No significant impact on market warranting review of regulatory frameworks, SEBI to SC

The Securities and Exchange Board of India (SEBI) told the Supreme Court on Monday that the shares of Adani Group have seen significant decline in prices on account of selling pressure, and the wider Indian market has shown full resilience and the combined weight of the group companies in Sensex is zero and in Nifty it is below 1 per cent.

In a note submitted in the apex court, Sebi said: "The events that are the subject of the PIL are related to one set of entities in the market and have not had any significant impact at the systemic level. While the shares of the Adani Group have seen significant decline in prices on account of selling pressure, the wider Indian market has shown full resilience. The combined weight of the group companies in Sensex is zero and in Nifty it is below 1 per cent."

It added that Indian markets have seen far higher turbulent times in the past, especially during the Covid pandemic, when Nifty fell by around 26 per cent during March 2, 2020 till March 19, 2020 (13 trading days). "Even during such turbulent times, SEBI did not resort to banning short selling, even though there were demands for banning it; and the markets continued to function in a robust manner, recovering far faster than other global markets` investor wealth (market capitalisation of all listed companies) which was around Rs 145 lakh crore in February 2020 but has almost doubled to about Rs 270 lakh crore now," it said.

The note said the subject of the PIL relates to events that are localised to a single group of companies and that there is no significant impact at a market wide level or at a system wide level that might warrant a system level review of the regulatory frameworks in operation. "The entity level issues that have arisen have had a significant impact on the entity level and warrant detailed examination by the regulator. The same has already been actioned," it said.

The note added, "In the context of the PIL, the guardrails put in place by SEBI were automatically triggered when ASM (additional surveillance measures) became repeatedly applicable to shares in the Group, both when the prices were going up and recently when prices started falling." It added that in case there are any learnings from the case that warrant policy review, SEBI would, as a specialised regulator, undertake the same in the normal course, following its established process of expert as well as public consultation.

"SEBI remains committed to its mandate of investor protection, market development and market regulation. In an ever-evolving and dynamic market, it would continue to welcome inputs in respect of the same," it added.

The SEBI`s came on a plea filed by advocate Vishal Tiwari, seeking a direction to set up a committee monitored by a retired apex court judge to investigate the Hindenburg Research report, which resulted in crashing of Adani Group company share prices and caused massive loss to investors. A separate plea has been filed by advocate M.L. Sharma in connection with the Hindenburg controversy.