This report is from this week's CNBC's "Inside India" newsletter which brings you timely, insightful news and market commentary on the emerging powerhouse and the big businesses behind its meteoric rise. Like what you see? You can subscribe here.

The big story

The head of a $25 billion Indian energy company, the former CEO of a New York-listed energy firm, and one of Asia's wealthiest men were set to meet in New Delhi to discuss business.

To prepare for the meeting, Vneet Jaain, chief executive of Adani Green Energy, photographed a document on his cellphone.

This document, according to the U.S. attorney's office for the Eastern District of New York, summarized the amounts the Indian energy company was owed by Azure Power, previously listed on the NYSE, for bribing Indian government officials.

Jaain's phone and other electronic devices were seized as evidence by U.S. prosecutors in their months-long investigation and included in the indictment on Wednesday in a New York federal court on charges related to a massive bribery and fraud scheme.

The U.S. prosecutors also allege that Gautam Adani, the second most-wealthy Indian man, personally met with Indian government officials to further their "bribery scheme."

They allege that about $265 million in bribes were offered to Indian officials to "motivate" the state-owned electricity distribution companies to purchase solar power from Adani and related companies at above-fair market prices.

The indictment also describes a trail of evidence that Adani and his executives left behind, such as presentation slides and spreadsheets. One document is alleged to reveal $7 million paid to secure a 650 megawatt power purchase agreement and $76 million as bribe for a 2.3 gigawatt contract.

The prosecutors have also successfully obtained an arrest warrant for the billionaire from a federal court.

Why are U.S. authorities involved?

The 62-year-old billionaire and others are charged with misleading U.S. and international investors as they raised more than $3 billion in capital to fund those energy contracts.

"As alleged, the defendants orchestrated an elaborate scheme to bribe Indian government officials to secure contracts worth billions of dollars and Gautam S. Adani, Sagar R. Adani and Vneet S. Jaain lied about the bribery scheme as they sought to raise capital from U.S. and international investors," said Breon Peace, U.S. attorney for the eastern district of New York.

"Adani and other defendants also defrauded investors by raising capital on the basis of false statements about bribery and corruption, while still other defendants allegedly attempted to conceal the bribery conspiracy by obstructing the government's investigation," added James Dennehy, FBI assistant director in charge.

The Securities Exchange Commission also piled in, calling the actions by Adani and two others a "massive bribery scheme."

"During the alleged scheme, Adani Green raised more than $175 million from U.S. investors, and Azure Power's stock was traded on the New York Stock Exchange," the SEC said in a statement justifying its jurisdiction and cause in the investigation.

What's Adani's response?

An Adani Group spokesperson said the allegations made by the U.S. Department of Justice and the SEC against the directors of Adani Green Energy are "baseless and denied."

"The Adani Group has always upheld and is steadfastly committed to maintaining the highest standards of governance, transparency and regulatory compliance across all jurisdictions of its operations. We assure our stakeholders, partners and employees that we are a law-abiding organisation, fully compliant with all laws," the spokesperson told investors.

Azure Power has said that the company has continued to cooperate with U.S. authorities and its staff referenced in the U.S. indictment were no longer associated with the company.

What's the impact on Adani?

Aside from the steep share price falls, where Adani Enterprises lost nearly a quarter of its market value, there have also been wider ramifications.

Investors in Adani's bonds have also suffered steep price drops after news of the indictment emerged. There are also concerns about whether Adani companies will be able to raise debt in the future in U.S. markets.

"The indictment of Adani Group's chairman and other senior officials on bribery charges is credit negative for the group's companies," Moody's, a credit ratings agency, said in a statement. 

"Our main focus when assessing Adani Group is on the ability of the group's companies to access capital to meet their liquidity requirements and on its governance practices."

The Adani Group was also forced to withdraw a planned $600 million bond sale on Thursday.

Even ardent believers of Adani also appear to be rethinking their backing of the conglomerate.

GQG Partners, which poured $1.9 billion into Adani companies despite a short-seller attack in 2023, told investors it was "reviewing the emerging details and determining what, if any, actions for our portfolios are appropriate."

The investment management firm's Sydney-listed shares also lost a fifth of their value on Thursday.

