Why are Adani stock prices increasing?

Adani stocks are back in the news. And this time, they brought smiles to investors' faces. At the start of 2023, after the Hindenburg report came into the public domain, most Adani stocks fell more than 50%. They remained under pressure for most months in 2023. However, in the last few weeks, they have started an uptrend. For example, Adani Enterprises, in the last one month, is up 20%, compared to Nifty50's 8% returns. Why are Adani's stock prices increasing? In this article, we cover the reasons for the recent rally in Adani stocks.

Adani Stocks Recent Performance

In the last one month, Adani stocks have given an exceptional rally. Let us look at Adani companies' returns. 

*one month ending 31 December

Adani Enterprises is up by 20%, Adani Port is up by 24%, Adani Total Gas has given a 39% rally, Adani Energy Solutions has given 19.5% returns, and Adani Power has delivered 21% returns to its investors. Last on the list, Adani Wilmar has been the only one with single-digit returns of 4%.

The fall of Adani stocks

As shown in the table above, despite the recent rally, the 2023 returns are in the red for some Adani companies. Before we discuss the rally reasons, we need to understand - why Adani stocks fell in the first place.

In January 2023, US investment research and activist short-seller firm, Hindenburg accused the group of stock manipulation and accounting fraud. In this report, the research firm has accused the Adani-led group of a “brazen stock manipulation and accounting fraud scheme over the course of decades.” 

The Adani group denied the allegation made by the firm and called it "a malicious combination of selective misinformation and stale, baseless and discredited allegations." 

Even though the group denied the allegations, it turned the investors' sentiment against the group companies. Adani stocks fell up to 75%, post the report was made public.

Why are Adani stocks increasing?

Let us look at the reasons that led to Adani's stock rally in recent weeks. Here are the top reasons for it:

State Election Impact: The BJP won the north-belt state elections in the first week of December. It signaled to the market that the BJP government has a strong chance to win the third term in the general elections in May next year. The Adani Group stocks actually rallied after the state election result announcement. The strong BJP performance has reduced the political risks around general elections and stable government.

Supreme Court & SEBI Judgements: First, SEBI has given a clean chit to the group on 22 out of 24 cases related to market manipulation by the Adani group. Also, the Supreme Court reserved judgment on PILs seeking a court-monitored probe into allegations by Hindenburg Research against the Adani group for stock market violations. 

In the judgment, the Court has questioned SEBI on safeguarding investors from market fluctuations. As discussed in the last section, allegations of inflated share prices from the Hindenburg report caused a significant drop in Adani companies' value, prompting petitions. Now, the Court's intervention has turned the investors' sentiment positive.

Foreign Investments: We mentioned in the previous point that investors' sentiments have turned positive after the SC ruling. There is another reason for the same. As per reports, Adani group companies have received more than Rs 52,000 crore from global strategic investors, insurance, and retirement funds in 2023 - most of which has come in the second half of 2023. Abu Dhabi Investment Authority and Australia’s superannuation funds, such as Australian Super and CareSuper invested in Adani Stocks this year.

COP28 themes benefit some Adani companies: COP28 (and clean energy) themes have been investors' favorites of late. Also, Adani Group has made announcements about clean energy. Mr. Gautam Adani has said in one of his posts on X that "Adani Electricity stands out with its green initiatives". 

He added that the company is "on course to provide 60% renewable electricity to Mumbai by 2027", noting that once achieved, this will set a global record for a major city. Adani Group is also seeking to raise as much as $4 billion to help develop manufacturing plants that would produce low-cost green hydrogen. All these developments are helping the companies around this business.

Before you go

Despite the recent rally, most Adani stocks are far from their all-time high. Investors should continuously monitor the news around the Adani stocks and check the quarterly results if they are invested in the company. To open new positions, you should evaluate the individual companies before investing.