Benchmark indices ended the day in the red, with a significant plunge in the shares of Adani Group companies, after bribery allegations surfaced against its chairman, Gautam Adani. The S&P BSE Sensex dropped by 422.59 points, closing at 77,155.79, while the NSE Nifty50 shed 168.60 points to settle at 23,349. This marked a notable retreat for the Indian stock market, particularly following the high-profile controversy surrounding the Adani Group, which dominated market sentiment throughout the day. Broader market indices also experienced substantial selling pressure, highlighting the heightened volatility across various sectors.
The negative movement was widely felt across multiple sectors, with metal, PSU banks, oil and gas, and FMCG leading the list of underperformers. These sectors, which had already been facing headwinds due to global economic uncertainties and weak corporate earnings in Q2, were hit harder by the fresh concerns surrounding the Adani Group. While stock markets had already been under pressure for several weeks, particularly due to foreign institutional investor (FII) outflows and growing valuation concerns, the bribery allegations served as a catalyst, accelerating the downward trend in stock prices.
Adani Group’s stocks were particularly hard hit, with all 10 listed companies in the conglomerate experiencing significant losses. The biggest shock came from Adani Enterprises, which saw its stock price plummet by over 23% on the Bombay Stock Exchange (BSE). Despite the group’s vehement denials of the bribery claims, calling them "baseless," the damage had already been done in terms of investor confidence. The latest allegations, which involve claims of bribery related to securing contracts in the United States, have led to an unprecedented erosion of market value. As a result, over Rs 2 lakh crore was wiped off the market capitalization of Adani Group stocks, deepening the fears of investors, especially those heavily invested in the group.
Vinod Nair, the Head of Research at Geojit Financial Services, attributed the decline in the market to a combination of factors, with the fresh allegations against Adani being a key trigger. He also pointed out that broader global issues such as the escalation of tensions in the Russia-Ukraine conflict and concerns about nuclear threats were also contributing to the negative sentiment. According to Nair, while there had been some signs of a slowdown in FII selling activity, the resurgence of foreign selling weighed heavily on market sentiment, particularly in sectors like financials that are sensitive to foreign investment flows. Nair indicated that the market could recover once global and domestic political tensions ease and investor sentiment stabilizes.
Prashanth Tapse, Senior VP (Research) at Mehta Equities Ltd, highlighted the ongoing "bear hug" the market had been under for several weeks, making today’s steep drop not entirely surprising. However, Tapse emphasized that the latest development surrounding the Adani bribery allegations acted as the tipping point, prompting a massive sell-off in the group’s stocks. With the market already struggling with a series of negative factors, this fresh blow has made it more difficult for investors to maintain confidence.
This sharp market reaction to the Adani controversy is just one of many challenges the Indian market faces. Other headwinds include a global economic slowdown, inflationary pressures, and the continuing uncertainty over the global geopolitical landscape. In the backdrop of these tensions, the Indian market will need to contend with the fallout from corporate controversies and their potential impact on investor confidence.
Investor caution is expected to prevail, with many waiting for further developments both in terms of the investigation into the bribery allegations and the broader economic and geopolitical conditions. The government’s response to the ongoing issues within the Adani Group, as well as the potential for any regulatory or policy changes in the wake of these allegations, will be crucial in shaping market sentiment in the coming weeks. In the short term, analysts anticipate continued volatility until there is greater clarity on both global and domestic issues that are currently weighing heavily on the stock markets.
In the longer term, the outcome of the investigations and how the Adani Group handles this crisis will be watched closely, not only by Indian investors but also by the global investment community. The case has brought into sharp focus the risks associated with large conglomerates, particularly those with significant political and economic influence, and could have far-reaching implications for corporate governance standards in India. The resolution of these issues will play a key role in restoring market confidence and stabilizing the economic environment, both in India and globally.
