Investors should remain open to India, despite Adani crisis

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Investors should remain open to India’s enormous potential, despite the heightening crisis engulfing the Adani Group, as global index provider MSCI, is set to change its weightings for the group’s shares, a leading financial manager said.

This follows mass protests by India’s opposition parties earlier this week that are demanding a probe into allegations by a U.S. short-seller against the conglomerate, which triggered the Adani Group of companies share price to plummet sharply.

“The serious issues of the Adani Group, headed by Gautam Adani, are causing such concern in a large part because he has been a close ally of Prime Minister Narendra Modi for many, many years,” said Nigel Green, CEO of independent financial advisory and fintech deVere .

Market losses have now exceeded $110 bln according to media reports since Hindenburg Research accused the corporate giant of stock manipulation and accounting fraud in a 24 January report.

Adani’s diverse businesses include port management, electric power generation and transmission, renewable energy, mining, airport operations, natural gas, food processing and infrastructure.

“With questions now mounting about this hugely influential conglomerate and issues of regulatory frameworks, nepotism, governance and debt, India’s credibility amongst global investors is now hanging in the balance,” explained Green.

China substitute

The debacle, according to many experts, is particularly inconvenient as some multinationals are looking to India as a substitute to China as an investment destination.

The questions being raised by investors have shaken confidence in India.

“However, I would urge them to keep an open mind on India’s incredible opportunities,” said the deVere CEO.

“The country is still set to overtake Japan and Germany to become the world’s third-largest economy, and together with China will account for more than half of global growth this year.”

Green added that India’s economy, “is showing incredible resilience despite external tailwinds such as supply chain issues, the reopening of China, the war in Ukraine, and the impact of considerable economic slowdowns in developed economies.

“The robustness of the Indian economy is attributable in a large part to enormous domestic markets, a growing middle class, significant supply-side reforms, a strong financial sector, pro-business reforms, and the ongoing digitalisation of public and private sectors.”