Adani Group shares continue to rally on MSCI-inclusion hopes

Gautam Adani-controlled Adani Group’s shares continued to be the biggest gainer on the bourses in the new FY amid a sharp surge in prices in a post-pandemic rally

Adani Group's share prices on a bull-run on MSCI-inclusion hopes
India’s Gautam Adani has gained more wealth this year than anyone else in the world, including Elon Musk and Mukesh Ambani, according to the Bloomberg Billionaires Index. Photo: AFP  

(ATF) Shares of Adani Group companies continued their year-long bull run on the first day of the FY 2021-22, after a brokerage report said that some of the Group’s stocks could be included in the MSCI semi-annual review in May.

Shares of Adani Transmission Ltd hit the 10% upper circuit following the report, while Adani Enterprises climbed 8%. Adani Total Gas advanced 7%, Adani Ports and Adani Green Energy hit the 5% upper circuit.

According to Edelweiss Research report, Adani Enterprises Ltd, Adani Transmission Ltd and Adani Total Gas Ltd are likely to be included in the MSCI global standard indices, with weightage of 0.49%, 0.44% and 0.44%, respectively.

Edelweiss expects inflows worth $243 million, $218 million and $221 million, respectively, in Adani Enterprises, Adani Transmission, and Adani Total Gas following the inclusion; if it happens.

The indices measures the market performance of large and mid-cap companies that have a global presence. Like other indices, such as the Dow Jones Averages or the S&P 500, they track the performance of the stocks included in them.

Funds with assets of over $50 billion track the MSCI standard global indices and are used as the base for exchange-traded funds. The ETFs mimic the stock holdings, that allows investors to profit from gains in the indices.

Similarly, the indices are also used as the benchmark of mutual funds that too use them as bases and even try to outperform them by picking better stocks

BIGGEST GAINER

Gautam Adani also emerged as the top gainer in the financial year 2020-21 that ended on Wednesday, adding more billions to his wealth than any other billionaire.

The net worth of Adani, a first-generation entrepreneur, jumped $16.2 billion in 2021 to $50 billion, according to the Bloomberg Billionaires Index, making him the year’s biggest wealth gainer, beating even Elon Musk, who has tussled with Jeff Bezos in 2021 for the title of the richest.

The surge in wealth dwarfs the $8.1bn added by Adani’s compatriot and the richest person in Asia, Mukesh Ambani. It also underscores the rising heft of the self-made billionaire, who has lured investment from Total SA to Warburg Pincus.

Shares of all Adani group stocks, except one, have rallied at least 50% this year.

Over the past three months in particular, three of its group companies more than doubled its investors’ wealth, on their excitement around this ports-to-power plants conglomerate.

Adani has been rapidly expanding his empire, adding ports, airports, data centres and coal mines in India, while determinately pursuing the controversial Carmichael coal project in Australia.

Adani Total Gas, for instance, surged 143% in 3 months rallying over 950% in the last 1 year. The stock has beaten other group firms and emerged as the top gainers among Adani Group companies in 2021.

Meanwhile, Adani Enterprises and Adani Power have also rallied around 110% each during the year, while Adani Transmission advanced 95%, Adani Ports rose 46%, and Adani Green gained 19%.

MSCI FROWNING

However, this sharp surge in prices could also prove detrimental to the group companies’ chances of getting included in the MSCI global indices, says Edelweiss.

“The Adani Group of stocks have run up significantly in the last three months. If MSCI frowns on that surge, which it could given that it frowns upon unusual movements, that can act as a deterrent to the inclusion,” Abhilash Pagaria, an analyst with Edelweiss Alternative Research told Asia Times Financial.

The MSCI has already sought market feedback on whether “extreme price increase” should be a reason for disqualification, added Pagaria.

According to him in February, the index provider also floated a consultation paper on Group’s recent share price movements seeking money managers’ inputs for its final decision on the inclusion before April 16.

Market experts said MSCI’s decision will be keenly watched even as the group stocks continue to a rally ahead of the scheduled MSCI semi-annual rebalancing in May, on the expectation that ETFs would be forced to buy the stock in large quantities if they are included in the index.

Last year in November, MSCI added 12 Indian stocks to its global standard indices while removing two others.

Among the twelve additions to the index are ACC, Apollo Hospitals, Balkrishna Industries, IPCA Laboratories, Kotak Mahindra Bank, Larsen & Toubro Infotech, MRF, Muthoot Finance, PI Industries, Trent, and Yes Bank.

The two securities to have been excluded from the global standard indices are BOSCH and LIC Housing Finance.

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