Broader implications and impact

The allegations against the Adanis could also risk souring foreign investors' sentiment and threaten to accelerate outflows from India. Foreign institutional investors pulled record sums from local bourses in October, and November also looks very similar.

"The U.S. bribery charges against Gautam Adani further complicate the calculus for foreign investors with respect to India," Matt Orton, chief market strategist at Raymond James, told CNBC's Tanvir Gill.

"While the 10% pullback on the Nifty presented investors with an interesting entry point to deploy capital, the Adani charges will pose a significant overhang to sentiment. In an environment where the U.S. continues to march higher, why add headline risk now in India?"

Orton added that select Indian equities still remained attractive despite the wider negative sentiment.

Investors are also concerned about lenders exposed to Adani Green Energy, the firm under the spotlight. One estimate by analysts at Citi puts Indian banks on the hook for more than $15 billion in borrowings and collateralized loans, with the State Bank of India owed large chunks of the debt.

Elsewhere, Singapore-headquartered lender DBS Group has previously disclosed nearly $1 billion in loans to other Adani companies. DBS declined to comment on the matter.

But it's not just investors and financial firms feeling the heat. Regulators in India have also come under severe scrutiny for their association with Adani.

"The Federal Bureau of Investigations has said [Adani] has committed a criminal act. Why isn't [India's] Central Bureau of Investigations saying the same? Why isn't SEBI saying the same?" questioned India's opposition leader Rahul Gandhi, referring to the Securities and Exchange Board of India (SEBI), according to a CNBC translation.

Earlier this year, the stock market regulator's chair, Madhabi Buch, was accused of having a conflict of interest while investigating Adani group companies, according to short-seller Hindenburg. Now, politicians are calling for her to be sacked.

Need to know

RBI reportedly planning to launch a cloud platform for financial firms. That program, which the central bank is opening only to IT companies incorporated in India, is part of its push to localize payments and financial data. The RBI's cloud service, which will reportedly be launched on a small scale in 2025 before expanding, will offer smaller banks and financial firms a cheaper alternative to services from dominant cloud players like Amazon Web Services and Microsoft Azure.

India will resume trade deal talks with the UK next year. U.K. Prime Minister Keir Starmer held a bilateral meeting with Prime Minister Narendra Modi at the G20 Summit in Brazil, where both parties agreed on the importance of establishing close relationships in trade, technology and cultural exchanges. The negotiations stalled in the summer with general elections in both countries. India will also set up two new Consulates General of India in Belfast and Manchester, Modi announced.

'Most overweight country' outside of the U.S. Since September, India's Nifty 50 index has been retreating from its all-time closing high of 26,277.35 points. Despite that recent pullback, Matt Orton, who is the chief market strategist at asset management firm Raymond James Investment Management, is still bullish on the Indian market, and is especially keen on one "top-quality" stock. [For subscribers only]

What happened in the markets?

The slide in India's stock markets continues. The Nifty 50 index has fallen another 0.7% this week, bringing this year's total returns to 7.45%. The index has fallen by 11% since its all-time high earlier this year.

The benchmark 10-year Indian government bond yield has remained relatively flat at 6.82% over the past week.

On CNBC TV this week, Amundi Group Chief Investment Officer Vincent Mortier said his firm has a "very overweight conviction" on India because the country's domestically driven demand helps to cushion it from external shocks that are rife today. Despite the recent pullback in India markets, Mortier is still bullish on the country because earnings growth forecasts for next year and 2026 are close to 20%, making the market and economy "very promising" still.

Meanwhile, CNBC Correspondent Seema Mody, having just returned from a trip in India, reported that investor optimism in the country is growing because of President-elect Donald Trump's historically strong relationship with Prime Minister Narendra Modi, and his "anti-China stance" potentially benefitting the emerging market.

What's happening next week?

NTPC Green Energy, a sustainable energy unit of the government-owned power company NTPC, lists Wednesday.

November 22: India HSBC PMI flash for November, Euro zone HCBOB PMI flash for November, Japan consumer price index for October

November 27: NTPC Green Energy IPO, U.S. Federal Reserve minutes for November meeting, Personal Price Consumption Expenditure index for October