GQG Partners Inc.’s sale of Adani Energy Solutions Ltd. shares during India’s closing auction on Monday overwhelmed demand from passive funds, according to people familiar with the matter, contributing to a 10% slump in the stock on the day.
The unexpected supply also hurt hedge funds that had positioned ahead of the MSCI Inc. index rebalancing on Aug. 31, expecting to sell shares to index-tracking funds, the people said.
Trading around index rebalancing is a common strategy among hedge funds, who often build positions ahead of index changes and look to sell into the expected demand from passive investors when the changes take effect.
The sale by GQG disrupted that trade by adding substantially more shares to the market than some traders had anticipated. The increased supply, together with positions built by hedge funds ahead of the rebalance, contributed to the slump in Adani Energy shares, the steepest in about seven months. About $569 million of the stock changed hands.
