“Ye market kab khulega reeeeeeeeee...,” tweeted one liberal commenter on a Friday morning, well past 10 AM. Her excitement came through in the extraordinary number of e’s in that sentence. Presumably, she was waiting for shares of Adani group companies to drop. Even though she does not appear to know when markets actually open, nor how to find out.
This is just an example of the unreasoned glee in certain sections over the recent fight between the Adani group and a US-based short seller. Another journalist who has recently lost his job, but not his delusions of grandeur, tweeted to his millions of fans about Adani being caught out by a “global research institution.”
How could such a confusion have happened? Probably because the US-based short seller goes by the name “Hindenburg Research.” In other words, speak now, read later. So what would explain the bizarre emotional reactions all around to a fight between a billionaire and a short-seller? What are the lessons for the general public, the media, the ruling BJP and its supporters, as well as the opposition and its ecosystem?
Here are six takeaways from this still developing story. In my defense, I waited at least two weeks.
1) The Indian financial system is rock solid
If there is any clear upside to the current episode, it must be this. Major international brokerages, ratings agencies, retail investors and everyone else on Dalal Street has spent the last two weeks looking for any systemic risk to Indian banks. Nothing significant was found. The RBI asked each bank to disclose their exposure to Adani group debt. As it turns out, the exposure of public sector banks was just 0.7 percent of their loan book, and for private banks, it was a mere 0.3 percent. For every single one of these banks, the debt exposure was well below the limit fixed by the RBI. And none of these loans had turned into NPAs anyway. After some initial jitters, the concerns about risk to our banks faded away.
For years, the rumors had been circulated, with the kind of conviction that turns lies into truth. They said that the Modi government had pressured public sector banks to pour their money into the Adani business. Now they thought that the Adani group was about to collapse. And they salivated that SBI would be next. In the initial reactions to the short seller report, the words “bloodbath” and “carnage” appear frequently, along with the more moderate “too big to fail.” They imagined a run on banks, a total collapse of the economy, people losing their savings. And finally, a popular uprising that can bring down the Modi government, which was their real target all along.
Except it could never have happened. There never was any such risk. Even for LIC, the amount invested in Adani shares was under 1 percent of their total assets under management. And so far, they have returned a profit even on that. And thus, they quietly buried the talking point about SBI and LIC going down. Don’t they look silly now?
2) Was the Hindenburg report an ‘American conspiracy’ against India?
In a word, no. Because investment banks on Wall Street, hedge funds and short sellers operate at a level of selfishness and greed that can be difficult for an average person to understand. In fact, it is difficult to imagine a short seller seeing themselves as part of any nation or group. For something to qualify as an ‘American conspiracy,’ the people behind it would have to see themselves as Americans. Do they?
But was the short seller report used opportunistically to attack India? Absolutely, yes. Major international publications pounced on this report to declare India as unworthy of investment, a den of crony capitalism, and so on. Somebody out there was desperate to hurt India’s reputation. Who could that be? These are the same publications who would not dare ask how Biden’s son got to be on the board of shady gas companies from Ukraine. Of course, the short seller in this case was only too glad to seize upon the narrative advanced by global liberals against India, with its jibe of “fraud cannot be covered by nationalism.”
Note here that for a short seller, ideas such as “nationalism” and “liberalism” are more like menu items. You choose your favored snack for the day. In this respect, the 2021 instance of what happened to the US-based video game seller Gamestop is particularly instructive. A number of firms had taken too many short positions against the stock, betting on it to collapse. But it so happened that some ordinary Americans got wind of this. They formed an online community of millions and began trading the stock upwards. This caused the short sellers to lose billions, in something known as a “short squeeze.”
Read More at https://www.indiatoday.in/news-analysis/story/six-takeaways-from-the-adani-hindenburg-saga-and-how-india-reacted-to-it-2334085-2023-02-13
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