Wall Street has been bearish on India for a while now and was selling Indian financial assets even before the Hindenburg-Adani incident. It was a well-planned conspiracy to derail the Indian economy. This shift in sentiment can be seen in the declining value of Indian equities and the general trend of selling by foreign investors.
Wall Street short-sellers often use orchestrated short-selling reports to attack corporate titans in other countries. These reports are typically prepared by research firms and are designed to shed a negative light on the target company, highlighting weaknesses and potential risks.
On January 24, 2023, Hindenburg Research released a report alleging various financial and environmental irregularities by the Adani Group. The Adani Group denied the allegations, claiming that the report was "baseless and malicious". Despite this, the controversy intensified, with both houses of the Indian Parliament being adjourned due to the opposition's demand for a joint parliamentary committee or a judicial probe into the matter.
Hindenburg Research is known for its aggressive short-selling tactics, which often target companies it believes are overvalued. The Hindenburg report has reignited the debate about the role of short-sellers in the financial markets. Short-sellers often target companies that they believe are overvalued, as a fall in stock price would generate significant profits for them.
How Short Selling Affects a Country’s Economy
Short-selling can be a profitable strategy for organisations, but it can also have a significant impact on the economy of a country.
In October 2015, Citron Research published a report accusing Valeant of using a network of specialty pharmacies to inflate its revenue and profit figures. The report also alleged that Valeant had engaged in aggressive price hikes on its drugs. Following the release of the report, Valeant's stock price plummeted, losing nearly half of its value in just two weeks. The decline in Valeant's stock price contributed to a wider decline in the Canadian stock market, and the negative news surrounding the company had a ripple effect on other Canadian pharmaceutical companies.
In March 2018, Glaucus Research published a report accusing Blue Sky of overstating its fee-earning assets under management and of engaging in questionable accounting practises. Following the release of the report, Blue Sky's stock price plummeted, losing nearly 60% of its value in just a few days. Blue Sky was one of Australia's largest alternative investment firms, and the collapse of its stock had a ripple effect on the Australian stock market.
In June 2011, Muddy Waters published a report accusing Sino-Forest of overstating its assets and revenue. The report alleged that Sino-Forest's actual timber holdings were a fraction of what the company claimed and that the company's revenue was largely fictitious. As a result of the report, Sino-Forest's stock price plummeted, losing nearly 80% of its value in just a few days. Sino-Forest was a Canadian-listed company and one of the largest forestry operators in the world. Its collapse had a ripple effect on the Canadian forestry industry and the wider Canadian stock market.
These are just a few examples of the types of short-selling reports that Citron, Muddy Waters, and Glaucus have published over the years. The reports are often controversial, as the companies targeted often deny the claims made in the reports.
However, the impact of these reports on the targeted companies can be significant, causing the stock price to decline and, in some cases, leading to bankruptcy. Plus, this causes the country’s economic growth to stall and creates financial distress. This indicates that the Adani-Hindenburg saga might also be a well-planned conspiracy to derail the Indian economy.
Wall Street was secretly selling India's financial assets even before the Adani - Hindenburg Saga
Wall Street was aware of the potential growth and success of India's economy, and they saw this as a threat to their own financial dominance. These companies devised a plan to tank the Indian economy by orchestrating a massive short-selling campaign aimed at the country's corporate titans.
Over the past nine months, Foreign Portfolio Investors (FPIs) have been heavily selling their investments in the Indian financial market. According to National Securities Depository Limited, FPIs have withdrawn a massive amount of Rs 255,879 crore ($33.5 billion) from the equity market and Rs 16,621 crore ($2.1 billion) from the debt market, resulting in a net outflow of Rs 2,71,950 crore ($35.6 billion) from October 2021 to June 2022. During the first half of this calendar year, the total net outflows reached Rs 227,290 crore ($29.7 billion).
Data Chart
This marks the longest monthly selling streak in the Indian equity market in the last three decades, surpassing even the 2008 global financial crisis.
Reasons behind Wall Street’s well-planned short-selling of India
It is believed that the United States is not satisfied with India's position on the Russia-Ukraine War and its purchase of Russian oil due to a number of political and economic reasons.
Firstly, the US has taken a strong stance against Russia's actions in Ukraine and has imposed several sanctions on the country. By purchasing Russian oil and taking a neutral stance on the conflict, India is seen as indirectly supporting Russia, which goes against the US stance.
Additionally, the US is one of the largest producers and exporters of oil in the world. The purchase of Russian oil by India, therefore, can be seen as a threat to the US oil industry and its economy. The US wants to ensure that its oil industry remains strong and competitive, and the purchase of oil from Russia by India is seen as a potential threat to this.
Furthermore, the US is also concerned about the influence that Russia may have on India as a result of its oil purchases. The US wants to ensure that its allies and partners align with its policies and goals, and India's purchase of Russian oil may be seen as a challenge to this.
Wall Street’s well-planned conspiracy to derail the Indian economy has had several effects on India
The massive outflow of capital and foreign investors selling Indian stocks had a significant impact on India's economy. The first and most obvious effect was the failing stock prices. As foreign investors pulled out their money, stock prices dropped, leading to a decrease in the value of investments held by Indian citizens and businesses. This decrease in wealth led to a decrease in consumer spending as individuals and businesses became less likely to spend money.
The decrease in consumer spending also leads to a rise in unemployment. As people spent less money, businesses made less profit, and some were forced to lay off employees or close their doors altogether. This led to a vicious cycle, as the unemployed had even less money to spend, which further decreased consumer spending.
Another impact of the massive outflow of capital was a decrease in government revenues. The government relies on taxes from businesses and individuals to fund its operations, and as the economy slows down, tax revenues decrease. This can force the government to cut spending on important programmes and services or to increase taxes, further slowing the economy
References
“Why foreign investors are dumping Indian stocks” Times of India,
https://timesofindia.indiatimes.com/business/markets/why-foreign-investors-are-dumping-indian-stocks/articleshow/92682230.cms
“Foreign investors pull out ₹6,000 cr from Indian markets in this Oct” Live Mint, 23 Oct, 2022
https://www.livemint.com/news/india/foreign-investors-pull-out-rs-6-000-cr-from-indian-markets-in-this-oct-will-it-worsen-further-11666501548348.html
