Adani stocks: Is this the right time to invest?

“… going ahead with the issue will not be morally correct…” Gautam Adani, on Cancelled FPO

Adani’s FPO was withdrawn, meaning whatever money was raised will be returned to the investors. In a concise span of time the stock of the Adani enterprise corrected by more than 60% and so are the other shares of the group.

Even if the Hindenburg episode had not happened, the stocks would have corrected maybe in due course of time because of the high valuation it commanded.

I don’t want to talk about the allegations of Adani’s wrongdoing, but from a neutral ground would like to shed some light on the current valuation as I write this post.

If you look at the PE, PB, PC, and PS – the stock is still far from its 5-year average, and even after such correction it might appear expensive (refer to the image below).

As we use morning star work station their valuation technique which is based on discounted cash flow says otherwise all the stocks appear to be undervalued.

Now, whether the stock is expensive or available at a fair price will depend on the perception of the investor to the investor, as it varies from one person to another.

The stocks have been hitting lower circuit and some of the investors, specifically retailer might feel trapped and desperate to get out of their position, most of the mutual fund houses has already exited from Adani group stocks (except Adani Enterprise and Adani Green) as of 31.12.2022.

One of my known who has invested to the tune of 10 Cr., in Adani Green stock itself is now worried (just like every other normal human would be) about what should he do with such massive holdings as he has lost half of its value.

The same investor was happy and cheering when he made an astronomical gain when every other X, Y, and Z investor/trader was betting big on Adani Green.

‘Behti Ganga mein haat dhona’ – after the first lockdown, I recall sitting with some of my friends and their friends (mostly engineers); they were talking about how Green is the best stock to invest in and the profits they have already made, and how foolish I was to remain silent and say nothing.

But if I look back most of them have either closed their trading account or are sitting on a huge pile of losses.

I do get calls on whether they should enter the stocks right now or wait. The answer is simple – if you are an investor, the answer is ‘BIG NO’; its not wise to catch the falling knife. Let the price settle, then you can catch the bus.

If you are a trader and want to take advantage of the situation definitely a contrarian bet would be highly risky, but if your chart says otherwise then ‘Maybe’, you can try your luck. The regulators are keeping a close eye on the entire ADANI Saga, what’s going to happen next is an interesting watch, but to summarise the entire discussion –