Global Watch | Why Indian markets are most attractive destination for global investors

The ‘Hindenburg vs Adani’ saga has proved to be a blessing in disguise as it tested the overall resilience of the Indian markets and the results couldn’t have been better. The expert panel set up by the Supreme Court has significantly highlighted the strength in terms of both the breadth and depth of the Indian market. The way Indian stock markets came out unscathed amidst such tumultuous events that had sent shockwaves across the globe has increased the confidence of global investors manifold. Indian markets, investors, traders and most importantly the authorities handled this episode with great maturity as well as transparency in a time-bound manner. In this context, it is important to have a detailed look at this expert committee’s report as it shows why the Indian stock market continues to be one of the most attractive destinations for not only domestic investors but also the rest of the world. But before we go ahead, let’s have a look at the chain of events from the beginning. On 24 January, 2023, Hindenburg Research published a sensational report titled: “Adani Group: How The World’s 3rd Richest Man Is Pulling The Largest Con In Corporate History.” This led to a major fall in the share prices of Adani Group’s companies and the Indian stock market indices dipped sharply indicating a potential crash. The report was used by the main Opposition Congress Party to mount an attack on the ruling party at the Centre. Congress has been targeting the Adani group for quite some time. A few writ petitions were also filed as public interest litigation in the Supreme Court of India. In the course of dealing with the petitions, the Supreme Court issued an order on 2 March, 2023. The apex court directed the Securities and Exchange Board of India(SEBI) to investigate the following aspects and to file a status report within two months:-

1. Whether there has been a violation of Rule 19A of the Securities Contracts (Regulation) Rules 1957 (“SCRR”);
2. Whether there has been a failure to disclose transactions with related parties and other
3. relevant information which concerns related parties, to SEBI, in accordance with law; and
4. Whether there was any manipulation of stock prices in contravention of existing laws

The Supreme Court also constituted an ‘Expert Committee’ and SEBI was directed to keep this committee apprised about its investigations. The committee was headed by retired justice Abhay Manohar Sapre. The other members were: Justice JP Devadhar (retd.), KV Kamath, OP Bhatt, Nandan Nilekani, Somasekhar Sundaresan. The Supreme Court of India constituted the committee vide order dated March 2, 2023 the report was submitted on 6 May, 2023. The Expert Committee interacted with several government agencies and private individuals and entities in addition to SEBI and submitted its report on 6 May, 2023. The report said that the Committee has not found any price manipulation by the Adani Group and there is no pattern of any artificial trading. According to the report, SEBI has found out some entities had taken short positions prior to the Hindenburg Report and profited after the price crashed upon the publication of the Report on 24 January. These entities are under now investigation. Indian Markets: Most attractive destinations for investment The Expert Committee report has dived deep to check the overall strength and robustness of the Indian stock markets. And the results of this assessment tell you why Indian markets have become the most attractive destinations for domestic as well as foreign investors. In this context, here are some key takeaways from this report: - SEBI submitted that the events related to Adani group companies had no significant impact at the systemic level. While the shares of the group have seen a significant decline in prices on account of selling pressure and may have dominated media attention, the markets remained largely stable and resilient. - According to SEBI, Indian markets have seen far higher turbulent times in the past, especially during the Covid pandemic period, where Nifty-50 fell by around 26 per cent during the period of 2 March, 2020 to 19 March, 2020 (13 trading days). Even, during such turbulent times, the markets continued to function in a robust manner, recovering far faster than global markets. - Investor wealth (market capitalisation of all listed companies) which was around Rs 145 lakh crore in February 2020 has almost doubled to about Rs 270 lakh crore now. Further, overall market volatility in India is on par with or lower than that in major developed markets. - The overall finding is that the Hindenburg report had a negative impact on Nifty 50 only for a short period of two weeks immediately following the publication of the report and the maximum extent of this impact was 4 per cent. After two weeks Nifty-50 bounced back relative to MSCI EM index and continued to outperform it. - Empirical data shows that the retail investors exposure to the Adani stocks has increased would point to the fact that investors and the market do make their own informed decision and a fall in the price led to more capital including from retail investors coming into ownership of these stocks at re-priced levels. - According to a SEBI’S report titled, Analysis of Profit and Loss of Individual Traders Dealing in Equity F & O segments, the total number of unique individual traders who traded through the top ten brokers in the Equity F and O segment has increased by over 500 per cent in FY22 as compared to FY19 and approximately 88 per cent of the individual traders were active traders. The Committee’s conclusion was, “The Indian market in general was not unduly volatile as is seen in the comparison of the Indian Volatility index (VIX) with the CBOE Volatility index (CBOE VIX).” The Committee has made an interesting recommendation to further strengthen the Indian financial system. The report says, “The Committee believes that financial literacy must be introduced as a matter of pedagogy right from school curriculum. Financial security of a society is as vital as national security for a society to be robust. School and university curricula must be attuned to bring in a culture of financial awareness and literary. Earning, saving, investing, earning returns, and giving back to society, are part of a virtuous cycle. The era of treating money with an unstated element of stigma must end.“ The writer, an author and columnist, has written several books. He tweets @ArunAnandLive. Views expressed are personal. Read all the Latest News, Trending News, Cricket News, Bollywood News, India News and Entertainment News here. Follow us on Facebook, Twitter and Instagram.