Continuing their unstoppable rally, Indian benchmark indices achieved new historic milestones in early morning trade today. The S&P BSE Sensex surpassed the 80,000 mark for the first time to reach 80,039 level, while the Nifty 50 reached a fresh all-time high of 24,292, approaching the 24,300 level.
The rally was largely supported by heavyweights, with HDFC Bank leading the charge. HDFC Bank's shares advanced 3.66% today, reaching a fresh all-time high of ₹1794 apiece. The Nifty 50 is currently trading with a gain of 136 points at 24,260, with HDFC Bank alone contributing 69.6 points, or 51% of the total gain.
Other banks, such as Axis Bank, ICICI Bank, and Kotak Bank, have also supported the frontline indices, driving them to higher levels in today's session.
The surge in HDFC Bank shares followed a decline in its foreign institutional investor (FII) shareholding to below 55%, which analysts expect will lead to increased MSCI inflows.
According to the experts, if the ownership of the bank drops below 55%, it could lead to an increase in the MSCI weightage. HDFC Bank’s current weight in the MSCI EM index is approximately 3.8%.
‘If the FIIs reduce their holding from 55.50% to below 55%, there could be a significant weight change from 3.8% to 7.2% to 7.5%, potentially leading to inflows of $3.2 billion to $4 billion, said wealth manager Nuvama Alternative & Quantitative Research in a note.
As the FII shareholding moves below 55%, it will necessitate an FII headroom of 25%, causing the half-factor to move to full. The foreign investment ceiling at HDFC Bank is 74%, according to BSE data.
“According to base case calculations, the weight increase should lead to approximately $3.3 billion in inflows. As the impact will be seen within 6 to 8 days and the stock is quite liquid, I don’t believe the weight increase (if it happens) should be staggered; it should occur in one go,” said Abhilash Pagaria, Head, Nuvama Alternative & Quantitative Research.
The strong rally in banking stocks has driven the Nifty Bank index to a new all-time high of 53,201, surpassing the 53,000 level for the second time in a week. As of 10:00 a.m., 8 out of the 12 index constituents are trading in the green, with HDFC Bank and Federal Bank leading the gains at 4% and 3%, respectively.
Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.
