Stock market reacts to indictment of Adani in US

The market capitalisation of Adani Group stocks has decreased by Rs 2.24 lakh crore (approximately $26 billion) following allegations from US authorities against Gautam Adani, his companies and executives concerning bribery and fraud on Thursday. Experts suggest that the allegations from the US Department of Justice (DoJ) could hinder the group's access to the stock market, as international financial institutions and investors may choose to distance themselves until the matter is resolved.

Financial analysts note that while the group does not face any immediate repayment deadlines, access to public markets may remain limited for several months.

Stock market reaction and forecast

Market analysts hold varying opinions on the future of Adani shares. Apurva Sheth, head of research at Samco Securities, recommends that retail investors avoid Adani stocks until the situation stabilizes. "Only those who are comfortable with high risk should consider these shares as we await further developments," he stated.

Sheth also mentioned that even if the allegations are cleared, share prices may remain stagnant without reaching new highs shortly.

Market analysts express concern over the potential for significant settlements that the group may have to pay to US authorities.

"The seriousness of the charges from US authorities has raised concerns about corporate governance among investors," noted Hemang Jani, founder-director of equity advisory firm Finazenn. "However, investors are primarily worried about the ongoing negative news surrounding the group."

These new allegations come less than two years after US short-seller Hindenburg released a critical report in January 2023, which led to a significant drop in Adani's share prices. The report accused the conglomerate of 'blatant stock manipulation' and 'accounting fraud.'

Conversely, Deven Choksey, founder and MD of DRChoksey FinServ, has expressed a positive outlook for a recovery in stock prices and encourages retail investors to hold onto their positions.

Financial analysts are divided regarding the long-term implications of the bribery allegations. Analysts at SKI Capital indicate that while a settlement could provide some stability, the group may still encounter difficulties in securing international funding.

"Although the Adani Group has avenues for appeals and settlements," remarked Narinder Wadhwa, Managing Director of SKI Capital, "the damage to their reputation and heightened scrutiny may hinder their capacity to attract significant international investments."

In a recent media briefing with Goldman Sachs's emerging markets equity strategist, an analyst emphasized the importance of closely observing developments related to the Adani Group. He pointed out that the indictments from the US Department of Justice and investigations by the SEC into group executives are detrimental to investor confidence.

The Department of Justice has brought charges against billionaire Gautam Adani, his nephew Sagar Adani, and six others for their alleged roles in a corruption scheme worth thousands of crores of rupees, which misled US investors and obstructed investigations — posing serious legal and reputational risks for the well-known Indian conglomerate.

Both the New York district court and the Securities and Exchange Commission (SEC) have filed criminal and civil charges, which could lead to significant financial penalties and recovery of profits, while also remaining amenable to settlement options. The Federal Bureau of Investigation (FBI) has been involved in the investigation.

The Adani Group has denied all allegations and stated its commitment to pursuing legal action.