BENGALURU (Reuters) - Adani Group, the Indian conglomerate rocked by a Hindenburg Research report last year, faced another heavy share selloff on Monday after the shortseller accused the head of India's market regulator of having links to offshore funds also used by the group.

$2.43 billion, or 1%, had been wiped off the market value of Adani companies by the end of the trading day, although that was a substantial recovery from earlier losses of more than $13 billion.

The battle between Hindenburg Research and the Adani Group began 18 months ago when the U.S. shortseller alleged Adani improperly used tax havens, accusations the group denied again on Sunday, saying its overseas holding structure was fully transparent.

Citing whistleblower documents, Hindenburg said on Saturday that Madhabi Puri Buch, chair of the Securities and Exchange Board of India (SEBI) since 2022, has a conflict of interest in the Adani matter due to previous investments.

Buch said the report's allegations were baseless and in a separate statement the regulator said allegations made by Hindenburg Research against the Adani Group have been duly investigated.

Shares in the group's flagship firm Adani Enterprises closed out Monday 1.1% lower, while Adani Ports, Adani Total Gas, Adani Power, Adani Wilmar and Adani Energy Solutions were down between 0.6% and 4.2%. Only Adani Green bucked the trend, closing 1% higher.

"The allegations are coming for the second time. Lot of investigations have happened over the last year and a half. This is a temporary, knee-jerk reaction. Things will get back to normalcy," said Sunny Agrawal, head of fundamental equity research at SBICAPS Securities.

Investments from Abu Dhabi-based International Holding and U.S. boutique investment firm GQG Partners have helped restore some investor confidence since Hindenburg's first report in January 2023, with Adani Group's share value losses narrowing to about $32.5 billion from $150 billion in the immediate aftermath.

Buch termed Hindenburg's allegations an attempt at "character assassination" following the regulator's enforcement action and "show cause" notice to the shortseller for violating Indian rules. A show cause notice signals an intention to take disciplinary action if satisfactory explanations are not provided.

Adani Enterprises is looking to launch a $1 billion share sale by mid-September, having shelved a record $2.5 billion offer in the wake of Hindenburg's first set of allegations. Adani Energy raised $1 billion from U.S. investors and sovereign wealth funds earlier this month.

"We will likely see a short to medium term sentiment impact on Adani stocks, especially as retail investors are pressurised by the allegations made against SEBI," said Kranthi Bathini, Director, Equity Strategy, WealthMills Securities.

As the latest allegations gained political traction, ruling Bharatiya Janata Party lawmaker Ravi Shankar Prasad said: "Instead of giving a response to the SEBI show cause notice, Hindenburg has issued this report, which is a baseless attack."

"The SEBI and the family (of Buch) have responded, we don't have anything to add to that," he told reporters.

However, opposition leader Rahul Gandhi said on X: "The integrity of SEBI, the securities regulator entrusted with safeguarding the wealth of small retail investors, has been gravely compromised by the allegations against its chairperson."