Adani Group stocks back in the red after MSCI review
What's the story
Adani Group's dream of building a winning streak in the market fell short on the third day. After rallying for two trading sessions, all listed companies of the group except for Adani Wilmar ended in the red on Thursday. This came after index provider MSCI (Morgan Stanley Capital International) said that it would review the free-float status of some Adani Group stocks.
Context
Why does this story matter?
The performance of Adani Group stocks in the equity market on Tuesday and Wednesday gave the impression that the conglomerate is ready to bounce back. However, the fall on the third day clearly shows how volatile Adani Group stocks are. If MSCI decides to remove some of the conglomerate's securities from its index, the repercussions would be even worse.
MSCI
MSCI index can determine inflows and outflows in the market
MSCI indexes are considered a benchmark for global institutional investors. Any change in the index can result in huge inflows and outflows of foreign investment in the market. "MSCI has received feedback from a range of market participants concerning the eligibility and free float determination of specific securities associated with the Adani Group for the MSCI Global Investable Market Indexes (GIMI)," it said.
Justification
Characteristics of some investors have sufficient uncertainty: MSCI
The investment research firm justified its review of Adani Group stocks saying it "has determined that the characteristics of certain investors have sufficient uncertainty that they should no longer be designated as free float." It defines free float as the proportion of outstanding shares that are available to international investors for purchase from public equity markets.
Reason
Hindenburg report led to suspicions
Hindenburg Research's allegations have raised suspicions about the investors in the Adani Group. In India, promoters of listed companies cannot hold more than 75% stake. The remaining 25% is reserved for trading. It is the investment in this 25% that MSCI is doubtful about. Hindenburg raised allegations that the money coming in for the 25% is not from genuine sources.
Stocks
Only Adani Wilmar tarded in green on Thursday
freefall MSCI's decision to review Adani Group stocks saw the conglomerate's listed companies. Adani Enterprises, which led the group's rejuvenation on Tuesday and Wednesday, fell 11.19% on Thursday. Adani Green, Adani Transmission, Adani Power, and Adani Total Gas fell 5%, while Ambuja Cement fell 6.87%. Only Adani Wilmar traded in the green on Thursday, which was powered by its Q3 results.
Wealth fund
Norway's sovereign wealth fund divested remaining Adani shares
Meanwhile, Norway's $1.35 trillion sovereign wealth fund said that it sold all its stakes in the Adani Group. By the end of 2022, the wealth fund had shares in Adani Green, Adani Total Gas, and Adani Ports. Over the past few weeks, it divested all these shares. Christopher Wright, the fund's head of ESG risk, said that it has "no exposure left."
Supreme Court
Supreme Court to hear plea on Hindenburg report today
In India, there are calls for a probe into the Hindenburg report. Today, the Supreme Court of India is set to hear a plea seeking a court-monitored probe into Hindenburg's allegations about the Adani Group. The petition was filed by advocate Vishal Tiwari on Thursday. He mentioned the matter for urgent listing before a bench headed by Chief Justice DY Chandrachud.