Adani effect? PSU bank stocks fall up to 7%; SBI, PNB, BoB lead

Shares of public sector banks declined up to 7% in intraday trade on Thursday, in sync with the broader market, led by a sharp sell-off in index heavyweights such as State Bank of India (SBI), Bank of Baroda (BoB), Canara Bank, and Punjab National Bank (PNB). The weakness in PSU bank stocks was triggered amid a sharp sell-off in Adani Group companies, in which banks and NBFCs have exposure of about 36% of the total debt. The total market capitalisation of Adani group listed entities declined over ₹2.2 lakh crore today after the power-to-port conglomerate’s chairman Gautam Adani and seven others were indicted in a multibillion-dollar bribery and fraud scheme in the U.S. court.

The banks and NBFCs have given over ₹88,000 crore in loans to the Adani Group, with three big PSBs (SBI, PNB, Bank of Baroda) having exposure of nearly ₹40,000 crore. SBI has given a maximum loan of ₹27,000 crore, while PNB and BoB’s exposures stand at ₹7,000 crore and ₹5,380 crore, respectively.

Among the PSU bank stocks, BoB shares dropped as much as 7.3%, followed by PNB, which slipped over 6% in intraday trade. On the other hand, shares of SBI, the country’s most valued banking stock, and Canara Bank lost over 5% during the trade so far.

The Nifty PSU Bank index crashed more than 5% today, with all 12 constituents flashing in red, falling in the range of 2-7%. Meanwhile, the equity benchmark Sensex and Nifty witnessed sharp selling today, falling up to 1%.

On the other hand, Adani Group companies crashed up to 20%, with more than half of them hitting their lower circuit limit. The group stocks were hammered after Gautam Adani was indicted in a federal court in Brooklyn, New York for allegedly bribing Indian government officials with over $250 million to secure lucrative solar energy contracts worth billions of dollars. 

In a separate development, U.S. Securities and Exchange Commission (SEC) charged Gautam Adani and his nephew Sagar Adani for an alleged bribery plot that involved paying or promising to pay the equivalent of hundreds of millions of dollars in bribes to Indian government officials to secure their commitment to purchase energy at above-market rates that would benefit Adani Green and Azure Power.

Meanwhile, Adani Group has refuted the allegations made by the U.S. Department of Justice and the U.S. Securities and Exchange Commission against directors of Adani Green, calling it “baseless”.

“As stated by the US Department of Justice itself, "the charges in the indictment are allegations and the defendants are presumed innocent unless and until proven guilty." All possible legal recourse will be sought,” says spokesperson of Adani Group.

“The Adani Group has always upheld and is steadfastly committed to maintaining the highest standards of governance, transparency and regulatory compliance across all jurisdictions of its operations. We assure our stakeholders, partners and employees that we are a law-abiding organisation, fully compliant with all laws,” says the spokesperson.

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