Global Index provider MSCI has changed its weightage for four Adani Group stocks in its various widely tracked Indices, After reviewing how many shares are available in the “free float” category – that is, shares which can be freely traded without restrictions. MSCI indices are tracked by investors globally, who allocate funds based on weightage given to countries and stocks. The four Adani group companies are Adani Enterprises, Adani total gas, Adani transmission and ACC.
What is MSCI?
MSCI, or Morgan Stanley capital international, is owned by the multinational investment management and financial services company Morgan Stanley. It is a leading provider of critical decision support tools, including stock indexes and services for the global investment community. It has over 1,60,000 Indexes in its portfolio.
What are MSCI indices?
MSCI has Indexes for countries, regions emerging markets, developed Markets, small cap, all cap and even Islamic Indexes. It selects stocks for its equity indexes that are easily traded and have high liquidity, with companies having high free float getting more weightage. It prefers stocks that have active investor participation, and are without owner restrictions.
These indices include enough stocks to represent the underlying equity market or the direction and performance of the market. MSCI is best known for its benchmark indexes, including the MSCI emerging market index and MSCI frontier markets index. The company launches new indexes every year.
MSCI India Index?
The MSCI India Index is designed to measure the performance of the large and mid – cap segments of the Indian market. With 113 constituents, the index covers approximately 85%of the Indian equity universe, MSCI says.
As in January 31,2023, Reliance industries has a weightage of 9.89, Infosys 7.13, HDFC 6.25, ICICI Bank 5.92 and TCS 4.24. Overall financial stocks have 24.74% weightage and IT 15.72% in the India Index.
The index is reviewed quarterly – in February, May, August and November – with the objective of reflecting change in the underlying equity markets in a timely manner, while limiting under index turnover. During the May and November semi – annual index reviews, the index is rebalanced and the large and mid – capitalization cut – off points are recalculated, MSCI says.
How does it matters for Adani?
MSCI has changed the weightage of Adani companies in various Indexes including emerging market index, India and Asian indexes after group companies lost around $110 billion in market capitalisation over the last two weeks. MSCI indexes are widely tracked by foreign portfolio investors, hedge funds, and other sovereign wealth funds which allocate funds to various markets like India depending on the overall weightage and direction given by these Indexes.
If India and it’s top listed companies get good weightage in MSCI indexes, foreign investors pump in more funds on that basis and vice – versa. The action on the Adani companies means these stocks will be less favoured by foreign investors and hedge funds while making their India allocations.
Moody’s investors service on Friday downgraded the outlook on four Adani group companies to “negative” from “stable” while affirmed the credit ratings on these entities. These companies are Adani Green Energy Ltd., Adani green energy restricted group (AGEL RG – 1), Adani transmission step – one Ltd. (ATSOL) and Adani electricity Mumbai Ltd.
The global rating company said that these entities may also face rating downgrade in the event of funding or refinancing challenges and credit profile deterioration.
The stock rout has heightened worries that the loss of confidence in the group led by billionaire Gautam Adani could evolve into loss of confidence in Indian businesses generally. There have been protest in parliament, with lawmakers demanding on investigation.