By Ankur Banerjee
SINGAPORE (Reuters) – Worries of a wider spillover from bribery charges against the Adani Group will hurt sentiment in India but not the long-term outlook, global investors say, as they wager one of the world’s best-performing markets will get back on track next year.
U.S. allegations, denied by the company, are that Gautam Adani’s colossal ports-to-energy conglomerate paid bribes to secure power sales and made misleading disclosures, roiling the stocks and debts of Adani companies.
Investors expect a stronger spotlight on governance and disclosure, and perhaps some volatility, but say the affair has not challenged the reasons they are in India in the first place – for exposure to a growing economy and a huge consumer market.
“Foreign investors may grow more cautious about the transparency and governance practices of Indian companies,” said Steve Lawrence, chief investment officer at Balfour Capital.
Still, he pointed to a roughly 3% rise in the Nifty 50 index since the Adani news broke as signalling confidence. In the same period, $14 billion has been wiped off the value of shares in 10 companies owned by Adani.
Foreigners are relatively small players in India’s over $5.5 trillion equity space with a share of less than a fifth, but are sensitive to the mood and performance of a market seen as increasingly attractive while China’s economy and stock market stalls.
India’s benchmark Sensex has more than doubled from its pandemic lows in 2020, outpacing even the S&P 500, something money managers say can’t be derailed by one company.
“We consider (the Adani indictment) as a stock specific event. We don’t see any negative sentiment at all towards India as a result,” said Mike Sell, head of global emerging market equities for London-based asset manager Alquity.
“Clients are continuing to seek higher allocations in India.”
After a gush of profit-taking and pre-U.S. election nerves drew a net $11 billion in foreign cash out of Indian stocks in October, flows have steadied in November, according to LSEG data.
TAILWINDS
Topping Adani’s troubles on investors’ list of concerns has been the recent lacklustre earnings season, which has driven a rotation away from some previously favoured consumer stocks but not shaken too many bulls’ faith in the longer-run.
James Thom, senior investment director of Asian equities at abrdn, expects earnings to recover and has a positive outlook, driven by “supportive government policies following a decade of painful, but necessary economic reforms.”
