Anyone can take two distinct views on Hindenburg Research's campaign.

(1) Hindenburg is an equity research outfit that specialises in negative research. It digs dirt against overvalued companies, shorts those stocks, makes its reports public, and thus makes (a lot of) money. This also helps the markets in general because it's good for companies to be valued correctly and bad for them to be overvalued. This was the nature of its report against Adani group stocks in early 2023.

(2) Hindenburg specifically targeted the Adani group as part of a political campaign to tar India's biggest business groups and the government, and in the process, it made a lot of money shorting these stocks.

(2a) Hindenburg is trying to discredit the SEBI investigation by making allegations against the SEBI chairperson. In the process, it also tried to make money again by shorting the Indian Markets.

Until a point back in 2023, when many people thought that point 1 above was mostly correct. There was a significant narrative in India that Hindenburg's primary role was that of a white knight trying to rescue Indian democracy or some such nonsense. The fact that this outfit's entire business model was making money by crashing stocks was conveniently forgotten.

However, as time has passed and more information has come to light, the pendulum of public opinion has swung the other way. Now, we have Hindenburg's brazen attempt to refuse to respond to SEBI's show-cause notice. Topping that, this outfit has come up with another report that claims a 'link' between the SEBI chairperson, her husband, and the Adani group.

People who have actually read the report say it has nothing, and by now, that is amply clear. However, the real question is, what did Hindenburg hope to achieve by making accusations that would not stand up to scrutiny? The answer is twofold.

Firstly, it's an 'attack is the best defence' move. Once it has made accusations against the regulator, it can dismiss any investigation and action by the regulator as being biased. It has dismissed the show-cause notice as 'nonsense' and refused to respond. Part of the bravado is an implicit racist and/or colonial attitude. Since Hindenburg is a Western entity, how dare the regulator in a non-western country like India question it? We saw a lot of this sort of nonsense during the whole COVID-19 vaccine episode.

Secondly, this attitude is readily accepted and amplified by a part of the political and media establishment. The speed with which the Hindenburg accusations were accepted as valid and then repeated and amplified made it pretty clear that this was an organised and coordinated effort. Apart from acting to bolster Hindenburg's own defence, there was a clear hope that the markets would tank and that it would severely damage the regulator's reputation. Of course, there would also be a bonanza of anyone trying to short the markets. As if on cue, we had the spectacle of a section of politicians and media rising in a chorus to support Hindenburg.

Anyone else who has been observing this drama should understand that we have entered a somewhat dangerous phase of the political discourse in India. Quite clearly, we have a powerful domestic political constituency that now equates inflicting institutional damage to the country and its economy with winning a political battle.

The Hindenburg saga is a stark reminder of the complex interplay between global finance, political interests, and national institutions. While short-selling and investigative financial research have their place in maintaining market integrity, this affair raises critical questions about the potential for abuse and manipulation. We'll likely see more such episodes, and it's important for investors and the public to stay aware of all this and critically assess information from all sources at every step.