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The rout in Adani Group shares has room to run based on charts that show key stocks in Gautam Adani’s empire may still extend declines to the 85 per cent downside flagged by Hindenburg Research.
The combined market value of the 10 listed companies in the group has slumped by $146 billion, or about 60 per cent, since the US-based short seller released its report a month ago, alleging accounting fraud and stock manipulation. Adani has denied the allegations.
Hindenburg identified seven of the stocks as having the potential to drop by 85 per cent, based “purely on a fundamental basis owing to sky-high valuations,” according to its January 24 report.
Four of those seven show a strong potential to be affected by technical levels, according to a Bloomberg analysis. Charts point to further declines for flagship Adani Enterprises Ltd., tests of support for Adani Transmission Ltd. and Adani Ports & Special Economic Zone Ltd., and a let up in losses for Adani Power Ltd.
Adani Enterprises: Support Distant
Adani Enterprises has slumped about 60 per cent from its close on January 24. It has room to decline another 26 per cent before finding initial support at the February 3 intraday low of ₹1,017, or 33 per cent before touching support from multiple Fibonacci levels in the area between ₹910 to ₹925. Just above that zone is the value level of ₹945 per share ascribed to the stock by Aswath Damodaran, a New York University finance professor.
Adani Transmission: On the Brink
Adani Transmission, which has tumbled 73 per cent since the Hindenburg report, is already testing the lower bound of support in a long-term parallel channel. Failure to arrest the decline here would open the shares to a further drop of about 20 per cent before the next likely support around ₹600, where there is a cluster of Fibonacci levels. The stock has fallen by the 5 per cent limit on every trading day since February 9.
Adani Ports: Bounce Test
Adani Ports & Special Economic Zone has tumbled 44 per cent from its September high, but has lost only 28 per cent since the Hindenburg report. The share’s volatile history includes an 81 per cent peak-to-trough plunge in 2008. Its rebound from a February 3 low was assisted by a cluster of Fibonacci levels lying between ₹370and ₹410. Holding above this zone would open the way to pushing above ₹650, while a breach below would bring into play the pandemic crash lows of around ₹200.
Adani Power: Decline Stalls
Recent price action suggests some buyers are starting to see value in Adani Power after an almost 70 per cent slump from its August highs through last week’s low. The shares are down about 43 per cent from their January 24 close. The formation of a doji candlestick pattern last week — in which opening and closing levels are closely aligned — occurred right at the lower line of a long-term rising channel. The odds of a larger rebound will increase only if the shares break above resistance at ₹191. Failure to do so would make the zone from ₹136 to ₹141 vulnerable, creating the risk of a drop to around ₹100.
Also read: Adani Power promised to supply electricity to Bangladesh in reduced price: Report
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