Unfortunately, Adani Group’s Crisis Emerges at the Wrong Time!

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  • One of the most reassuring signs emerging from the backdrop of the disastrous last three years of the pandemic and the ongoing Russia-Ukraine conflict was the way the Indian economy was able to tide over the crisis through some resilient economic measures initiated by the Indian government. Of course, due credit should go to the people of all hues who joined hands with the government ensuring the country doesn’t stare at an imminent disaster. Yes, our economic fundamentals must have been strong enough to not only face the dire challenges with resolute counter-measures but also showed people’s steely resolve to not give up just like that despite being placed under tremendous survival pressures.

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  • Several naysayers, including economic experts, were intent on writing off the Indian economy predicting catastrophic consequences in the face of mounting challenges. We could sail through those difficult times and also emerge as the fastest-growing economy in the world aptly mirrors how strong our fiscal fundamentals are. Even as few of the most economically advanced nations are grappling to emerge less scathed from the geopolitical dynamics being played out in their respective economies, India showed tremendous survival instincts logging up impressive figures indicating bouncing back. When all looked hunky dory with predictions showing 6-7% GDP growth for the year, comes the news about the Adani group’s fraudulent governance charges.
  • The damning Hindenburg Research report on the Adani group’s corporate practices has shaken the investor’s confidence leading to a meltdown of stock shares of over $107 billion. This has pulled down the enthusiasm of the market dynamics to a great extent leading to a ring of uncertainty on the efficacy of the regulatory aspects. Thankfully, the signs emerging from the market are encouraging. The Nifty 50 stock index ended last Friday’s session at 17,845.05, a gain of 1% over the week. One of its constituents, Adani Enterprise, recorded a 50% fall in its price during the week to close at Rs 1531. The sharp divergence here is an indicator of the underlying optimism in the Indian economy which an index of diverse companies captures.

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  • The optimism about India’s economic future has shown up for a while. Indeed, two trends are worth highlighting. In 2022, global economic and geopolitical disruptions led to a net FII outflow of $16.5 billion in Indian equities. Yet, the bellwether BSE Sensex rose 4.4% in 2022. The FII outflow was more than offset by the emergence of Indian retail investors in equity as a countervailing force. Take mutual fund SIPs, a proxy for retail investment. Since September 2021, the monthly inflow has exceeded Rs 10,000 crore every month. In 2022-23, the annual inflow is set to more than double what was collected five years ago. The GOI has reassured investors of the integrity of market systems.
  • However, the performance of Adani group shares indicates uncertainty. This fear needs to be addressed by the regulators in India’s larger economic interest. Remember, what is at stake is not only the credibility of the lending institutions but also the hard-earned money of common citizens hoping for a just reward.