The selloff in Adani stocks deepened as MSCI reduced the amount of shares it considers freely tradable in the public market.
(Bloomberg) — The selloff in Adani stocks worsened on Friday as MSCI Inc. cut the amount of shares it considers freely tradable for four of the group’s companies, a move that will cause their weightings in its indexes to drop.
Flagship Adani Enterprises Ltd. slumped as much as 10% before paring losses as the global index provider trimmed its free float assessment for the stock. It also made changes for Adani Total Gas Ltd., Adani Transmission Ltd. and ACC Ltd. Mumbai-based Nuvama Wealth Management estimates the move would result in a combined outflow of more than $400 million from the stocks, as lower weightings mean passive funds would need to cut their allocations to these securities.
Adding to pressure on the embattled Adani Group, Norway’s $1.4 trillion sovereign wealth fund on Thursday said it had sold its remaining stake in related companies, while shareholder Life Insurance Corporation of India has said it will engage with the conglomerate’s management soon. Meantime, the Supreme Court of India will hear on Friday two public interest litigation pleas related to the Hindenburg report.
Still, the pace of the rout sparked by US short seller Hindenburg Research’s damning Jan. 24 report has eased this week as Adani Group stepped up measures to reassure investors and banks by repaying loans and pledging to reduce debt ratios. The slump in the group’s dollar debt has attracted buyers such as Oaktree Capital Management and Davidson Kempner Capital Management.
“The weighting cut will lead to outflows and further increase the odds of exclusion for Adani Power, Adani Total Gas and Adani Transmission in MSCI’s May review,” Brian Freitas, an analyst who publishes on Smartkarma, said by phone. He estimates the cut in free float will lead to outflows of around $570 million across the three stocks.
Six of the 10 Adani stocks were lower in the morning session in Mumbai. Adani Total Gas and Adani Transmission dropped as much as 5%.
“The pressure will remain on the stocks,” said Sameer Kalra, founder of Target Investing in Mumbai.
–With assistance from Abhishek Vishnoi and Ashutosh Joshi.
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