Global index manager MSCI Inc has decided to exclude two Adani Group firms, Adani Transmission Ltd and Adani Total Gas Ltd, from its India gauge,starting at the end of May.

This move could potentially deal a blow to the stocks of the two companies, which have been trying to recover from the fallout caused by a short-seller report earlier this year.

According to a statement released by MSCI on Thursday, the exclusion was made following changes in the calculation of the amount of shares considered freely tradable in the public market for the two companies.

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Brian Freitas, an independent equities analyst who publishes on Smartkarma, estimated that the exclusions will trigger a passive outflow of $186 million for Adani Total Gas and $203 million for Adani Transmission.

He added MSCI’s decision was “mostly expected” but that the passive selling will keep the two stocks under pressure, particularly Adani Transmission, which may also need to do some fundraising.

The action by the index provider comes as Gautam Adani’s conglomerate is seeking to raise funds, which will be a major test of investor confidence in the group.

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The allegations of market manipulation and accounting fraud by Hindenburg Research in late January wiped out more than $150 billion from the group’s value at one point.

Adani has denied the allegations, and the selloff has eased in recent weeks as the company has been trying to regain investors’ trust through a series of investor roadshows, early debt repayments, and plans to scale back its pace of spending on new projects.

Earlier this month, MSCI had already announced that it would implement weighting cuts for Adani Transmission and Adani Total Gas in its indexes.

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The reduction had been initially announced in February, shortly after Hindenburg’s scathing report on the group, but its implementation was delayed until now.

The exclusion of the two Adani firms from the MSCI India gauge is expected to have a significant impact on their stocks, which have already been under pressure due to the allegations against the group.

However, some analysts believe that this move by MSCI was not unexpected and that the two firms may be able to weather the storm in the long run.

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Overall, the exclusion of Adani Transmission and Adani Total Gas from the MSCI India gauge is a significant development that will have implications for the group’s ability to raise funds and for its stock prices.

It remains to be seen how the market will react to this news in the coming weeks and months.

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