The Hindu Business Line : ‘Favourable’ political equation lifts ADAG stocks

Anil Dhirubhai Ambani group (ADAG) stocks recovered smartly on short covering, fresh buying and, in some counters, growth in outstanding long positions.

According to analysts, a section of the market players have had pent up shorts in these counters, which were covered significantly, and an expectation that the group may find the going smoother with a “favourable” regime improved the sentimental value for the group’s stocks.

Outperform

On a day when the Sensex went up by 6 per cent, all the ADAG stocks outperformed the benchmark.

Reliance Capital finished with a gain of 14.62 per cent at Rs 1,230. Reliance Communications shot up 12.43 per cent to close at Rs 525.70. Adlabs Films moved up 16.41 per cent.

Reliance Power soared 19.86 per cent to Rs 171.10. Reliance Infrastructure gained 10.56 per cent at Rs 1,016.70. Delivery quantities, however, varied between 12-16 per cent except for RCOM, which saw deliverable quantity to the total traded quantity in the counter on the NSE at 35.27 per cent.

Political proximity

According to Mr V.K. Sharma, Director Angram Securities, RNRL added outstanding position of about 12 per cent, and Adlabs around 6 per cent.

“RPower also added some new position, but there were not much fresh positions in Reliance Capital and Reliance Communications.”

The assumption that a “political proximity” to the people at the power now would help the companies with unchanged fundamentals might have prompted some to buy into the stocks, he said.

“However, some of the companies in this stable would take a long time to generate significant revenues and may not be able to justify higher valuations at present,” he added.

The general optimism after the trust vote results have brought back a sense of momentum in the ADAG stocks in the backdrop of the group’s equations with the current regime. Analysts pointed out that ADAG stocks fared better today over the Mukesh Amabani group stocks.

According to Mr Arun Kejiriwal of KRIS, the movements suggested euphoria; like all euphoria, it is not based on ground realities and there is a question mark on its sustainability.

“Political equation is like a doubled-edged sword, which could cut both ways,” he added.

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