MSCI shocked by two Adani companies

MSCI in February deferred the review of the two stocks to May, at a time when their shares continued to hit the lower circuit every day, making it difficult for investors to exit. On January 24, shares of the Adani group companies took a sharp tumble after US short-seller Hindenburg Research accused the ports renewable energy group of irregularities and accounting fraud.

As a result, MSCI decided to cut the free float designation of four group stocks – Flagship Adani Enterprises, ACC, Adani Total Gas and Adani Transmission – thereby reducing their weighting in the relevant MSCI index. However, MSCI decided to defer the review of Adani Total Gas and Adani Transmission till May. Friday’s MSCI decision will encourage passive funds that track the index to sell these stocks.

Abhilash Pagaria, head of Nuwama Alternative and Quantitative Research, expects to sell shares worth $201 million in Adani Transmission and $186 million in Adani Total Gas when the changes take effect on May 31.

The index provider conducts quarterly and semi-annual reviews of where the weights of its components are increased or decreased, and stocks are included or excluded, and the indices are rebalanced.

The news of MSCI’s move hit the stocks on Friday, with shares of both the companies hitting the 5% lower circuit. Adani Total Gas closed down 4.29 percent. 818.35, while Adani Transmission closed down 3.5%. 884.8. Flagship Adani Enterprises closed down 1% 1964.70.

MSCI also made major changes in the weights of Kotak Mahindra Bank and Reliance Industries Ltd. The former gained weight while the latter saw a decrease, resulting in an estimated inflow of $810 million for Kotak Bank and an outflow of $155 million for RIL. million, according to Pagaria.

Flat closed at the level of Kotak Bank 1960.6 in a volatile session where the Nifty climbed 148.2 points between high and low before closing 0.13% higher at 18314.8. RIL closed with a gain of 0.17 percent. 2484.35.