Indian stocks lag Asian peers in January as Adani losses weigh

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By Ambar Warrick 

Investing.com -- Indian stock markets were set for steep losses in January, lagging their Asian peers following a sharp drop in shares linked to the conglomerate Adani Group, which also triggered a wider selldown in local shares.

The BSE Sensex 30 index was set to lose about 2.7% in January, while the Nifty 50 index was set for a 3.1% loss in the month. Both indexes recently sank to a three-month low. 

Selling in Indian stocks intensified over the past week, with shares of the seven listed firms under the ports-to-power conglomerate Adani Group falling drastically after a short seller report targeted the firm.

Hindenburg Research raised concerns that Adani stocks were highly overvalued due to their debt leverage, and also accused the firm of engaging in widespread stock price manipulation and money laundering. 

While the conglomerate categorically denied the Hindenburg report, threatening legal action against the short seller, the resulting stock rout wiped out as much as $85 billion from Adani’s value.

This in turn affected the Nifty 50 the most, given that Adani Enterprises Ltd (NS:ADEL) and Adani Ports and Special Economic Zone Ltd (NS:APSE) - the conglomerate’s two flagship firms - are constituents on the index. 

The Hindenburg report also weighed on stocks with exposure to Adani. Shares of Bank of Baroda Ltd (NS:BOB), Punjab National Bank (NS:PNBK), ICICI Bank Ltd (NS:ICBK), and State Bank Of India (NS:SBI) were set to tumble between 5% and 10% in January, following a string of sharp losses in the past week. Life Insurance Corporation of India (NS:LIFI), which is also exposed to the conglomerate, was set to lose nearly 10% in January. 

Losses triggered by Adani largely offset strong results from a slew of major lenders. 

Industrial stocks owned by Adani, consisting of Ambuja Cements Ltd. (NS:ABUJ) and ACC Ltd (NS:ACC), also tumbled sharply over the past week. 

Beyond Adani, a string of weak quarterly earnings also weighed on Indian stocks through January, amid increasing costs and lower margins for most local firms.

Markets were also skittish in the run-up to the release of the 2023 Union Budget, with investors holding out for more tax breaks.

The underperformance in Indian stocks comes after they largely outperformed their Asian peers in 2022, thanks to resilience in the Indian economy. But that momentum failed to hold as doubts grew over whether the Indian economy will be able to maintain its strength in 2023, amid increasing global headwinds.