Indian equities fell on Friday, tracking a slide in global equities on concerns of a looming U.S. recession, and as sentiment soured after index provider MSCI said it will cut the weightings of four Adani Group companies. Reacting to the development, Sensex down up 100 points, Nifty touched 17,850 level during the noon session around at 11.25 am.
Trading in Adani Group equities was mixed after index provider MSCI said that it has lowered the free floats of Adani Enterprises, Adani Total Gas, Adani Transmission, and ACC while leaving the free floats of the other firms unchanged. According to MSCI, free float refers to the portion of outstanding shares that are offered for sale to investors on open stock markets.
On the BSE, shares of Adani Total Gas and Transmission struck a 5% down circuit, while those of ACC were only slightly lower. At the time the piece was being written, Adani Enterprises, the Group's main company, had recovered from the day's low to trade marginally higher. As of January 30, the four firms together comprised 0.4% of the MSCI emerging markets index. The modifications take effect on March 1.
As some ETFs and index funds that utilise MSCI as the benchmark may resort to selling in order to modify their portfolios, MSCI lowering the weightings may intensify the selling pressure on Adani Group stocks. Since Ambuja Cements and ACC were recently bought and free float should ideally not be an issue with these two stocks, we believe that stocks other than those two would bear the brunt of the review the most.
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