a definite hit now. Most of the companies have come out and said that the hit on them might be marginal but I do not think so because as per some of the insurance brokers I have talked to, they were quite negative on this move because a lot of money in high value gets deployed in insurance for taxation benefit purposes. Growth could slow down in the near term and that is what is getting reflected in stock prices. It is not a sector which will completely go out and once these stock prices adjust to the new normal, at that time they will be again worth looking at.

Let us look at the market positioning. One year ago, high growth stocks were getting extremely richly valued. Same time last year , , were on a different plateau and that trade has reversed completely. Then high leverage companies made a comeback whether it was Adani Group companies or infrastructure companies or real estate companies. IT has already corrected, the FMCG stocks are expensive. Now with the exception of banks which are a proxy on economy, where is leadership in the market?
Yes but then there is leadership in the auto stocks. Look at something like M&M which is almost at an all-time high. Look at

which can potentially make a comeback. Good numbers are coming from . Even delivered good numbers. So this four-wheeler space looks decently placed. On the infrastructure side, irrespective of whatever is correcting, L&T is doing reasonably well. It is just 3%, 4%, 5% off from the tops. Many other capital good companies will also do reasonably and financials will come back after this wave of correction.

So that’s where the leadership will lie. On the consumer side, durables, non-durables, selective companies will keep on doing well. Selective stories out of defence etc. will keep on doing well. Look at the last two-three days, the results of and were exceptional. Many of these companies which are giving exceptional results and which adjust their valuations for a much higher stock price in the future, could still do well.