Short selling in Adani group shares led to gains for 12 firms: Report

Short selling in Adani group shares in the aftermath Hindenburg report led to gains for 12 companies, Enforcement Directorate (ED) told market regulator Securities Exchange Board of India (SEBI), Indian Express newspaper reported. Foreign portfolio investors and foreign institutional investors based in tax havens were top beneficiaries of short selling in shares of Adani Group.

Short selling occurs when an investor borrows a security and sells it on the open market, planning to buy it back later for less money. Short sellers bet on, and profit from, a drop in a security's price. This can be contrasted with long investors who want the price to go up.

As per the ED some of the short sellers took position in Adani Group shares 2-3 days ahead of Hindenburg Research report was published on January 24, Indian Express report said.

Three out of 12 entities are based in India, four are in Mauritius, one each in France, Hong Kong, Cayman Islands, Ireland and London. One entity was incorporated in July 2020 and had no business activity till September 2021 and between September 2021 and March 2022 earned Rs 1,100 crore on turnover of Rs 31,000 crore.

The parent of FII based in Cayman Islands which was among the top beneficiaries pleaded guilty of insider trading and paid fine of $1.8 billion in the US.

Among the two top short sellers are also two Indian entities registered in New Delhi and Mumbai. SEBI has passed an order for misleading investors and manipulating stock markets against the promoter of one of the India-based companies.

US-based short seller Hindenburg Research had released a report on January 24 accusing billionaire Gautam Adani-backed Adani Group of fraud, stock price manipulation and improper use of tax havens.