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Adani market rout fuels investor nervousness

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Flagship firm plunges 35% during trade

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Crisis is major setback for billionaire chairman

(Releads with parliament disruption, details)

NEW DELHI, Feb 3 (Reuters) - Shares of India's Adani Group companies fell sharply on Friday as ripples from a market rout disrupted parliament for a second day, fanning fears of systemic risk after a critical research report by a U.S. short-seller.

Seven listed Adani enterprises lost more than half their market capitalisation, which shrivelled to less than $100 billion, after the Hindenburg Research report raised questions about the conglomerate's debt levels and use of tax havens.

Investor sentiment was jolted further after the group shelved its $2.5-billion share sale on Wednesday, one of the biggest setbacks for its billionaire chairman, Gautam Adani, whose fortunes had risen rapidly in recent years.

Lawmakers have called for a wider investigation of the matter, and sources have told Reuters the central bank has asked lenders for details of exposure to the group.

Some politicians shouted slogans against Adani, an associate of Prime Minister Narendra Modi, in parliament on Friday.

"We want a joint parliamentary committee (to investigate)," they said. "Stop looting the poor."

Adani has called the Hindenburg report baseless and said its financials remain strong, but investor sentiment has withered, bringing an unabated fall in stock prices.

Shares of the flagship company, Adair Enterprises Ltd , were down 16% on Friday after earlier losing 35% to their lowest level since March 2021.

The stock's new low took its losses to nearly $33.6 billion since last week, for a decline of 70%.

Adani Ports and Special Economic Zone Ltd was down 2%, while Adani Transmission Ltd and Adani Green Energy Ltd slumped 10% each.

Adani Total Gas Ltd , a joint venture with France's TotalEnergies SE, fell 5%.

In a statement, TotalEnergies said it had limited exposure from stakes in Adani companies and had not re-evaluated the stakes.

"Contagion concerns are widening, but still limited to the banking sector," said Charu Chanana, a market strategist with Saxo Markets in Singapore. "The focus remains on further risks of index exclusions."

On Thursday, S&P Dow Jones Indices said it would drop the Adani Enterprises flagship from widely used sustainability indices on Feb. 7, which would blunt their appeal for environment-conscious investors.

"One of the big risk factors to watch for now is if more indices remove Adani stocks," said Chanana. "This can result in foreign outflows as funds sell Adani stocks, further aggravating confidence issues."