The share prices of all nine listed companies of the Adani Group continued to tank on Friday, two days after a report by US-based company Hindenburg Research accused the conglomerate of stock manipulation and improper use of offshore tax havens.

With some of the stocks of the group falling by as much as 20%, the nine companies have lost more than Rs 4.20 lakh crore in market capitalisation since the markets closed on Tuesday, according to The Indian Express.

The sell-off had a broader impact on the Indian equity markets as investor wealth plummeted by more than Rs 12 lakh crore in just two trading sessions on Wednesday and Friday, the Business Standard reported. The markets were closed on Thursday on account of Republic Day.

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In a report published on Wednesday, Hindenburg had claimed that key listed companies of the Adani Group are on a “precarious financial footing”. It also alleged that the conglomerate headed by India’s richest person, Gautam Adani, has amassed substantial debt by pledging overvalued shares.

The Adani stocks went on a spiral soon after markets opened for trading on Friday morning. At 3.25 pm, the group’s flagship company Adani Enterprises was down more than 18%. Adani Total Gas, Adani Green Energy and Adani Transmission were the worst performers as the stocks crashed by 20% each.

Adani Power (5%), Adani Ports (15.58%) and Adani Wilmar (5%) also faced significant losses. The overall 30-share BSE Sensex was down nearly 900 points, or 1.5%

Congress demands investigation

Meanwhile, the Congress on Friday demanded that the Reserve Bank of India and markets regulator Securities and Exchange Board of India should investigate into Hindenburg’s allegations against the Adani Group.

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In a statement, Congress General Secretary in charge of communications Jairam Ramesh expressed concerns, pointing out that public sector financial institutions like the Life Insurance Corporation and the State Bank of India have exposure to the Adani Group.

Ramesh claimed that 8% of the LIC’s equity assets, amounting to Rs 74,000 crore, are invested in Adani Group companies. Moreover, 40% of the loans advanced to the conglomerate have been from the SBI, the Congress MP said.

“These institutions have liberally financed the Adani Group even as their private sector counterparts have chosen to avoid investing because of concerns over corporate governance and indebtedness,” the statement noted.

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Besides the huge losses in Adani shares, the bloodbath in the equity markets on Friday could also be attributed to sell-off in bank stocks as investors became wary of their exposure to the conglomerate, the Business Standard reported.

The Nifty Bank sub-index lost more than 3% in Friday’s trading as State Bank of India and ICICI Bank lost in excess of 4% each, while HDFC Bank, Kotak Mahindra Bank, IndusInd Bank and Axis Bank were also among the stocks which registered highest losses.

In his statement, Ramesh claimed that the Narendra Modi-led central government and the group of companies headed by Adani have a “close relationship”.

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“For all its posturing about black money, has the Modi government chosen to turn a blind eye towards illicit activities by its favourite business group?” he questioned.

What has happened since the Hindenburg report?

In its report, Hindenburg Research had said that it holds short positions in the Adani Group companies through US traded bonds and non-Indian-traded derivative instruments. Short positions are “created when a trader sells a security first with the intention of repurchasing it or covering it later at a lower price”, according to Investopedia.

Investment research firms like Hindenburg often engage in “activist short selling”, or making information about companies public in order to trigger a fall in their share prices.

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Responding to the allegations, the Adani Group had said on Wednesday that the report was “a malicious combination of selective misinformation and stale, baseless and discredited allegations”.

On Thursday, the Adani Group issued another media statement, saying that the report was “maliciously mischievous” and “unresearched” and that it had adversely affected the conglomerate, its shareholders and investors.

Hindenburg Research, however, has defended the report, saying that it stands by it. On Thursday, the research firm said that Adani Group has resorted to bluster and threats instead of answering the issues raised.

“...Adani hasn’t addressed a single substantive issue we raised,” the company said. “At the conclusion of our report, we asked 88 straightforward questions that we believe give the company a chance to be transparent. Thus far, Adani has answered none of these questions.”