Adani Group's stock surge at risk of reversal, technical indicator shows

The stock rallies of Gautam Adani’s companies, which expanded his fortune at a pace that outran all other billionaires globally, is set for a reversal, according to a technical indicator that predicted previous slumps for more than a decade.

TD Sequential, a widely followed DeMark technical indicator that forecast drops in Adani Enterprises Ltd. three times since 2009, suggests that last week’s near 6% slump in the shares of the company may extend, with the stock continuing to pare its more than 100% gains for the year. It also hints at losses in the offing for the shares of Adani Total Gas Ltd. and Adani Ports & Special Economic Zone Ltd.

Adani, who started the year as No. 14 on the Bloomberg Billionaires Index, had surged to the second spot before last week’s rout in his company’s stocks reversed some gains in his wealth. Shares of his flagship Adani Enterprises rose to a record last month, and some of his companies, including Adani Total, have climbed more than 1,000% in the last two years.

“Technical indicators suggest that these three Adani group stocks will face significant headwinds,” said Kunal Kansara, co-founder and strategist at Mumbai-based Curl Capital. “Some of these stocks are also dangerously overbought and are ripe for a deeper setback based on price action.”

The TD Sequential study, a market timing indicator that uses a method of counting applied to chart patterns, suggests a reversal of the rally in the three Adani stocks. The last trend reversal signal on Adani Ports -- flashed in 2021 and still active with a downside forecast -- is the second since its listing in 2007, while that on Adani Total from August is the first since the stock made its public debut in 2018.

The last time TD Sequential suggested a reversal to rally in Adani Ports’ shares was in 2015, and a 55% drop followed. However, those who made trades following a 2007 sell signal by the indicator on Adani Enterprises, the first one since its public market debut in 1999, faced losses. 

Some investors had been balking at the debt-fueled expansion of the group’s ports-to-power conglomerate and the lack of broader coverage by research analysts. The conglomerate’s rapid expansion into areas such as renewable energy and media has left it with leverage that Fitch Group unit CreditSights described as elevated and “a matter of concern.” 

The group has downplayed the concerns, saying its credit metrics have improved in the past few years, and has received equity infusions from global investors. Adani Group didn’t respond to an email seeking comment about the technical indicator suggesting a reversal in share price rise.