Adani Total Gas, Adani Transmission shares drop as two Adani group stocks exit MSCI index

Two Adani group stocks namely Adani Transmission and Adani Total Gas plunged up to 4 per cent in Wednesday's trade, as the scrips moves out of MSCI Global Standard index.

MSCI will exceptionally analyse the price evolution for these two securities after the close of May 31. If Adani Total Gas or Adani Transmission trade at the lower price limit for at least 5 minutes cumulatively today, MSCI will delete these securities at the lowest system price as of the close of May 31. Otherwise, MSCI will use the official closing prices, as per the MSCI Index Calculation methodology.

MSCI will make an announcement confirming the price used for deleting Adani Total Gas and Adani Transmission after the close of May 31. Domestic brokerage Nuvama expects Rs 189 million in outflows in the case of Adani Transmission while it anticipated $167 million in outflows for Adani Total Gas.

On Wednesday, shares of Adani Transmission fell 3.67 per cent to a low of Rs 774.30 on BSE. Adani Total Gas, on the other hand, declined 4.47 per cent to a low of Rs 667.15.

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To recall, MSCI had excluded the two stocks and the Adani companies did not meet the relevant free float-adjusted market capitalisation requirements.

"Subsequent to our announcement of the FIF calculation treatment of Adani Group securities for the February 2023 Index Review, MSCI received feedback from market participants on significant potential replicability issues arising from the price limit mechanism being triggered for the affected securities. If the lower price limit were reached for Adani Total Gas and/or Adani Transmission on May 31, 2023, the reduced trading liquidity and volumes would likely result in significant difficulty in implementing the announced index changes at the official index security closing prices," MSCI said.

Net-net, Nuvama is expecting $500 million in passive foreign inflows due to the MSCI rejig of domestic stocks.

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For the August review, Nuvama expects Power Finance Corporation, Astral, Polycab and IDFC Bank as close contender for inclusion in MSCI Standard index.

The brokerage has Indus Towers as contra long bet (Short Term): "The stock will get excluded from MSCI Std Index on May 31, 2023 and that will lead to a passive outflow of $80 million. Going by past instances of MSCI stock exclusions (Zee , Biocon etc) , I believe Indus Towers should bottom out now," said Abhilash Pagaria of Nuvama Institutional Equities.

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