The long-awaited weightage increase of HDFC Bank will be happening in the month of August, however MSCI has made an exception by raising with lower adjustment factor, leading to an inflow of $1.8 billion, equivalent to 93 million shares, with an impact of about 4.5 days in August Rejig.
The remaining float adjustment (second and final tranche) is expected to be done in the November 2024 rejig, provided the foreign room remains at least 20%.
The timeline of the second tranche has not yet been communicated.
Currently, HDFC Bank’s weight in the MSCI EM Index is around 3.8%. Post-rejig, this could jump to 7.2%-7.5%, potentially bringing in $3.2 billion to $4 billion inflows over 6 days, according to a report by Nuvama Alternative & Quantitative Research.“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,” said the Nuvama report.Analysts at Nuvama believe that as the FII shareholding moves below 55%, this will necessitate an FII headroom of 25%, causing the half-factor to move to full.“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,” said the Nuvama report.
Analysts at Nuvama believe that as the FII shareholding moves below 55%, this will necessitate an FII headroom of 25%, causing the half-factor to move to full.
“MSCI will maintain HDFC BANK in MSCI Indexes with an increase in the Foreign Inclusion Factor (FIF) from 0.37 to 0.56 as of the close of August 30, 2024 (effective September 2, 2024) coinciding with the August 2024 Index Review,” said MSCI in its note.
MSCI further added that HDFC Bank is subject to a Foreign Ownership Limit (FOL) of 74% and an adjustment factor of 0.5. Based on the latest available shareholding disclosure, the foreign room is above 25%, which makes the bank eligible for the weightage increase in the index.
