Adani stocks gain despite spotlight on Modi ties

Shares of the three listed firms of nearly $9 billion Adani Group traded with strong gains in a weak Mumbai market on Tuesday. Adani Group is based in Gujarat, where BJP's prime ministerial candidate Narendra Modi is current chief minister.

There are perceptions of close ties between Adani and the BJP and shares of the Adani group have moved on hopes of electoral success for the BJP.

The group's flagship Adani Enterprises has surged over three-fold since the BJP announced Mr Modi as its prime ministerial candidate in September 2013. The stock has nearly doubled since the start of February, compared with a nearly 20 per cent gain in the infrastructure index.

Analysts say Adani Group has benefitted from Mr Modi's emphasis on infrastructure development. However, the BJP's opponents have accused Mr Modi's government of favouring the Adani Group, especially by selling land at below market price for the group's massive port-cum-SEZ in Mundra along the Gujarat coast.

The BJP has denied these allegations, but Gujarat government's own documents, accessed by website Truth of Gujarat, suggest that the Adani Group may have got land below the market rates. (Read the full story here)

Mr Adani told NDTV that these low rates pertain to an earlier period, before Mr Modi came to power.

These accusations, however, have had little impact on the fate of the group's shares in the market. Adani Enterprises closed 1.3 per cent higher at Rs 433.90 after earlier rising as much as 4 per cent. Adani Power and Adani Ports traded higher for most part of Tuesday's session, but closed with 0.3 and 0.5 per cent losses as against a 0.7 per cent drop in the broader Sensex.

The big question for common investors is, are Adani Group stocks benefitting from a speculative rally, which is bereft of fundamentals?

Global brokerage Nomura has named Adani Ports and SEZ among its 11 bets that are likely to be beneficiaries of the improving fundamentals resulting from a stable government. (Read the full story here)

A stable, investment-focused government is likely to lead to faster decision making and removal of key bottlenecks in infrastructure projects, Nomura says. A recovery in economic growth should bode well for ports, transport operators and IPPs (independent power producers), it added.

Adani's vast port and special economic zone at Mundra is the first Indian commercial port to claim 100 million tonnes in annual cargo handled. The company has also built India's largest privately-owned power plant near the port.

The brokerage has a price target of Rs. 237 on the Adani Ports, indicating a 23 per cent upside in share prices.

More recently, the group has stepped up its operations outside Gujarat in recent years with hefty investments in Australia and elsewhere in India, which is viewed positively by analysts.

(With inputs from agencies)