MSCI Cuts Weightages Of Four Adani Stocks, Keeps Free Float For Four Others

MSCI has revised lower the weighting of four Adani Group companies after re-designating some of the free float, following feedback from market participants. Meanwhile, the global index provider has kept the free float for four other companies of the group unchanged.

The changes — to come into effect from February 28 — are expected to lead to selling pressure in Adani Group stocks, which are already reeling under pressure, following the allegations of fraud and stock price manipulation by US-based Hindenburg Research on January 24. Among the companies whose weighting have been cut include flagship Adani Enterprises (AEL), Adani Total Gas (ATGL), Adani Transmission and ACC. Meanwhile, a status quo has been maintained on Adani Ports & SEZ (APSEZ), Ambuja Cements, Adani Green Energy (AGEL) and Adani Power. Two other listed group firms — Adani Wilmar and NDTV — are not a part of any MSCI indices.

Shares of AEL fell as much as 10 per cent on Friday. It recouped some of its losses to settle at Rs 1,847, down 4 per cent over its previous close. ATG and Adani Transmission hit 5 per cent lower circuit, while ACC closed nearly two per cent lower. AGEL and Adani Power too hit their 5 per cent down limit, while APSEZ and Ambuja Cements ended with marginal gains. “MSCI has changed the foreign inclusion factor (FIF) in a few names and the major downward revision has been seen in Adani Transmission, Adani Total Gas and Adani Enterprises. This will lead to meaningful outflows in these names,” said a note by Nuvama Alternative & Quantitative Research. The brokerage projects more than $100 million outflows in each of these three stocks.

In a statement on Thursday, MSCI had said that it “has determined that the characteristics of certain investors have sufficient uncertainty that they should no longer be designated as free float pursuant to our methodology.”

Some analysts say reduction in the FIF could eventually lead to complete removal of some Adani Group stocks from the MSCI indices. “Adani Power, Adani Total Gas, and Adani Transmission could be deleted from the index in May,” analyst Brian Freitas of Periscope Analytics, who publishes on financial research platform Smartkarma, said in a note on Thursday.

On January 27, the index provider had initiated market feedback on the treatment of Adani Group stocks in its indices, following the Hindenburg allegations, which the group has denied.

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- BS Reporter