Indian shares recovered most early losses to close marginally lower on Monday, as gains in bank stocks largely offset the impact of Hindenburg Research's latest report.
Over the weekend, the U.S.-based short seller had alleged that Madhabi Puri Buch, the head of the Securities and Exchange Board of India, previously held investments in offshore funds also used by the Adani Group.
Buch denied the allegations, while SEBI asked investors to remain calm and exercise due diligence.
The two Adani stocks on the Nifty 50 index - Adani Enterprises and Adani Ports - fell 1.1% and 2.1%, respectively. Adani Enterprises was among the top five losers and Adani Ports was the top loser on the index.
Overall, all but two Adani stocks fell, ranging from 0.5% to 4.5%, losing a combined $10 billion in market capitalisation.
The NSE Nifty 50 index closed down 0.08% at 24,347, and the S&P BSE Sensex inched 0.07% lower to 79,658.92. The indexes had lost about 0.6% in early trading.
The broader, more domestically focussed small- and mid-caps rose about 0.25% each, outperforming benchmarks.
Seven of the 13 major sectors logged gains, with the financial services index rising 0.2% and private bank index adding 0.44%.
HDFC Bank rose 0.6%. Other private lenders like Axis Bank added about 2%, and was among the top three gainers in Nifty 50 index by percentage.
The buying interest in banking stocks indicates that investors are focussing on safety, especially after the drop early last week, as the sector offers comfortable valuations, two analysts said.
"One short-seller alleging concerns over SEBI chief will not hurt sentiment in domestic equities, as SEBI has a proven track-record, credibility and reputation in terms of governance, disclosure standards," said Neeraj Dewan, investment and research analyst and former director at Quantum Securities.
Among individual stocks, Natco Pharma rose about 4% to a record high after June quarter profit jump.
Sun TV tumbled 11% on downbeat quarterly results.