HDFC Bank’s share surgesrallied over 3% on Wednesday, hitting a record high during early trade on the NSE. The shares jumped by 3.66%, reaching a fresh high of ₹1,794.00 each. This surge was driven by expectations of increased passive fund inflows due to a likely weight increase in the MSCI index.
HDFC Bank’s Share Surges
The latest shareholding pattern of HDFC Bank shows that foreign institutional investors (FII) ownership has dropped below 55%. This decrease is expected to boost the stock’s weightage in the MSCI index, leading to higher passive inflows. As of June 2024, FII ownership in HDFC Bank stands at 54.8%, according to BSE data.
Potential for Significant Weight Change
Nuvama Alternative & Quantitative Research estimates that FIIs holding in HDFC Bank below 55% could lead to a significant weight change from 3.8% to 7.2% to 7.5%. This adjustment could potentially trigger inflows worth $3.2 billion to $4 billion. An FII shareholding below 55% requires an FII headroom of 25%, causing the half-factor to move to full.
Market Analysts’ Perspectives
VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, noted, “The delivery-based buying in HDFC Bank stock witnessed in the last many days has the potential to continue for a few more days, pushing the stock further up and imparting resilience to it. As the weightage of HDFC Bank in Nifty increases, there will be more delivery-based buying by ETFs and active funds. There can be a marginal negative impact on other high-weightage stocks in the Nifty like RIL, TCS, Infosys, and ICICI Bank.”
Upcoming MSCI EM Index Rebalancing
The forthcoming MSCI EM Index rebalancing is scheduled for August, with the official announcement set for August 13. Abhilash Pagaria, Head of Nuvama Alternative & Quantitative Research, stated, “According to base case calculations, the weight increase should lead to approximately $3.3 billion in inflows.”
Analysts’ Insights: Jefferies and UBS
Jefferies has maintained a ‘Buy’ rating on HDFC Bank shares, setting a target price of ₹1,880 per share. They highlighted that the increase in MSCI index weight could be a positive near-term catalyst for the stock. In the medium term, strong deposit growth and improving Net Interest Margins (NIMs) are expected to be key drivers.
Impact on US-listed ADRs and Bank Nifty Index
HDFC Bank’s US-listed American Depository Receipts (ADR) rose by more than 4% overnight on the New York Stock Exchange (NYSE). The share price rally also boosted the Bank Nifty index, which jumped over 1.85%, or nearly 1,000 points, to trade above the 53,000 level.
Recent Performance of HDFC Bank Shares
After a prolonged period of stagnation, HDFC Bank shares have surged nearly 20% over the past three months. The stock is up more than 12% in the past month alone. As of 9:30 am on Wednesday, HDFC Bank shares were trading 2.28% higher at ₹1,770.00 each on the BSE.
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