By Ankur Banerjee
SINGAPORE (Reuters) – Concerns surrounding bribery charges against the Adani Group may dampen investor sentiment in India, but global investors remain optimistic about the country’s long-term outlook. They believe that despite the allegations, India’s strong economic fundamentals will help it bounce back in the coming year.
The U.S. allegations against Gautam Adani’s conglomerate, which have been denied by the company, suggest that bribes were paid to secure power sales and that misleading disclosures were made. This has caused turbulence in the stocks and debts of Adani companies.
While investors anticipate increased scrutiny on governance and disclosure practices, they are confident that the underlying reasons for investing in India remain intact – the growing economy and vast consumer market.
“Foreign investors may become more cautious about the transparency and governance of Indian companies,” said Steve Lawrence, chief investment officer at Balfour Capital.
Despite the Adani controversy, the Nifty 50 index has seen a 3% increase since the news broke, indicating a level of confidence. However, Adani-owned companies have collectively lost $14 billion in market value during the same period.
Foreign investors, although a relatively small segment in India’s equity market, closely monitor the market’s performance, viewing it as an attractive investment destination compared to China’s slowing economy.
India’s Sensex has more than doubled from its pandemic lows in 2020, surpassing many other markets, a trend that investors believe will persist despite the Adani scandal.
“We view the Adani indictment as a company-specific event and do not foresee any negative impact on India as a whole,” said Mike Sell, head of global emerging market equities at Alquity.
Following a period of profit-taking and uncertainty before the U.S. election, foreign investments in Indian stocks stabilized in November after a net outflow of $11 billion in October.
While the Adani Group’s troubles and a lackluster earnings season have raised concerns, investors remain positive about India’s economic prospects, driven by government policies and structural tailwinds.
Despite potential risks such as high valuations, investors continue to seek opportunities in Indian equities, focusing on quality and defensive stocks with strong fundamentals.
As scrutiny on corporate disclosures intensifies post-Adani, investors are expected to conduct more thorough due diligence before making investment decisions.
Most investors downplay the Adani scandal as a trigger for market volatility and believe that India’s growth story remains compelling.
“I don’t believe that a single case will deter client demand,” said Tareck Horchani, head of prime brokerage dealing at Maybank Securities in Singapore, comparing India’s current boom to China’s growth 15 years ago.
