Adani Group’s shares in its seven listed companies lost Rs 1 lakh crore (US$ 10.73 billion) in market capitalisation in India on Wednesday after Hindenburg Research published a report. The crash continued for the second straight day on Jan 27, 2023.
Hindenburg Research report stated that the conglomerate took a short position in certain securities of the group through its US-traded bonds and non-Indian-traded derivative instruments.
Short Selling occurs when an investor sells all the shares that he does not own at the time of a trade. In short, a trader buys shares from the owner with the help of a brokerage and sells them at a current market price with the hope that prices will surge.
When the stock price falls, the seller buys the shares and books a profit. However, short-selling comes with a high risk-to-reward ratio, and traders can either book profit from short-selling or incur huge losses from it.
Short-selling is a term in the stock market that involves making a quick sale while earning a decent profit in a short time. Long-term investors buy stocks and speculate on their rise in the future, while short-sellers tend to look at the price situation and make gains from falling prices.
There two primary reasons which make investors get involved in short-selling of shares are speculation and hedging risk.
An investor may be speculating about the prices of a particular company’s stock taking a dip due to an impending earnings announcement or perhaps other relevant factors.
Such an investor buys the shares and sells them at a higher price. When the price slip downward, the investor repurchases such shares at a comparatively lower price and returns them to the lender. This way, the investor books profits through the price difference.
On the other hand, an investor could be holding a long position in a particular related security. In order to protect themselves from the downside risk, these investors may short-sell this security, so that they can hedge the risk.
Founded by Nate Anderson, Hindenburg is a US activist fund that looks for stocks that have a possibility to crash.
Meanwhile, Adani Group has denied the allegations levied in the Hindenburg Research report, and the company looks forward to taking a legal course.
Rajiv is an independent editorial consultant for the last decade. Prior to this, he worked as a full-time journalist associated with various prominent print media houses. In his spare time, he loves to paint on canvas.
The systematic investment plan (SIP) contribution in February 2024 has crossed a new milestone. The monthly contribution tipped at Rs…
The Income-Tax (I-T) Department has directed taxpayers to access the Annual Information Statement (AIS) via the e-filing official portal and…
Considering the vagaries of the stock market, investors often ponder over reevaluating their strategies. Whether to continue to remain invested…
Financial planning is beyond just investing wisely to save on taxes; it's also related to protecting oneself and one's loved…
A salaried individual earning up to Rs 5-15 lakh as net salary on an annual basis must first take stock…
Equity-linked savings schemes (ELSS), also referred to as tax-saving schemes, are equity funds that invest a significant portion of their…