SEBI weighs on Adani stock rout, says ‘all surveillance measures in place to address excessive volatility’

Adani Group stock crash: Market regulator Securities and Exchange Board of India (SEBI) on Saturday said for orderly and efficient functioning of the market, all surveillance measures are in place to address excessive volatility in specific stocks. In a statement, the market regulator said that it is committed to ensuring market integrity and its structural strength amid the rout of Adani Group stocks. On February 1, it was reported that SEBI is examining the recent crash in shares of Adani Group and looking into any possible irregularities in a share sale by its flagship company.

SEBI in its statement said in the past week, unusual price movement was observed in stocks of a business conglomerate. It assured that market integrity and its structural strength will be taken care of. The market regulator stated: “As part of its mandate, SEBI seeks to maintain orderly and efficient functioning of the market and has put in place a set of well-defined, publicly available surveillance measures (including the ASM framework) to address excessive volatility in specific stocks. This mechanism gets automatically triggered under certain conditions of price volatility in any stock.”

This is SEBI's statement is its first reaction after the recent rout of Adani Group stocks. It further added: "In  all  specific  entity  related  matters,  if  any  information  comes  to SEBI’snotice, then,as per extant policies, the same is examined and after due examination,appropriate action is taken."

On Thursday, National Stock Exchange placed Adani Enterprises, Adani Ports, Ambuja Cements under ASM (Additional Surveillance Margin) framework with effect from February 3, 2023, which will require 100 per cent margin to trade in their shares. This will likely curb a lot of speculation and short selling. "There shall be Additional Surveillance Measures (ASM) on securities with surveillance concerns based on objective parameters viz. Price / Volume variation, Volatility etc," said NSE on its website to explain the measure. The step will likely curb a lot of speculation and short selling.

Earlier on Saturday, FM Nirmala Sitharaman said regulators, like SEBI, are monitoring the developments in the Adani group and they are independent to function. “The market has functioned in prime condition. SEBI has worked on it well," Sitharaman said at a press conference in Mumbai. Sitharaman made the comment after she was asked Adani Group stocks value crash this week in the stock market. 

Adani Group has lost around Rs 9 lakh crore m-cap in the last seven trading sessions since January 24, when US-based short-seller Hindenburg Research released a report accusing Adani Group companies of “brazen stock manipulation, money laundering, and accounting fraud scheme over the course of decades”. The short seller claimed that the report was summed up after a two-year investigation.

The impact has been such that Adani Enterprises had to call off its follow-on public offer (FPO) even after it was fully subscribed on January 31. The total m-cap of the group dipped to a low of Rs 10 lakh crore on February 3 from Rs 19.2 lakh crore on January 24. 

On Friday, Sitharaman affirmed that LIC and SBI were not “over-exposed” to Adani Group shares and that “investors’ confidence” would endure in the market.

She said that India remained "an absolutely well governed" country and a "very well regulated financial market."