Budget euphoria in capital markets fizzles out as Adani stocks slump

Equity benchmarks Sensex and Nifty end on a mixed note

Updated - February 01, 2023 09:20 pm IST

Published - February 01, 2023 08:59 pm IST - MUMBAI

Gautam Adani speaks during an inauguration ceremony after the Adani Group completed the purchase of Haifa Port in Israel on January 31, 2023.

Gautam Adani speaks during an inauguration ceremony after the Adani Group completed the purchase of Haifa Port in Israel on January 31, 2023. | Photo Credit: Reuters

Shares of Adani Group firms taking a beating on the bourses wiped out the gains the capital markets reaped in the early hours of trade following a positive response to the presentation of the Union Budget on Wednesday. 

In a roller-coaster ride, the S&P BSE Sensex surged over 700 points in intra-day trade, but closed with minor gains of 158.18 points or 0.27% to settle at 59,708.08. In contrast, the NSE Nifty declined 45.85 points or 0.26% to end at 17,616.30. Shares of Adani Enterprises nosedived 28.45% to close at ₹2,128.70 on the BSE, while Adani Ports plunged to 19.69%.

“Despite positive budgetary announcements, Indian equities closed lower due to the sell-off in Adani Group stocks when news emerged that Credit Suisse has stopped accepting bonds of Adani Group as collateral for margin loans to its private banking clients,” Mitul Shah, head of research, Reliance Securities, said.

The Budget adequately focused on the holistic development of the economy with special emphasis on infrastructure, MSME financing needs and affordable housing, Mr. Shah said. “The surge in capex spending will assure a significant multiplier effect on the overall medium-term growth prospects of the economy,” he said. 

The bulls were in control in the first half, but the tone reversed as the session progressed, Ajit Mishra, vice-president, technical research, Religare Broking Ltd., said.

“A well-tuned Budget with strong emphasis on consumption and capex has lifted optimism in the market. However, volatility sparked in the latter half as focus shifted back to the Adani saga and Federal Open Market Committee meeting [in the US],” Vinod Nair, head of research at Geojit Financial Services, said. 

“Life insurance players witnessed heavy selling as the Budget pushed for the new tax regime, making insurance products less appealing as a tax-saving tool,” he added.

Stating that the markets had a knee-jerk reaction on Wednesday, stock analyst Arun Kejriwal, founder of Kejriwal Research, said the indices should rise on Thursday once the traders properly understand the implications of the budgetary proposals. 

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