Adani group shares: MSCI makes no changes to Foreign Inclusion Factor in August review

In light of "continued uncertainty with the free float of Adani Group and associated securities within the MSCI ACWI IMI indices", index aggregator MSCI said it will not implement any changes in the Foreign Inclusion Factor (FIF) or number of shares (NOS) for the related securities as part of the August 2023 Index Review, until otherwise announced.

"Also, until otherwise announced, MSCI will review the treatment of non-neutral corporate events for the affected securities on a case-by-case basis and potentially defer their implementation. The treatment of any such non-neutral corporate event would be announced to all clients with advance notice through regular Index announcements. For the avoidance of doubt, MSCI will continue implementing any neutral corporate events including ones requiring application of a Price Adjustment Factor (PAF)," it said in a note.

MSCI said it welcomes feedback from all market participants and investors on these issues and will communicate further as necessary or appropriate.

MSCI has also tweaked weightages of two dozen stocks including Reliance Industries Ltd, ICICI Bank Ltd, HDFC Bank Ltd, Infosys Ltd and Tata Consultancy Services, which is likely to result in up to $130 million in outflows for the stock. All changes will be implemented as of the close of August 31.

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Reliance Industries may see $130 million in outflows. It would be followed by ICICI Bank ($78 million) and Infosys ($77 million). HDFC Bank ($58 million) and TCS ($53 million) would be two other scrip seeing over $50 million in outflows. Axis Bank, Kotak Mahindra Bank, Bajaj Finance, Bharti Airtel, Larsen & Toubro, Wipro, Mahindra & Mahindra, ITC and Maruti Suzuki are some other stocks that are expected to see outflows.

Index aggregator MSCI also included and excluded a few scrips from MSCI Global Standard indices. MSCI added Power Finance Corporation Ltd (PFC), REC Ltd, Ashok Leyland Ltd and five other stocks, which could result in $150-200 million in inflows for the stocks.

The list included Cummins India, HDFC Asset management, IDFC First Bank, Supreme Industries and Astral Ltd. ACC, a Adani group stock, would be the only scrip that is excluded from the list. This stock is expected to see $75 million in outflows.

"A total of eight inclusions have been announced, aligning with our projections for six of them. However, two unexpected entries (REC & Supreme Industries) emerged as surprises. In our assessment, these were strong contenders for the November 23 review. It's worth noting that the aforementioned stocks were selected via the NOC route as this time India got six NOC slots which is one of the highest seen in my experience," said Abhilash Pagaria, Head, Nuvama Alternative & Quantitative Research.

Also, the MSCI made changes to its MSCI Global Small Cap indices, wherein it made 40 inclusions and 11 exclusions in MSCI India list. The inclusions included Mishra Dhatu Nigam, PTC Industries, Glenmark Life Sciences, Five Star Business Finance, Anant Raj, CPCL, Ather Industries, Ami Organics, Marksans Pharma, Newgen Software and Patel Engineering, among others.

Exclusions for the index include Tata Communications, Aditya Birla Capital, Ashok Leyland, IDFC First Bank, REC, NIIT, BEML Land Asset and Astral among others.

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