Finance Minister Nirmala Sitharaman signalled on Saturday, February 11, that the government was drafting a response to the Supreme Court’s concerns about the meltdown in Adani group stocks in the wake of a research report published by US-based short seller Hindenburg Research. Ms. Sitharaman emphasised that the country’s “experienced” regulators were already seized of the matter and were always “on their toes”.
On Friday, a three-judge bench of the Supreme Court led by Chief Justice of India (CJI) D.Y. Chandrachud expressed concerns about the need to protect Indian investors from sudden market volatility, pointing out that the stock market was no longer limited to just “high value investors” but also a “wide spectrum of the middle-class”.
Asking how it would be ensured that something like the week-long stock meltdown and volatility would not happen in the future, the Court had sought a note from the market regulator, the Securities Exchange Board of India (SEBI), on the regulatory framework for stock markets at its next hearing on February 13, adding that it may even consider setting up an expert panel to act as a “wise guiding force” in the matter.
Responding to a query after a meeting with the Reserve Bank of India’s Board in Delhi, the Ms. Sitharaman said that she was not going to divulge into what the Centre’s response would be in the top court.
However, the Minister said: “India’s regulators — and I am sitting in the company of one of the oldest regulators in the country [pointing to central bank governor Shaktikanta Das] — India’s regulators are very, very experienced, and they are experts in their domains. So, the regulators are fairly seized of this matter and they are on their toes, as always, not just now. So, I will leave it there.”
The January 24 release of the scathing report by Hindenburg Research alleging irregularities in the financial practices of the Adani conglomerate triggered a huge sell-off in the group’s stock, with its listed companies losing a combined value of over $110 billion in market capitalisation in about a week’s time. While the Adani group has denied all allegations, the Hindenburg report has invoked concerns in the market about the robustness of the country’s regulatory framework. The crisis of confidence also mounted with the initial silence of SEBI on the matter. Notably, the Supreme Court also asked SEBI for a “threadbare analysis” of its powers and to suggest whether it needed to grow more teeth to deal with the “new world” of seamless capital movement.
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