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Introduction
Today, I want to share my research on the Adani Group, walk you through my calculations, and explain my investment strategy. Whether you’re new to investing or trying to fine-tune your approach, this discussion might help you understand how to evaluate opportunities in the stock market.
I am not a SEBI-registered investment advisor or research analyst. Everything I share here is for educational purposes only and based on my personal research. Always consult your financial advisor before making any investments, and remember that stock markets involve risks.
The Adani Group stocks, which are the focus of my research, are highly volatile. While I see long-term potential, it’s crucial to carefully assess the risks before investing.
Why read when you can watch the video
My Investment Approach: Planning for Long-Term Success
Investing for the long term requires:
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Research to identify undervalued opportunities.
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Taking calculated risks while managing downside exposure.
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Using logical reasoning to avoid emotional decisions.
Currently, Adani Group stocks present an interesting opportunity. Many are trading at 40–55% discounts compared to their 52-week highs. This provides a chance to invest at lower prices, with the aim of holding these stocks for 6 months to 3 years and achieving significant returns.
How I Did My Calculations
To estimate potential returns, I analyzed the following Adani Group companies:
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Adani Enterprises
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Adani Ports
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Adani Green Energy
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Adani Power
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Adani Total Gas
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ACC
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Ambuja Cement
I compared their 52-week high prices with their current prices and noted the discounts. For most of these companies, the discounts range from 40% to 55%, signaling significant upside potential if the stocks recover.
For example, even if these stocks return to just 80% of their 52-week highs, the returns could still be impressive.
Why Are Adani Stocks Trading at a Discount?
The main reason is the indictment charges filed by the U.S. Department of Justice, which caused panic selling among investors.
However, I see this situation as a temporary opportunity for long-term investors. Here’s why:
1. Markets Overreact:
Investors often panic in response to negative news. While the charges are serious, I believe the fundamentals of Adani Group’s businesses remain strong, and the sell-off is overdone.
2. Political Influence:
Adani’s close ties with the Indian government, particularly Prime Minister Modi, have attracted international criticism. In my opinion, these charges are part of a politically motivated campaign to discredit the group. Figures like George Soros may also be amplifying the negative sentiment.
3. Business Resilience:
Most of Adani’s businesses are domestic, which limits their exposure to U.S. regulations. Moreover, the group has 28 months of loan serviceability, giving them enough time to manage their financial obligations.
In summary, while risks exist, I believe they are temporary, and I remain optimistic about the group’s long-term prospects.
My Investment Strategy
Portfolio Overview
I’m building a portfolio worth ₹30 lakhs with the following allocation:
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₹18 lakhs: My own money.
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₹12 lakhs: Borrowed through margin trade funding (MTF).
Why not borrow more?
While brokers allow up to 80% margin for many stocks, Adani Group stocks are considered riskier. As a result, brokers cap the margin at 40%, meaning I need to invest ₹60 of my own funds for every ₹100.
How I Allocate Funds
I allocate funds based on market capitalization:
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Larger companies (e.g., Adani Enterprises, Adani Ports): Get a larger share as they are relatively safer.
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Smaller companies (e.g., NDTV, Adani Wilmar): Receive smaller allocations, typically ₹30,000–₹60,000.
This approach balances risk and reward, while ensuring stability.
Expected Returns
Here’s what I expect from my portfolio:
1. Short-Term (6 Months):
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Partial recovery could deliver an average ROI of 34–35%, even after accounting for borrowing costs.
2. Medium-Term (1 Year):
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Over a year, I expect an ROI of around 38%.
3. Long-Term (2–3 Years):
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In a worst-case scenario, if I hold for 3 years, I still anticipate annualized returns of 15% or more.
Even with conservative assumptions, the returns remain attractive for a high-risk portfolio.
Key Risks and How I Mitigate Them
1. U.S. Indictment Charges:
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While concerning, the group’s 28-month loan serviceability provides ample time to address these challenges.
2. Political Risks:
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The criticism surrounding Adani’s government connections creates uncertainty, but it also offers stability and support domestically.
3. Business Fundamentals:
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Adani’s diversified, India-focused businesses are less exposed to global pressures.
Why I’m Confident in My Strategy
1. Buying at a Discount:
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Acquiring stocks at 40–55% discounts creates a margin of safety.
2. Balanced Allocation:
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Allocating funds based on market capitalization reduces overall risk.
3. Conservative Assumptions:
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Even with cautious estimates, the returns are promising.