The recent indictment of Gautam Adani in New York, linked to allegations of a multi-million-dollar bribery and fraud scandal, has caused significant market turmoil for both the Adani Group and its major lenders.
Following the news, shares of the Adani Group dropped by as much as 20 percent, while public sector banks such as State Bank of India (SBI), Bank of Baroda (BoB), and Punjab National Bank (PNB) experienced declines of up to 7 percent on November 21. This has raised concerns among investors about the long-term implications for these financial institutions.
However, analysts believe that the market's response has been excessive and that the underlying fundamentals of PSU banks remain strong. They argue that the alleged $250 million in bribes is not as significant as the market has priced in, and much of the expected exposure has already been discounted. Market experts are recommending strategic accumulation of PSU bank stocks during this downturn, highlighting the strong asset quality and provisioning measures taken by these banks. They believe that concerns regarding exposure to Adani Group loans are overstated.
While negative sentiment may persist until more clarity emerges regarding the situation, analysts do not anticipate a repeat of the drastic declines experienced following the initial Hindenburg report. The Adani Group has stated its commitment to pursuing legal action related to the allegations, and investors are closely monitoring developments for further clarity. The performance of PSU banks will likely remain intertwined with the group's ability to address the allegations and restore investor confidence.