MSCI lifts freeze on Adani stocks, revises stance amid Hindenburg fallout

MSCI, which had earlier excluded Adani Energy and Adani Enterprises from the global standard index, stated it would now review the companies' fundraising activities

Global index provider Morgan Stanley Capital International (MSCI) has removed its freeze on the Adani Group and its subsidiary stocks, allowing for new developments within the conglomerate’s business operations, according to a report by NDTV. 

The adjustments, which include changes to the number of shares and both foreign and domestic inclusion factors, will take effect from the August 2024 Index Review, as clarified by MSCI.

These domestic and foreign inclusion factors were previously announced in conjunction with the August 2024 review, the report stated.

MSCI, which had previously excluded Adani Energy and Adani Enterprises from the global standard index, stated that it would take into account the two companies’ fundraising efforts. The index provider also mentioned that it will continue to monitor Adani Group stocks, with particular attention to aspects related to free-float.

Removal of Adani from MSCI

In the previous year, MSCI had removed Adani Transmission and Adani Total Gas from its India index, effective May 31, 2023. MSCI specified that if these two Adani stocks were to hit their lower trading limit for a cumulative five minutes on May 31, the deletion would occur at zero value. If they did not, the index provider would use the official closing price.

The removal of these two stocks from the MSCI India index was a result of a reduction in their free float, following feedback from market participants in February, after allegations were made by US-based Hindenburg Research on January 24. 

On May 6, MSCI announced it would reduce the free float of Adani Total Gas and Adani Transmission to 14 per cent and 10 per cent, respectively, down from 25 per cent.

Following this announcement, analysts had predicted the removal of Adani Transmission from the MSCI index, as its lower float would cause it to fall below the minimum market cap threshold required to remain in the index. They also anticipated that Adani Total Gas would barely meet the threshold.

India’s weight in MSCI global index

Meanwhile, India’s weight in the MSCI Global Standard index, which tracks emerging market stocks, has reached another record high. This development is expected to bring in about $3 billion in inflows to its equity markets, according to a Reuters report.

India has also further closed the gap with China on the key MSCI index. China’s weightage on the index is set to drop to 24.2 per cent from 24.8 per cent, while India’s weight will increase to 19.8 per cent from 19.2 per cent, the report said, citing Nuvama Alternative and Quantitative Research.

These changes in index weights are scheduled to take effect after markets close on August 30. The report suggests that India’s weight could potentially exceed 20 per cent by the end of November.