8 Adani group stocks stare at $1.5 billion outflows. Here are 4 scenarios

Adani group stocks namely Adani Total Gas, Adani Entertainment, Adani Transmission, Adani Green, Adani Ports & SEZ, Adani Ports, Adani Power and shares of two recently acquired companies ACC and Ambuja Cements, which are constituents of MSCI Standard index, could see an up to $1.5 billion in total outflows. This is if the index provider MSCI decides to reduce the weight of these Adani shares by half, said Nuvama Institutional Equities.   

The cumulative weight of all these stocks in the index stands at 5.75 per cent, as per Nuvama's assumption of passive tracking. The current cumulative value of eight names stands at $3.5 billion, as of January 27, the brokerage said.

MSCI has said it is seeking feedback on Adani group & associates from its subscribers on what next step they should take as Adani & Group currently holds sizeable weight in the Standard Index.

The index provider is aware of the reports recently published about the Adani Group and its associated securities. It is also closely monitoring publicly available information regarding the situation and the factors that may impact the eligibility of those relevant securities for the MSCI Global Investable Market Indexes, Nuvama noted.

For now, however, the index provider does not intend to take any action until the feedback process is concluded, Nuvama noted.

Four scenarios

Nuvama, which is also a MSCI subscriber said if the price volatility ceases, the index provider might not take any action and stocks will continue to be a part of the index.

In the second scenario, it said if the volatility in Adani group stocks continues and the common feedback from participants is towards exclusion, the index provider can exclude these stocks with a prior announcement.

Nuvama said if MSCI intends to exclude the stocks and few of names continue to trade at lower circuit with no liquidity, the index provider can postpone their exclusion until enough liquidity is there.

"In the worst case scenario, the index provider can delete specific stocks at “zero value”. In the recent past, index provider deleted Russian equity at “zero value” in March 2022 as it was uninvestable," Nuvama noted.

In the scenario four,  Nuvama sees reduction in the weight of Adani stocks by half or so. That can lead to cumulative outflow of $1.5 billion, it said.

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