India’s regulators are looking into the Supreme Court’s suggestion of reviewing the framework to protect stock market investors, Union finance minister Nirmala Sitharaman said on Saturday, a day after the top court’s comments that came in the context of a rout in the share prices of Adani Group companies.
The minister’s comments came as officials separately reiterated the regulatory system was robust, and that the controversy surrounding the Gautam Adani-led companies was a one-off incident with no wider implications for India’s business environment.
“India’s regulators are very-very experienced and they are experts in their domains. So, the regulators are seized with this matter and they are on their toes, as always, not just now…,” Sitharaman told reporters after the post-Budget interaction with the Reserve Bank of India’s board.
Stocks of Adani group companies plunged after a report from American activist investor group Hindenburg Research accused it of fraud and stock price manipulation — allegations that the Indian conglomerate denied.
Sitharaman declined to provide any specific details related to the Supreme Court’s directives and observations. “Obviously, [you are] not expecting me to say, to you or to this gathering of senior journalists, what I will be saying in the court,” she said.
The Supreme Court on Friday implored the Union government to put in place a “robust framework” by amending laws and strengthening supervisory control in order to protect thousands of investors who have been hit after Adani Group companies lost a record $120 billion, or nearly 50% of their value, within days.
Dealing with two public interest litigations (PIL) that highlighted the share price rout, a bench headed by Chief Justice of India (CJI) Dhananjaya Y Chandrachud proposed the constitution of an expert committee under the supervision of a retired judge to formulate the way forward.
“If the Union (government) is ready to accept the suggestion, the necessary recommendation of the committee may be made,” said the court in its order, while asking solicitor general (SG) Tushar Mehta, who appeared for the Centre and the market regulator Sebi, to submit by February 13 a detailed report on the current regime and the changes that can be planned to make it more robust in the future.
Two senior bureaucrats in the government said on condition of anonymity that Indian financial institutions are robust and both — banking sector regulator Reserve Bank of India, and market regulator Securities and Exchange Board of India (Sebi) — are vigilant. “Adani shares fell after a report, veracity of which will be examined by regulators. But this is an isolated event involving one individual company. Regulatory mechanisms are in place and effective. They will act accordingly. Meanwhile, stocks are volatile in nature and investors know risks associated with it,” one of them said.
Union finance secretary TV Somanathan, in an interview to HT on Monday, said India has a “sound financial market infrastructure” with “strong regulators”, and it is “safe trading place” that will not be affected by one individual company.
With reference to the Adani controversy, he had said: “As far as the public financial institutions — the banks and insurance companies — are concerned, they are absolutely safe. I will repeat that whatever has happened is utterly insignificant, too small in its effect on the public financial institutions.”
“There’s absolutely no danger to depositors, policyholders, investors in these institutions,” he added.
The fallout of the Hindenburg report has since triggered a massive political row as well, with the Opposition targeting the ruling Bharatiya Janata Party over alleged links between Prime Minister Narendra Modi, and his government, and the Adani Group.
Congress leaders say the losses to investors, and the impact on state lender State Bank of India (SBI) and pension fund Life Insurance Corporation of India (LIC) must be investigated, and whether they were forced into having an outsized exposure must be probed.
The government has distanced itself, pointing to regulatory bodies capable of taking required action.