Low float stocks crash big

The sharp plunge in many Adani group stocks on Friday baffled experts, given the shares available for public trading are low.

- Ram Sahgal

While listed firms, by the market regulator's mandate, have to sell 25% of the company to the public, many of the shares of the Adani group are held by investors that rarely trade the stocks, reducing the so-called free float.

An analysis of the number of shares that investors have taken delivery of to the total traded volumes shows that much of the carnage in the wake of the Hindenburg report was caused by non-delivery-based transactions such as short selling that do not require the physical delivery of securities.

Trading volumes of stocks such as Adani Transmission, Ambuja Cements and Adani Ports rose to the highest in a year, while delivery as a percentage of the traded stocks was relatively below the annual average. Stocks of Adani Green Energy, ACC and Adani Enterprises also saw traded volumes hit three-five-month highs, with below-average delivery compared to the yearly average.