HDFC Bank's weight may go up in MSCI index as FII holdings drop below 55%; inflows up to $4 billion likely

HDFC Bank's weight in the MSCI index could go up to 7.2-7.5% in the August 2024 review from 3.8% now as the foreign institutional holding (FII) has come down below 55% according to the shareholding data available on the BSE. This could also trigger passive inflows of up to $4 billion, according to estimates by Nuvama.

The bank’s American Depository Receipts (ADRs) reacted positively to the development, jumping by over 3% to $66.16.

The FII shareholding at the end of the June quarter stood at 54.83% versus 55.54% at the end of March quarter. The foreign investment ceiling in HDFC Bank is 74%.


The bank remains in the spotlight with a significant weight change that could go up to 7.2-7.5%, the Nuvama note said, adding that as the FII shareholding moves below 55%, this could necessitate an FII headroom of 25%, causing the half-factor to move to full.

The forthcoming MSCI EM Index rebalancing will be done in August, with the official announcement on August 13. However, price action is likely to occur preemptively, as speculation builds ahead of the release of the shareholding data, the note said.

Domestic funds have been consistent buyers of HDFC Bank, while FII flows into India have picked up, potentially indicating purchases of private banks, particularly HDFC Bank.

HDFC Bank shares on Tuesday ended the session at Rs 1,730.55 on the NSE, jumping by Rs 25.80 or 1.51%. In the last one month HDFC Bank shares have rallied nearly 10%.

The stock has been a market laggard returning less than 1% in the past 12 months versus 15% returns by Nifty Bank. Meanwhile, the broader Nifty50 has yielded 25% in the said time period.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)