The Adani Group’s US$120 billion loss in market value after Hindenburg Research accused it of fraud roughly equates to India’s annual infrastructure budget. But the government has shown few signs of worry - or at least that’s the impression it’s giving to the markets.

The calculus is tricky. Prime Minister Narendra Modi is considered a close ally of Gautam Adani, whose business interests often align with the government’s growth goals. A show of support may assuage investors and stabilise losses for the ports-to-energy conglomerate, which abruptly dropped a US$2.4 billion share sale this week, further sinking the stock.

But rallying around Adani, one of the world’s richest people, could become a political liability ahead of next year’s national elections. Modi, the son of a tea seller, has sold himself as an anti-corruption reformer, which may create an optics problem if the Adani Group selloff becomes a systemic risk.

For now, officials have downplayed the Adani Group’s woes in interviews with Bloomberg News. Ashwini Vaishnaw, a cabinet minister, said India’s economy is resilient to the stock rout. The finance secretary, TV Somanathan, echoed that view, saying the issue is “between one private company and the regulator and the market”.

One finance ministry official, who didn’t want to be named speaking about a private firm, said the government doesn’t need to intervene because the stock rout is ultimately about valuation and has nothing to do with the Adani Group’s solvency.

The official said it was up to the Securities and Exchange Board of India (SEBI) to probe the allegations. SEBI is exploring possible irregularities in the Adani Group’s recent share sale, according to Reuters. Meanwhile, the Reserve Bank of India has asked lenders for details of their exposure to the group, according to people with knowledge of the matter.

The Adani Group’s stock wipe-out, one of the biggest in India’s history, relegated the country’s much-hyped US$550 billion budget to a sideshow this week. In interviews with local news outlets, finance ministry officials spent much of their time sidestepping questions about Adani.

The finance ministry didn’t respond to requests for comment.

Hindenburg’s accusations against the Adani Group, which included stock manipulation and accounting fraud, have provided ammunition to Modi’s opponents before 2024 elections.

Opposition lawmakers called for a parliament debate on public sector investments in “companies losing market value endangering the hard-earned savings” of millions of Indians - a demand that was rejected. India’s legislature was adjourned for a second consecutive session on Friday amid raucous heckling over the revelations in the Hindenburg report.

The main opposition Congress party now plans to hold nationwide protests on Monday to highlight the exposure of state-owned institutions to Adani’s businesses and draw attention to the billionaire’s links to Modi.

The Adani Group has tried to contain the fallout, denying all charges of impropriety and questioning the motivations of Hindenburg, an activist short seller based in New York.

Nationalist symbolism has peppered many of the company’s rebuttals. In a video statement, chief financial officer Jugeshinder Singh spoke in front of a massive Indian flag. Adani released his own video on Thursday. He wore an Indian waistcoat rather than the business suit he usually dons when addressing the public.

The decline in Adani’s personal wealth has spawned a new genre of social media meme. #AdaniEnterpries has trended round-the-clock on Twitter and one commenter compared Adani’s fall to a sharp depreciation in the Indian rupee. Adani has tumbled from No 2 to No 21 on the Bloomberg Billionaires Index.

Modi has so far remained quiet on the matter. But as the Adani Group’s stock fell, the state-owned Life Insurance Corp said in a statement that it had limited exposure to Adani companies.

“In the ordinary course of business, LIC does not share details of its company and industrial group specific investments,” the company said in a Jan 30 statement. 

  - Bloomberg