The intense adverse impact on Adani stock prices has been mitigated after the Adani Group promoters pared down their debt, secured by encumbrances on their shareholding and infusion of fresh investment of $2 billion by a private equity investor from the promoters of the Adani Group.

The Supreme Court-appointed committee to probe Adani- Hindenburg saga said the market has repriced and reassessed the Adani stocks though it has not returned to the pre-January 24, 2023 levels.

Empirical data show that retail investors’ exposure to the Adani stocks has increased and this points to the fact that investors do make their own informed decisions. A fall in the price led to more capital including from retail investors coming into ownership of these stocks at repriced levels, said the report.

The committee suggested that SEBI must consider directing index writers to construct indices to compute volatility of stocks that are constituents of indices so that volatility in these stocks can be compared with volatility in the indices. The availability of such data on a real-time basis would enable the market to be more informed in making its investment and divestment decisions. SEBI must ensure that there are secular norms and periodic reviews for construction and design changes in indices, it said.

High volatility

There was certainly high volatility in the Adani stocks after publication of the Hindenburg Report, with the markets’ confidence in the Adani Group being shaken by the allegations in the Hindenburg Report. While the Hindenburg report called for a probe and was inferential based on publicly available information, it presented together a formulation that questioned the foundational premises on which the market priced Adani stocks, it said.

The Indian market in general was not unduly volatile as is seen in comparison of the Indian volatility index (India VIX) with the CBOE volatility index (CBOE VIX).

Speculative trading volume has gone up substantially after stock exchanges introduced weekly options settlement as compared to the earlier monthly settlements. Most of the volume occurs in the weekly options market, leading to a sharper price discovery, the flip side of which is an inherent potential for increase in volatility.

Since institutional investors such as mutual funds, insurance companies and pension funds use the derivatives segment purely for hedging and mainly deal in the cash segment, according to AMFI, an element of volatility is inherent in the derivatives market due to lack of depth in institutional participation, said the report.

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