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All is well, say government, RBI on Adani Group stock rout



All is well, say government, RBI on Adani Group stock rout

All is well, say government, RBI on Adani Group stock rout

The Adani Group crisis continues to worry investors and shareholders, but the government assured people, saying India’s public financial system is robust despite the fluctuations in the group’s stock value.

Several government officials, including Finance Minister Nirmala Sitharaman and Finance Secretary TV Somanathan, and the Reserve Bank of India issued statements on Friday assuring people that the Adani Group crisis had not affected India’s financial system. This came on a day when the Opposition stepped up its demand for a probe into the allegations levelled by US short-seller Hindenburg Research against the Gautam Adani-owned conglomerate in Parliament.

Meanwhile, the issue reached the Supreme Court after a Public Interest Litigation (PIL) was filed seeking a probe against Hindenburg and its founder, Nathan Anderson. The petition said the firm exploited investors and caused the “artificial crashing” of the Adani Group’s stock value in the market.

Here are the top developments:

  1. In her first reaction to the fall of Adani Group’s stock value, Finance Minister Nirmala Sitharaman said India’s market was “well regulated”. She said one instance “however much talked about globally” is not indicative of how well Indian financial markets have been governed. She added that the investor confidence that existed before shall continue even now.This comes two days after she announced the Union Budget 2023-24 in Parliament.
  2. In a similar vein, the Reserve Bank of India said it keeps a constant vigil on the banking sector and on individual banks to maintain financial stability. The central bank’s statement comes amid concern about the exposures of Indian banks to the Adani Group. The banking sector remains resilient and stable as per its current assessment, said the RBI, adding that banks are in compliance with the Large Exposure Framework (LEF) guidelines it issued.
  3. Finance Secretary TV Somanathan also assured people that India’s public financial system is robust and called the fall in Adani Group’s shares a “storm in a tea cup” from a macroeconomic perspective. He said the shares of a single company cannot create an impact at the macro level and so “there is absolutely no concern from that point of view.” He said the turmoil in the stock market does not affect the macroeconomy, adding, “There is absolutely no concern from the point of view of financial stability, either for depositors, for policyholders, or for anyone holding shares in these institutions.”
  4. The Adani group also faced some relief on Friday after two global rating firms stuck with their calls on its credit profile and its French partner, Total Energies, backed its investments in the group’s firms. This comes after a tumultuous couple of days for the conglomerate after its shares slumped and its value was almost halved. The group’s flagship firm Adani Enterprises ended in positive territory on Friday for the first time since January 24 after erasing an intraday loss of 35 per cent. Adani Ports and SEZ also ended 8 per cent higher. However, six other group stocks finished lower.
  5. Advocate ML Sharma filed a Public Interest Litigation (PIL) in the Supreme Court on Friday seeking an investigation into US short-seller Hindenberg Research and its founder Nathan Anderson after Adani Group’s stocks faced a massive crash following the report it published on the conglomerate. The case said the US firm was responsible for exploiting investors and the “artificial crashing” of the Adani Group’s stock value in the market. A report published by Hindenburg Research accused Adani Group of stock manipulation, improper use of tax havens and money laundering. It also raised concerns about the group’s mounting debts.

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