📊 Hindenburg vs Adani: Round 2

Good morning. Paris Olympics 2024 has come to a close and it’s been a really exciting, sporty 2 weeks.

India won a total of six medals - one silver and five bronze - and millions of hearts 💘 

Here’s hoping to very, many more wins (including some gold) for India in the next Olympics 🇮🇳 🥇 

- Ruchirr Sharma & Shatakshi Sharmaa

TABLE OF CONTENTS

• 📊 Hindenburg vs Adani saga continues

• 💵 RBI saves the rupee

• 🗞️ Bite-sized summaries

  • ✈️ China sends drones to Vietnam

  • 🥉 Another lost medal

  • 💔 Rest in Paradise, Susan Wojcicki

• 🧑‍🍳 What else is cookin’?

• 🍿 Entertainment, Entertainment, Entertainment

MARKETS

🇮🇳 India

• Benchmark indices Sensex and Nifty ended the week's last trading session with 1% gains. Most stocks on both indices closed higher, led by auto and tech companies. Broader indices and sectoral indices also rose. The fear index, India VIX, fell. Ola Electric Mobility shares surged 20% after a flat debut on the stock exchanges.

🌍️ International

• The S&P 500 ended higher on Friday, recovering from Monday's steep selloff due to recession fears and yen-funded carry trade unwinding. Technology stocks boosted the index. For the week, major indexes were nearly flat. Investors await upcoming economic data and the next Fed meeting, with expectations of rate cuts. Despite recent volatility, markets remain up for the year.

ADANI

📊 Hindenburg vs Adani saga continues

Just when many thought the Hindenburg-Adani controversy had settled, the US-based short-seller has reignited the debate with fresh allegations - this time targeting Securities and Exchange Board of India (SEBI) Chairperson Madhabi Puri Buch.

The allegations:

• Hindenburg claims that Buch and her husband held stakes in offshore funds linked to Gautam Adani's brother, Vinod Adani. 

• These Bermuda and Mauritius-based funds were allegedly used to trade large positions in Adani Group shares.

This move appears to respond to SEBI's show-cause notice to Hindenburg for violating Indian market regulations. Notably, Hindenburg has been on the back foot since the Supreme Court refused to transfer the Adani investigation to the CBI or form a Special Investigation Team.

As you may have suspected, both the Buch family and the Adani Group have vehemently denied these allegations. The Buchs stated their finances are "an open book" with all required disclosures furnished to SEBI. They view Hindenburg's claims as character assassination following SEBI's enforcement action.

As the Indian stock market prepares to open, investors brace for potential turbulence. Market experts are advising caution, but expect only minor corrections in the Sensex and Nifty indices.

• Ambareesh Baliga suggests some impact on Adani stocks but doesn't anticipate a sharp reaction like January 2023, when the first Hindenburg short report against Adani was released.

• Kranthi Bathini believes the market will behave maturely, emphasising that earnings drive share prices.

Bathini’s belief is also indicative of the overall market sentiment, which has been largely dismissing these claims: 

• Deepak Shenoy of Capital Mind states there's "hardly any substance" to the allegations.

• Gurmeet Chadha sees it as a systematic attack on Indian companies and regulators, urging against overreaction.

Looking Ahead: As the situation unfolds, market watchers will keenly observe how these developments impact the Indian stock market, particularly the Sensex, Nifty, and Adani Group stocks. While initial reactions may cause some volatility, the long-term impact remains uncertain.

Read more: Economic Times

MONETARY POLICY

💵 RBI saves the rupee

In a bid to support the faltering Indian rupee, which has hit record lows for three consecutive days, the Reserve Bank of India (RBI) reportedly asked major banks to refrain from adding to their existing positions against the currency.

Here’s what’s happening

• On 6th August, with the rupee at risk of breaching the 84/$ level, RBI officials contacted several large banks.

• The Indian rupee has become the worst-performing Asian currency over the past month, primarily due to the unwinding of trades using the Chinese yuan to fund long bets on the local currency.

• To combat this depreciation, the RBI has been intervening across various market segments: spot, futures, and non-deliverable forwards.

