Adani stocks may see up to $1.5 billion outflows if MSCI reduces them
Adani Total Gas, Adani Entertainment, Adani Transmission, Adani Green, Adani Ports SEZ, Adani Ports, Adani Power and shares of two recently acquired companies ACC and Ambuja Cements, which are part of the MSCI Standard Index, could see up to 1.5 billion in total outflows. If the index provider MSCI reduces the weight of the Adani shares by half, said Nuvama Institutional Equities.
The cumulative weight of all these stocks in the index is 5.75 per cent, as per Nuvama's assumption of passive tracking. The cumulative value of eight names is $3.5 billion as of January 27, according to the brokerage.
The reports about the Adani Group and its associated securities have been released by the index provider. It is closely monitoring the situation and factors that may affect the eligibility of securities for the MSCI Global Investable Market Indexes, as well as the public available information, according to Nuvama.
The index provider does not intend to take any action until the feedback process is completed, according to Nuvama.
Nuvama, a subscriber of MSCI, said if the price volatility stops, the index provider might not take any action and stocks will continue to be part of the index.
In the second scenario, it said that if the volatility in Adani group stocks continues and the feedback from participants is towards exclusion, the index provider can exclude these stocks with a prior announcement.
If MSCI intends to exclude the stocks and a few of the names continue to trade at lower circuit with no liquidity, the index provider can postpone their exclusion until enough liquidity is there, according to Nuvama.
In the worst case the index provider can delete specific stocks at zero value In the past, the Russian equity was deleted at zero value in March 2022, as it was uninvestable, according to Nuvama.
In scenario four, Nuvama sees a reduction in the weight of Adani stocks by half or so. It said that could lead to cumulative outflows of $1.5 billion.