HDFC Bank share price jumps over 3% to record high as FII shareholding lifts MSCI weight increase potential

HDFC Bank share price rallied over 3% to hit a record high apiece in early trade on Wednesday on expectations of high passive fund inflows amid likely weight increase in MSCI index. HDFC Bank shares jumped as much as 3.66% to a fresh high of ₹1,794.00 apiece on NSE. 

The latest shareholding pattern of HDFC Bank shows foreign institutional investors (FII) ownership in the bank dropped below 55%, which is expected to boost the stock’s weightage in the MSCI index, leading to higher passive inflows.

According to BSE data, the FII ownership in HDFC Bank as of June 2024 stands at 54.8%.

According to estimates by Nuvama Alternative & Quantitative Research, FIIs holding in HDFC Bank below 55% could lead to a significant weight change from 3.8% to 7.2% to 7.5%, potentially triggering inflows worth $3.2 billion to $4 billion.

FII shareholding below 55% necessitates an FII headroom of 25%, causing the half-factor to move to full.

“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 also active funds. There can be a marginal negative impact on other high weightage stocks in the Nifty like RIL, TCS, Infosys and ICICI Bank,” said VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services.

The forthcoming MSCI EM Index rebalancing will be in August, with the official announcement to be made on August 13.

“According to base case calculations, the weight increase should lead to approximately $3.3 billion in inflows,” said Abhilash Pagaria, Head - Nuvama Alternative & Quantitative Research.

According to Jefferies, HDFC Bank’ jump in MSCI index weight could be positive near-term catalyst in stock. In medium term, strong deposit growth and improving Net Interest Margins (NIMs) should be key drivers, it said.

Jefferies maintained a ‘Buy’ rating on HDFC Bank shares with a target price of ₹1,880 per share.

UBS believes the MSCI weight increase could lead to estimated $3 - 6.5 billion buying in HDFC Bank stock, which is partly factored in the recent rally, a report said. The brokerage firm has a ‘Buy’ call on HDFC Bank shares with a target price of ₹1,900 per share.

Meanwhile, HDFC Bank’s US-listed American Depository Receipts (ADR) rose more than 4% overnight on the New York Stock Exchange (NYSE).

HDFC Bank share price rally also lifted the Bank Nifty index which jumped over 1.85% or nearly 1,000 points to trade above 53,000 level.

After a long period of lull, HDFC Bank share price rallied nearly 20% in the past three months, while the stock is up more than 12% in one month.

At 9:30 am, HDFC Bank shares were trading 2.28% higher at ₹1,770.00 apiece on the BSE.

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