GQG sell-off knocks Adani Energy; MSCI bets disrupted

GQG Partners sold a large block of Adani Energy shares in India’s Aug. 31 closing auction, putting sudden supply into the market during a major MSCI index reshuffle. An exchange filing and people familiar with the matter showed a single entity offered about 21.92 million Adani Energy shares at 1,417 rupees apiece in the session’s auction.

The block overwhelmed demand from index-tracking funds that market participants had expected would buy newly weighted stocks after the rebalance. Several event-driven and quantitative funds had built positions ahead of the MSCI changes, anticipating passive inflows to absorb additional supply.

Research from Nuvama Alternative & Quantitative Research estimated that passive index trackers would need to buy roughly $310 million of Adani Energy after its addition to the MSCI Standard Index. The same research projected about $202 million of passive inflows for Adani Enterprises following an increase in its index weighting. Traders said the single large sell order exceeded those passive demand estimates during the closing auction.

Adani Energy fell about 10% on Aug. 31, its steepest one-day drop in nearly seven months. Total turnover in the stock for the session reached about $569 million, with trading concentrated around the auction.

An exchange filing showed GQG’s disclosed stake in Adani Energy was 3.46% as of Aug. 31, down from 5.1% in June 2023. The filing noted the holding had changed through multiple purchases and sales but did not disclose the exact number of shares sold in the most recent transactions. GQG declined to comment, and the Adani Group did not respond to requests for comment.

The MSCI rebalance was the first major index event conducted under India’s new closing-auction mechanism. Market participants noted the auction timing concentrated liquidity and made it harder for passive buying to absorb a sudden increase in available shares.

Some funds that position ahead of index rebalances build directional or relative-value trades expecting predictable passive flows. The large, auction-timed block altered the expected balance between buyers and sellers during the rebalance window and triggered heavy trading and rapid price movement on Aug. 31.