HDFC Bank's Drop In Q1 FII Holding Paves Way For Higher MSCI Weight

HDFC Bank Ltd. has reported a reduction in foreign institutional investors' shareholding to 54.83% in the June 2024 quarter, down from 55.54% in the previous quarter. This change aligns with the MSCI Index's requirement of keeping FII shareholding below 55.5%.

The decrease in FII shareholding will likely trigger a significant increase in HDFC Bank's weight in the MSCI Index, according to the research firm Nuvama.

At the time of merger of HDFC and HDFC Bank, MSCI had assigned a lower weight for the merged entity. This was because the headroom for foreign investors was close to 15%.

Currently, HDFC Bank's weight stands at 3.95%, but with the shareholding drop, it could rise to between 7.2% and 7.5%, Nuvama said in a note, adding that the adjustment is expected to result in substantial inflows, estimated between $3.2 billion and $4 billion.

The MSCI Index rebalancing is scheduled for August, with the official announcement set for Aug. 13 and the flows anticipated on Aug. 30.

Shares of HDFC Bank closed 1.3% higher at Rs 1,728 apiece. That is compared with a 0.07% fall in the country's benchmark NSE Nifty 50.