In Adani-Hindenburg saga hard to pinpoint regulatory failure, says SC panel

On price volatility, the committee said that the Indian market was 'not unduly volatile' after the Hindenburg report on Adani was revealed in January

It would not be possible to return a finding of regulatory failure on the count of price manipulation in Adani group stocks, the report of an expert committee set up by the Supreme Court to probe the allegations on the group by Hindenburg Research said.

The report said that the committee could not find any pattern of artificial trading among the same parties multiple times. 

"In one of the patches where the price rose, the foreign portfolio investors (FPIs) under investigation were net sellers. One investing entity that had purchased across the patches had purchased far more of other securities. In a nutshell, there was no coherent pattern of abusive trading that has come to light," it said.

On the other hand, it said that Sebi has found that some entities that had taken short positions before the publication of the report have profited from "squaring odd their positions after the price crashed".

"All the parties are still under investigation and thus the committee therefore does not express any opinion on merits," the report added.

On the ownership of overseas entities, the report said that Sebi has been investigating 13 such entities since October 2020 and has found 42 contributors for these. However, despite taking the help of several agencies, Sebi has "drawn a blank".

"The securities market regulator suspects wrongdoing but also finds compliance with various stipulations in attendant regulations. Therefore, the record reveals a chicken-and-egg situation," the committee said in the report.

The panel also recommended a "coherent enforcement policy" to govern minimum public shareholding norms.

On price volatility, the report said that the Indian market was "not unduly volatile" after the report was revealed in January as compared to India VIX and CBOE VIX indices.

"The market has re-priced and re-assessed the Adani stocks. While they may not have returned to pre-January 24 levels, they are stable at the newly re-price level," it said.

The panel added that the exposure of retail investors to Adani group stocks has increased after January 24.

The committee was constituted by the apex court on March 2 to investigate the allegations of Adani Group by the Hindenburg Research report.