ADANI ENTERPRISES IS HIGHLY OVERBOUGHT

Adani Enterprises may replace Shree Cement as a constituent of NIFTY 50 stocks which can lead to a shuffling of shares worth Rs 2400 crore. An ICICI research analyst has said the probability of this change is very high. There might be a selling worth of Rs 630 crore in Shree Cement and buying worth of Rs 1760 crore in Adani Enterprises by ETF fund managers after the reshuffling.

NIFTY Reshuffle

The shuffling of Nifty50 shall be announced soon and the changes might come into effect by the end of September 2022.

Since HDFC ltd and HDFC Bank are being merged into one single entity, there will be a void for one additional company in the members of Nifty.

“The HDFC merger will likely result in an unprecedented about 14 percent of the Nifty50 weight getting replaced by two new incoming stocks with a combined weight of 1 percent and the remaining 13 percent weight getting distributed amongst the existing 48 stocks in the index at that time,” said by Vinod Karki who is an ICICI Securities Analyst.

NDTV Acquisition

An Adani Group company has acquired a 29% stake in NDTV and Adani has also announced for an open offer to buy an additional of 26% in NDTV in accordance with SEBI’s takeover rules.

Fundamentals

Data from Screener

If we take a look at the PE ratio of Adani Enterprises, it is very shocking. The book value might somehow justify the highly swollen PE ratio but the Book value seems to be very high. The stock is trading at 16.7 times its book value. EPS ratio is a mere 8.71 which is a big joke. PEG ratio is -115. These are some signs of manipulation.

The PE is 369 on 29th August 2022. This stock is overbought on unimaginable levels. We can see that the share price is highly unrealistic but it may be in accord with the good quarterly results which were declared on 5th August 2022.

Adani Enterprises has reported in their first quarterly earnings: Net Sales are up by 224% to Rs 40844 crore. Net Profit is up by 73% at Rs 469 crore.

The stock has given a return of 55% in the last 6 months and a return of over 90% in the last 12 months.

Technicals

Let us take a look at the candlestick chart for Adani Enterprises:

Adani Enterprises Weekly Candlestick Chart on Sharekhan’s TradeTiger

The price stands around Rs 3146 on 29th August 2022.

If we look at the 200 Days Moving Average. The Price is overextended and very far away from the moving average. This imbalance will not endure for a long period as price which forays far away from the average will return to the average soon.

The Weekly MFI is 92 points. This means that the stock is insanely overbought.

The stock has been into a strong uptrend for a few weeks and the ADX value is about 37 points. The uptrend might become weak soon as ADX value above 40 means the trend is unsustainable and the chances of trend reversal are very high.

Options Data

The Implied Volatility of Adani Enterprises is 50.49 as of 29th August 2022 and the IVP is 87 points. The stock is highly volatile and trading options of this stock will be a deadly affair as option premiums would be very expensive. Hence do not trade options unless you learn from our Advance Options Training Course which is on a 25% discount till 31st August 2022.

Hence this is a very good time to book profits in the stock holdings. Considering all of the data mentioned in this article, we may have a very good opportunity to initiate short trades.

Disclaimer: We do not endorse or encourage you to take trades or investment decisions based upon our posts/research, all of your trading and investment activities are your own and should be taken through consultation with reputed financial advisors. The analysis posted on this website has been created by involving multiple mediums which are present over the Internet.

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