New Delhi: Indian conglomerate Adani Group’s shares took a hit on Tuesday as investors adjusted their holdings to reflect changes in the composition and weighings in the MSCI India Index, according to a report by Bloomberg.
The group’s biggest firm by market value, Adani Green Energy, has led the rout. Shares of the company tanked a record 12 per cent in trading volume, about nine times the average of the past three months. The other group companies were Adani Total Gas, Adani Transmission, and Adani Power declined by around 5 per cent each.
The stocks of these firms extended losses during early morning trade on Wednesday.
What is MSCI Inc?
MSCI is an US finance firm headquartered in New York. It is a global provider of equity, fixed income, real estate indexes, multi-asset portfolio analysis tools, ESG, and climate products. The company operates the MSCI World, MSCI All Country World Index (ACWI), MSCI Emerging Markets Indexes.
According to the report, MSCI Inc. published additions and deletions to its global indexes last month. However, the announcement regarding the changes made didn’t divulge much to the weightings of individual stocks in its indexes.
The changes took effect on Tuesday during the close of trading. Analysts said Adani Green’s weighting in the MSCI India Index was cut as it admitted new stocks.
The moves show how Adani’s companies’ shares are vulnerable to outsized swings, compounded by lower liquidity relative to those of stocks such as Reliance Industries.
“Adani Green soured sentiment for the group’s stocks as its weighting reduction in MSCI India Index took effect,” Brian Freitas, an analyst for independent research platform Smartkarma, said. “Adani Power saw profit taking as it had run up ahead of its inclusion in the same index,” he added.
A rally in shares had taken Adani ahead of Mukesh Ambani as Asia’s richest person earlier this year.
Bloomberg Billionaires Index shows though Adani remains among the top-10 richest people in the world, his wealth dropped by $3.7 billion on Tuesday.
Abhilash Pagaria, an analyst with Edelweiss Alternative & Quantitative Research, wrote in a note last month that after the change in Adani Green’s weight in the MSCI India Index, the stock could see outflows of $220 million.
Shares of Adani Enterprises and Adani Ports and Special Economic Zone have dodged the sell-off.
Nitin Chanduka, a strategist with Bloomberg Intelligence, said a small number of foreign funds own a significant portion of Adani Group shares, posing concentration risks. “Having a large chunk of shares held by a few funds also reduces the effectiveness of the public float, leaving stocks prone to asymmetric volatility,” he mentioned.