Adani-Hindenburg Case: Market Volatility and SEBI’s Role

In January 2023, U.S.-based short-seller Hindenburg Research published a report accusing the Adani Group, one of India’s largest conglomerates, of accounting fraud, stock manipulation, and corporate governance lapses. The report was released just days before the launch of Adani Enterprises’ ₹20,000 crore Follow-on Public Offer (FPO), triggering sharp declines in the group’s stock prices. Within days, Adani companies collectively lost over $100 billion in market capitalization, making it one of the largest wealth erosions in Indian stock market history.

The controversy brought global attention to the group’s financial practices and raised questions about the robustness of India’s regulatory framework. It also stirred political debates and intensified scrutiny from investors, credit agencies, and foreign institutions. The episode was a test for market resilience and the effectiveness of Indian regulators like SEBI (Securities and Exchange Board of India). It raised concerns over corporate transparency, regulatory oversight, and investor protection mechanisms in emerging markets. While the Adani Group denied all allegations and called the report malicious, the case sparked broader discussions about short-selling, disclosure norms, and systemic risks in the Indian financial ecosystem.

• Market Volatility

The Adani-Hindenburg episode triggered unprecedented market volatility, with Adani stocks witnessing steep intraday losses across multiple trading sessions. Adani Enterprises, Adani Ports, and Adani Green Energy were among the hardest hit, with price corrections of up to 50–60% in just a few weeks. The broader indices like Nifty 50 and Sensex also saw negative spillovers due to the heavy index weightage of Adani Group companies. Investor sentiment turned cautious, especially among foreign institutional investors (FIIs), some of whom began withdrawing from Indian equities fearing systemic risk.

The FPO of Adani Enterprises was fully subscribed but later withdrawn to protect investor interest. Credit agencies like Moody’s and S&P revised their outlook on Adani companies, adding further pressure. Domestic mutual funds and banks with exposure to Adani stocks also saw increased scrutiny. Retail investors were impacted by the sudden wealth erosion and uncertainty surrounding price recovery. The episode highlighted the fragility of emerging markets in the face of external shocks and speculative reports. It also raised concerns about over-leveraging, promoter-driven growth, and the interconnectedness between large corporates and financial institutions. The overall market mood remained jittery for weeks, underlining the importance of transparency, governance, and investor communication.

• SEBI’s Role:

Following the Hindenburg allegations, SEBI faced immense pressure to respond swiftly and effectively. Initially, SEBI issued a public statement confirming its ongoing surveillance of the market and the Adani stocks. Later, under Supreme Court direction, SEBI was tasked with conducting a detailed probe into possible regulatory violations, including allegations of stock price manipulation, lack of disclosure of related-party transactions, and the use of offshore shell companies.

SEBI’s investigation involved examining Foreign Portfolio Investor (FPI) links, corporate structure opacity, and compliance with minimum public shareholding norms. The regulator submitted an interim report to the court, but critics argued that its actions lacked speed and transparency. The Supreme Court-appointed expert committee concluded that SEBI had not found conclusive evidence of manipulation but recommended tightening disclosure norms and beneficial ownership rules.

In response, SEBI began proposing reforms aimed at improving disclosure standards, monitoring high-leverage positions, and enhancing the tracking of offshore fund flows. While SEBI’s role was both questioned and defended, the incident highlighted the need for greater regulatory agility, proactive enforcement, and real-time monitoring capabilities. The case may become a turning point for strengthening India’s market oversight and improving investor protection mechanisms in line with global best practices.