Investor reaction to Adani market rout after short-seller report

SINGAPORE (Reuters) -India's Adani group called off a $2.5 billion share sale as losses for the conglomerate's biggest firms snowballed to more than $100 billion in the wake of a U.S. short-seller's report.

The rout has sparked concern that the fallout could also affect, more broadly, confidence in India.

Following are comments from investment managers:

SABRINA JACOBS, SENIOR CLIENT PORTFOLIO MANAGER, PICTET ASSET MANAGEMENT, LONDON:

"So far the Adani developments had been fairly contained but today we are seeing a bit of a spillover into other high-yield bonds in India."

"Away from this, it is so far not clear how much contagion there will be – if any. There might be a bit of negative sentiment in general, but I think it should be a fairly idiosyncratic situation."

HUGH YOUNG, CHAIRMAN OF ASIA PACIFIC AT ABRDN, SINGAPORE: (WHICH DID NOT BACK FPO)

"Certainly a bullet dodged. They (investors who supported Adani's cancelled share sale) must be grateful."

"I doubt any investor confidence has been restored. Now (it's) just a matter of wait and see."

SAMEER KALRA, FOUNDER, TARGET INVESTING, MUMBAI:

"The decision on reversing on FPO has made even the neutral investors a bit nervous leading to higher sell orders in many of the group companies. The regulator and various agencies reviewing the situation puts more volatility and uncertainty ahead."

IPEK OZKARDESKAYA, SENIOR MARKET ANALYST, SWISSQUOTE BANK, SWITZERLAND:

"Indian shares were trading at a premium last year and that premium is now at risk as investors realise maybe the underlying fundamentals are not as strong as many thought. Adani may have started a confidence crisis in Indian shares and that could have broader market implications."

MARK MOBIUS, FOUNDER, MOBIUS CAPITAL INVESTORS, LONDON: (DID NOT INVEST IN FPO)

"It made sense to cancel the new issue since in all probability it would not have been successful in view of the negative news.

"Probably they will try to answer all the accusations and reschedule the share sale. Of course, if regulators and other authorities weigh and make some negative comments then we will be in another game.

"A full disclosure of balance sheets and particularly details regarding debtors (is necessary)."

PANKAJ PATHAK, FUND MANAGER - FIXED INCOME, QUANTUM ASSET MANAGEMENT, MUMBAI:

"Everybody's keeping a very close eye on (Adani's) debts. But on the domestic debt side, we hardly see any impact on the broader corporate bond market... In the domestic market, it’s not widely held, except for banks and banks do not mark-to-market and so we will not know the real impact until the debt comes due."

DAVID CHAO, GLOBAL MARKET STRATEGIST, ASIA EX-JAPAN, INVESCO, SINGAPORE:

"I think it's possible that there could be a bit of systemic risk. If retail sentiment is damaged, we could have a bit of valuation correction in mid cap and small cap companies."

"This development could present an interesting catalyst for foreign investors to start looking at Indian stocks again, and especially if we do get a bit of valuation rerating from the mid to small cap companies."

MONICA HSIAO, CHIEF INVESTMENT OFFICER OF TRIADA CAPITAL, A CREDIT FUND BASED IN HONG KONG:

"We were happy to take our profits trading the volatility in recent week across Adani bonds, because we believed there was a floor based on hopes of FPO (follow-on public offering) completion and we sold into strength on their announcement about FPO subscription."

"However after this U-turn by the company to pull out from FPO with equity spiralling, we see the market is losing confidence on how to gauge where the bottom can be and although there will be short-covering rebounds, we expect more fundamental downside risks given more private banks (are) likely to cut or reduce margin and (there may be) possible risk to their ratings and widening inquiries by regulators."

SAT DUHRA, PORTFOLIO MANAGER, DIVIDEND INCOME STRATEGY AT JANUS HENDERSON INVESTORS, SINGAPORE:

"We own less than 2% in Indian equities and would need to see a serious correction before we considered adding especially in light of the recent issues which are likely to sour sentiment for an expensive market."

GEORGE BOUBOURAS, HEAD OF RESEARCH AT K2 ASSET MANAGEMENT, MELBOURNE (UNDERWEIGHT ON INDIA)

"The Adani effect works both ways given the market cap relative to index. (Investors) benefited on the upside and are obviously dealing with the downside given current events.

"The weighting-risks are similar to the large weighting of Samsung in the Korea Index...(India's) index will need to impose a single stock cap going forward."

MAN WING CHUNG, LEAD MANAGER FOR VALUE PARTNERS’ ASIA EX JAPAN FUND, HONG KONG (UNDERWEIGHT ON INDIA)

"While the news overnight on Adani definitely is negative from a sentiment perspective, it doesn’t change our view that it is more of an idiosyncratic, rather than systemic event. So far the broader Indian markets have been relatively calm despite the news.

"We believe it has yet to reach an attractive level for us to move in. We will continue to monitor the situation and if there is more significant volatility as a result, we could potentially look at very selectively adding to some high quality names should valuations fall to an attractive level."

JIMMY LIM, CHIEF INVESTMENT OFFICER, MODULAR ASSET MANAGEMENT, SINGAPORE (MODULAR HAS NO POSITION IN ADANI)

"We are short the Nifty index but that's a trading view. At this point in time, don't think it's a systemic risk as the balance sheets of banks are strong as they have de-leveraged a lot during COVID period.

"Don't see a wider fallout on Indian Rupee as RBI has strong reserves and have shown their willingness to use those reserves to defend the currency."

JOSHUA CRABB, HEAD OF ASIA-PACIFIC EQUITIES AT ROBECO, HONG KONG (UNDERWEIGHT ON INDIA ON VALUATIONS)

"India unlike the rest of Asia was at the higher end of its valuation range. We don’t have any exposure to high leverage type of companies – but that just goes to show the impact some bad news can do to expensive markets. (India is) still a great long term story and getting cheaper now."

(Reporting by Summer Zhen in Hong Kong, Vidya Ranganathan, Tom Westbrook, Rae Wee and Ankur Banerjee in Singapore, Bansari Mayur Kamdar in Bengaluru and Sinead Cruise in London; Editing by Edwina Gibbs and Muralikumar Anantharaman)