Aug 3, 2023
Brokers stop offering margin trading on select Adani scrips
The majority of top brokers have stopped providing the margin trading facility to investors wanting to take leverage on shares of several Adani Group companies, according to people in the know.
The companies include Adani Green Energy, Adani Total Gas, Adani Power, and Adani Transmission that have been consistently hitting the lower circuit in the past few days.
The margin trading facility (MTF) offered by brokers allows investors to buy stocks by paying just a fraction of the total transaction value. The balance amount is funded by the broker.
The margin can be given in the form of cash or shares as collateral depending upon the availability with the respective investor. According to current rules, shares bought using MTF must be pledged in favour of the broker.
Brokers holding the above-mentioned Adani shares as collateral have been struggling to offload them in the market due to lack of buyers and stoppage in trading after hitting lower circuits.
“Brokers are trying to square off their positions and get away from Adani scrips. There is some buying interest from speculators, but brokers have decided not to offer leverage for the next three months or till things stabilise,” said an industry official, on condition of anonymity.
“Further MTF exposure in several Adani Group stocks has been stopped till clarity emerges,” said Ashish Rathi, whole time director, HDFC Securities.
Brokers who have provided funding have incurred significant losses given that some of the Adani securities didn’t have liquidity and exit wasn’t available, said experts.
MTF for Adani Enterprises and Adani Ports & Sez, however, is still being offered by brokers as these are part of the Nifty 50 index.
The National Stock Exchange of India had included Adani Enterprises, Adani Ports & SEZ and Ambuja Cements under the short-term additional surveillance measure from February 3. This implied margins of 50% or higher. On February 10, Adani Ports and Ambuja Cements were removed from this list.
Gautam Adani, chairman of the Adani Group, said on Tuesday the current market volatility was temporary and that AEL would continue to work with the twin objectives of moderate leverage and look at strategic opportunities to expand and grow.
Two large Adani Group companies are likely to repay their short-term commercial paper debt as they come due over the next few months, instead of rolling them over as is normal, according to a Reuters report. The Group has appointed accountancy firm Grant Thornton for independent audits of some of its companies in a bid to discredit claims by short-seller Hindenburg Research that have battered its stocks and bonds, Reuters reported Monday.
MSCI has changed the foreign inclusion factor in Adani Transmission, Adani Total Gas and Adani Enterprises, which could lead to estimated outflows of $416 million in these companies. The MSCI passive trackers will implement changes on February 28.
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