MSCI’s India stock gauge heads for correction amid Adani selloff

The MSCI India Index slid as much as 1.7%, taking its losses from a Dec. 1 peak to more than 10%. Eight of the 10 Adani-linked stocks are part of the measure. They were the biggest decliners on the index on Wednesday. 

A broad risk-off mood in Asian markets ahead of the minutes of the US Federal Reserve’s latest meeting also contributed to negative sentiment. Traders are watching for signals of larger interest-rate hikes in the US as higher inflation persists.

“There is little bit of renewed pressure since interest rates will likely stay elevated longer than expected, which will obviously impact economic growth,” said Amit Kumar Gupta, chief investment officer of Fintrekk Capital.

The decline in the MSCI measure marks a reversal from last year, when India’s stock gauges were in the running to be the best performers globally. Foreign funds have pulled out more than $3 billion from the country’s equities year-to-date, after $11.5 billion of inflows in the second half of 2022, according to latest data compiled by Bloomberg.

Stocks linked to billionaire Gautam Adani have weighed heavily on the MSCI gauge since short seller Hindenburg Research’s report was published on Jan. 24. The market capitalization wipeout of the conglomerate’s shares deepened on Wednesday to more than $140 billion, with all 10 stocks in the red.

The MSCI India measure’s losses since the start of December are almost double those of the benchmark Sensex index, which doesn’t include any of the Adani Group stocks. The Sensex is down 5.5% from an all-time high in that period. The NSE Nifty 50 Index, which holds two Adani stocks, has dropped more than 6%.