Indian government and business circles are worried about the timing of the report by Hindenburg Research, seen as a Deep State entity, Sputnik India has learnt. There are fears that the group behind the scenes wants destabilise the Modi government, amid concerns about US role in Bangladesh. – Sputnik Reported
The report by US short-seller Hindenburg Research against Indian market regulator Securities and Exchange Board of India (SEBI) is being viewed as a ‘Deep State plot’ to undermine confidence in Indian institutions, industry sources have told Sputnik India.
The Indian authorities have been made aware of these endeavours by Hindenburg Research, which they say are essentially attempts by Western actors to destabilize the government of Prime Minister Narendra Modi, sources informed.
There are several possible reasons, according to the sources, why West would want to destabilise India: a strong-performing economy, which was poised to overtake the US in coming decades, increasing use of INR amid de-dollarisation and a strong tradition of strategic autonomy in foreign policy.
“There is a clear attempt to discredit Indian public institutions. The attacks are not on Adani per se, but on the integrity of SEBI this time. Similarly, their previous report (in January 2023) had triggered panic in major public institutions such as Life Insurance Corporation (LIC), State Bank of India (SBI) and other public sector banks which have an exposure to Adani scrips,” the sources claim.
India’s stock market to GDP ratio has increased from 77% in 2019 to 124% in 2023-24. However, any significant volatility in the markets could affect millions of middle-class Indians directly invested in the market, sources said.
Further, the field experts observed that what has happened is the direct opposite of what is being intended by Hindenburg, adding that LIC has increased their respective exposures, albeit marginally, to Adani entities between then and now.
“There is an economic motive as well, which is to benefit by shorting Adani stocks. It is believed that around 200 US-based stockbrokers and middlemen had received advanced copies of the Hindenburg report published last January, which had triggered one of the biggest stock market crashes in Indian corporate history,” sources revealed.
Hindenburg was yet to make it clear to SEBI whether the American entity benefited from the shorting of Adani shares, they noted. The question was raised in a show-cause notice by SEBI to Hindenburg last month.
Significantly, the sources expressed concern that the Deep State actors are aided by certain Indian interests, which allegedly include opposition politicians, rival businesses as well as some in the government.
Sources added that these Indian entities may be looking at “short-term political or economic gains”, while overlooking the larger geopolitical context.
“The trove of documents Hindenburg has received wouldn’t have been possible if it hadn’t been help from Indian actors. The Deep State, which involves a section of US establishment and billionaires like George Soros, has many fronts in India,” sources claim.
Significantly, India’s main opposition Congress party has demanded the resignation of SEBI Chief Madhabi Buch in the wake of the latest allegations. Further, a Congress party statement on Monday claimed that Prime Minister Narendra Modi ‘facilitate his close friend’s illicit activities’.
The ruling BJP has criticised the stance of the Congress Party. BJP Parliamentarian Kangana Ranaut has accused Gandhi of “trying everything to destabilize this nation, its security and economy”.
For its part, SEBI has dismissed the allegations of going soft on Adani in the ongoing investigations. Additionally, the Indian market regulator has also rejected the conflict-of-interest charges against Buch.
“The Hon’ble Supreme Court in its Order of January 3, 2024, noted that SEBI had completed 22 of the 24 into the Adani group. Subsequently, one more investigation was completed in March 2024, and one remaining investigation is close to completion,” SEBI said in a statement on Sunday.
The SEBI statement further stressed that Buch had made “relevant disclosures” from time to time, and had also “recused herself in matters involving potential conflicts of interest”, as it responsed to a charge that the SEBI chair and her husband had hidden stakes in two offshore funds which were linked to laundering of money by Adani.
Meanwhile, Adani has described the allegations in the new Hindenburg report as “malicious, mischievous and manipulative selections of publicly available information to arrive at pre-determined conclusions for personal profiteering with wanton disregard for facts and the law.”
Last year, Adani had described allegations by Hindenburg as a “calculated attack on India”.
‘Timing of Hindenburg Report Questionable’
Sputnik India also spoke to several Indian market experts to understand the motivation of Hindenburg Research in targeting Indian public institutions.
“While Hindenburg’s intention may not directly be to indulge in India’s domestic politics, but seems to be to start boiling the pot all over again. The timing of the report is questionable. It comes after the events in Bangladesh and the proroguing of the Parliament session and the conclusion of the Budget session. The geopolitical motive could be unintended and Hindenburg, not directly, but may provide fuel and ammunition so that it could be twisted into a geopolitical issue,” Arun Kejriwal, the Founder and Director at the investment advisory firm KRIS, told Sputnik India.
In a way Hindenburg was trying to “play dirty and raise havoc in the Indian market” through “diversionary tactics”, Kejriwal remarked.
Further, the expert recalled that the allegation raised with respect to SEBI chief were already “done and dusted”. A more apparent motive was to make money by shorting Indian scrips, Kejriwal suggested.
“The last time Hindenburg came out with its report, it came out of the blue as nobody had anticipated such an attack. The markets reacted adversely, triggering one of the biggest stock market crash in Indian history. However, as we saw at the opening of markets today, there was no significant impact due to the report. The very purpose of creating a panic in the Indian stock market has been defeated,” Kejriwal asserted.
He, however, opined that New Delhi shouldn’t allow Hindenburg to go “scot-free” in the wake of its attack on SEBI. The expert suggested the board to write to International Organization of Securities Commissions (IOSCO), which oversees the regulatory markets around the world, and seek details about Hindenburg’s credentials as well as who is regulating it.
“Now, since Hindenburg has hurled direct charges against an Indian institution, there is bound to be retaliation from the regulator and from the government,” Kejriwal stated.
On the other hand, Sudip Bandyopadhyay, Group Chairman of Inditrade Capital, told Sputnik India that allegations of activist investors at a management to replace them altogether is widespread in the US.
Meanwhile, by better handling accusations from shortsellers like Hindenburg, the Indian market is definitely maturing, he said.
“We saw what happened in the lead-up to the Lok Sabha election results, when the market went down and then recovered. The same was witnessed when the Capital Gains Tax was increased in the Union Budget on 23 July,” Bandyopadhyay concluded.