Hindenburg Effect: Quant Mutual Fund exits Adani Stocks amid falling shares

Adani Group continues to face challenges, with Quant Mutual Fund reportedly exiting from the company. A source with direct knowledge, who wished to remain anonymous, stated that the fund house changed its view on Adani’s stocks due to the rise in volatility in early February and has now fully reduced its exposure.

On February 2nd, a Twitter user queried Quant Mutual Fund about its holdings in Adani Group stocks. The asset management firm replied that they closely track liquidity and risk appetite data and adjust their portfolio through dynamic rebalancing. CEO Sandeep Tandon further explained in a TV interview that they manage their investments dynamically, adjusting their perspective as the data changes.

On January 28th, Mint reported on Quant Mutual Fund’s holdings in Adani Group stocks. At the end of December, these holdings comprised 5-8% of individual scheme assets, but were reduced to 2-6% in January. However, in February, the fund fully divested from Adani Group stocks. The rapid increase in Adani Group’s stock prices generated impressive returns for Quant’s schemes in 2022, with the Quant Absolute Fund delivering 44.48% and 13.32% returns in 2021 and 2022 respectively, outpacing the S&P BSE 100 index by a substantial margin.

A meltdown in Adani group stocks, resulting in billions of dollars in market value being lost, was triggered by an investigative report from US-based short-seller Hindenburg Research on January 24th. Adani Ports and SEZ has seen a decline of around 40% since the report was released. As a result, Quant Mutual Fund schemes have also suffered.

The Quant Infrastructure Fund has dropped 8.9% since January 24th and the Quant Tax Plan is down 7.7%. Investors in Quant Mutual Fund schemes may experience losses. However, if Adani shares recover, Quant Mutual Fund unit holders may miss out on potential gains. It’s important to note that the fund house’s high-frequency strategy means a quick re-entry into Adani stocks in the event of a rebound cannot be ruled out.