Nifty 50 index at risk after the new Adani allegations

The Nifty 50 index continued drifting downwards as trades digested the new allegations about Adani’s empire. The index slipped to a low of 16,850, meaning it has slipped by over 10% from the highest point this year. This means that it has entered a correction zone.

New Adani allegations

The Nifty 50 and Sensex indices continued their bearish trend on Friday as investors assess the performance of Adani. In fact, Adani Enterprises share price was the worst-performer on Friday as it dropped by over 2%.

The latest catalyst for Adani was new reports about how the company received its funding. According to the Financial Times, about 50% of all foreign direct investments (FDI) in the company came from offshore entities linked to Gautam Adani’s family. 

The report said that these offshore firms invested at least $2.6 billion in the group between 2017 and 2022. Also, the report said that the amount was likely higher considering that not all data was captured by official statistics.

One of the goals of these flows was to inflate the company’s stock price. This report seemed to confirm some of the allegations that Hindenburg Research wrote in its now infamous report. 

Adani Enterprises and Adani Power were the worst-performing Nifty 50 index constituents this week. The other top companies that dropped during the week were Coal India, HCL Technologies, Tata Steel, Wipro, and Bajaj Finance.

Indian bank and insurance stocks were among the best-performing this week. HDFC Life and SBI Life stock price rose by more than 2%. Axis Bank rose by 1% after falling sharply last week as banks remained under scrutiny.

Nifty 50 index forecast

Nifty chart by TradingView

The daily chart shows that the Nifty 50 index has been in a bearish trend in the past few weeks. It has formed a downward channel shown in blue and is now hovering at the 50% Fibonacci Retracement level. The index has also moved below the 50-day exponential moving average while the MACD has continued drifting lower.

Therefore, the index will likely continue falling in the near term, with the next key level to watch being at 16,605 INR, the 61.8% Fibonacci Retracement point. The alternative is where the index rises and retests the upper side of the channel at ~17,553 INR.