What are “non-deliverable forwards” you ask? Great question. Non-deliverable forwards (NDFs) are financial contracts used to trade currencies that are difficult to directly exchange due to restrictions. They allow traders to speculate on or hedge against currency movements without actually exchanging the underlying currencies, settling the difference in cash instead.

What’s RBI’s approach?

• A senior treasury official at a large foreign bank reported that the RBI asked them to consider their existing position size as the risk limit. 

• This effectively requests banks not to increase their trading positions on the rupee. This informal approach is a common tactic used by the Indian central bank to manage excessive volatility, with banks typically complying.

The good news? This tactic seems to have an immediate effect:

• The intervention successfully prevented the rupee from falling below the psychological barrier of ₹84 to the US dollar.

• Reports indicate the central bank likely sold about $1.5B in the non-deliverable forward market before the spot market opened on 6th August.

Overall: The RBI has not asked banks to reduce existing positions or issued specific instructions regarding non-deliverable forwards market positions. The focus seems to be on preventing aggressive bidding for speculative positions.

As the situation evolves, market watchers will keenly observe the effectiveness of the RBI's interventions in stabilising the rupee. These actions highlight the ongoing challenges faced by emerging market currencies in the current global economic climate.

Read more: Reuters

GENERAL OVERVIEW

🗞️ Bite-sized summaries

✈️ China sends drones to Vietnam - Chinese drones were detected in Vietnamese airspace on 2nd and 7th August 2024, coinciding with increased collaboration between Vietnam and the Philippines. The incursions, involving Wing Loong-10 UAVs from China's Hainan Island, followed joint Coast Guard drills between the two Southeast Asian nations. Experts suggest China's actions aim to disrupt regional cooperation against its expansionist activities in the South China Sea. The Philippines had also engaged in maritime exercises with Australia, Canada, and the US. Vu Duc Khanh, a law professor, warns that whilst the Vietnam-Philippines relationship promotes regional peace, it may provoke escalated tactics from Beijing, potentially involving the People's Liberation Army in future.

🥉 Another lost medal - American gymnast Jordan Chiles has been stripped of her bronze medal in the floor exercise at the Paris Olympics, following a Court of Arbitration for Sport ruling. The medal will be awarded to Romanian gymnast Ana Bărbosu. The decision came after it was determined that the USA's inquiry into Chiles' score was filed after the one-minute deadline. The International Olympic Committee confirmed the reallocation of the medal, while the US Olympic and Paralympic Committee announced plans to appeal, citing errors in both the initial scoring and the appeal process. USA Gymnastics expressed devastation at the ruling. Chiles has since withdrawn from social media, citing mental health concerns.

💔 Rest in Paradise, Susan Wojcicki - Former YouTube CEO Susan Wojcicki has passed away after a two-year battle with cancer, as announced by Google CEO Sundar Pichai. Wojcicki, who stepped down from her role in February 2023 after nine years, was a pivotal figure in Google's history, known for her significant contributions to YouTube's growth, introducing new ad formats and launching streaming services. She was also a vocal advocate for paid parental leave.

HEADLINES

🧑‍🍳 What else is cookin’?

What’s happening in India (and around the world 🌍️)

• Lamborghini bets big on India's long-term potential.

• Nirmala Sitharaman urges banks to boost deposits as credit gap widens.

• Why have European car makers struggled to succeed in India?

• Google Cloud to set up startup hub, centre of excellence in Madhya Pradesh.

• Karnataka govt. to offer ₹25,000 monthly stipend for aspiring entrepreneurs.

• Blinkit kicks off a 10-minute delivery of Passport Photo for Delhi & Gurugram users.

CULTURE

🍿 Entertainment, Entertainment, Entertainment

• Olympics updates:

  • The Olympic games have officially come to an end! Final medal tally here.

  • USA beats France 98-87 in Men’s Basketball to take home a 5th consecutive Olympic title. LeBron James named Olympics MVP.

  • USA win eighth straight Olympic women’s basketball gold in a thriller over France, beating them 67-66.

• Disney unveils the trailer of Mufasa: The Lion King, a prequel to the 2019 photorealistic rendition of The Lion King.

• Adele Confirms engagement to Rich Paul at Munich concert: "I'm getting married".