HDFC Bank may see inflows of up to $4 billion as MSCI weighting rises
Foreign portfolio investors (FPI) holdings in HDFC Bank fell below 55 per cent at the end of the June 2024 quarter, according to a disclosure by the private lender.
FPI holdings fell to 54.83 per cent from 55.54 per cent at end-March 2024. Amid continued selling by FPIs, their holding had fallen from 66 per cent in the last five quarters.
The development is significant because 55 percent is the upper limit set by global index provider MSCI for the stock to be fully included in its indices. Due to insufficient investment space, MSCI has limited its weighting in its indices.
“Currently, HDFC Bank’s weight in the MSCI Emerging Market index is around 3.8 per cent. Post rebalancing, it could go up to 7.2 per cent or 7.5 per cent, potentially bringing in $3.2 billion to $4 billion in inflows,” Abhilash Pagaria, head of Nuvama Alternative & Quantitative Research, said in a note issued after HDFC Bank’s latest disclosure.
In the run-up to the announcement of the shareholding pattern, HDFC Bank shares have outperformed, rising nearly 10 percent in the past month, while the benchmark Nifty has gained 4 percent.
The next announcement from MSCI on rebalancing is expected around mid-August. In the run-up to that, the stock is expected to rise further, say market experts. Given that HDFC Bank has the heaviest weight in both the Sensex and the Nifty, a possible rally in its stock could also boost the overall market.
Shares of HDFC Bank last closed at Rs 1,728. Nuvama expects the stock to move towards Rs 1,900 ahead of the MSCI announcement. Analysts said given the large impact, it remains to be seen whether MSCI increases HDFC Bank’s weighting in a phased manner or in one go.
First print: 02 Jul 2024 | 21:09 IST