Index provider MSCI on Thursday said that it had determined that some securities from the Adani group should no longer be designated as free float. This happened after market participants raised concerns about the eligibility of the conglomerate’s companies for its indices.
MSCI will be announcing the changes for Adani’s Securities associated with its MSCI Global Investable Market Indexes later on Thursday, as a part of its regular review for February.
MSCI indices are reviewed periodically and the rebalancing takes place bi-annually. Stocks that are included or excluded from MSCI’s Global Standard Indices can trigger substantial inflows and outflows.
Triggered by MSCI’s review, the shares of Adani group were reeling under pressure after showing some recovery for the last two trading sessions. Eight stocks of the conglomerate are constituents of MSCI’s indexes.
Adani Ports and Special Economic Zone (down 2.71%), Adani Power (down 5.00%), Adani Enterprises (down 9.11%), Adani Transmission (down 5.00%), Adani Green Energy (down 5.00%) Adani Total Gas (down 5.00%), Ambuja Cements (down 6.79%) and ACC (down 3.01%) were in the red at 02:45 PM on Thursday.
If the MCI decides to reduce the number of free-floating shares of the Adani Group, it is likely to impact the stocks negatively.
What is MSCI?
Morgan Stanley Capital International (MSCI) is an investment research firm that provides stock indices and governance tools to global institutional investors like index funds, hedge funds and exchange-traded funds to do their allocations. Its indices are considered a benchmark and any change in the MSCI index composition can result in huge inflows or outflows in the stock markets.
What is free float?
Free float is the number of outstanding shares of a company available for trading to the public. MSCI considers free float as the proportion of outstanding shares available for purchase in the public equity markets by international investors.
What did Hindenburg have to say?
The Gautam Adani-led conglomerate has been engulfed in crisis since American short-seller Hindenburg Research published a report on January 24, accusing it of stock manipulation and improper use of tax havens. It raised concerns about high levels of debt and excessive valuations.
The Adani group denied the allegations, saying the short-seller’s narrative of stock manipulation has “no basis” and stems from an ignorance of Indian law. However, its stocks have suffered a bloodbath in the past few days.
Nathan Anderson, the founder of Hindenburg wrote on Twitter: “We view this as validation of our findings.”
Written by Simran Bafna
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