Some brokers will take a hit from Friday trade in HDFC Bank

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Tarun SharmaMoneycontrolThe Securities Exchange Board of India (SEBI) had advised Reserve Bank of India to give some time to the custodians to divest their FII stake in HDFC Bank before 1.40 pm last Friday, when the central bank notification on the breach of the limit was flashed on stock exchange terminals, sources privy to the meeting told Moneycontrol. However, brokers who bought the scrip on behalf of foreign portfolio investors (FPIs) after 1:40PM on February 17 will have to take a hit.The country's market regulator met with the Reserve Bank of India on Monday to discuss the issue of foreign institutional investor (FII) holding in HDFC Bank overshooting the 74 percent.Frenzied buying by FIIs in the HDFC Bank stock on Friday led to the statutory limit of 74 percent being crossed. Reserve Bank of India had told the custodians of the FIIs that purchases made after 1:40PM that day will not be settled. “We are surprised at the way RBI has obstructed the live market," said a source privy to the development. "We sought to know how they got the information of the limit breach in HDFC stock before the day close.”On the orders that were placed before the deadline, a SEBI source said, “We will give time to divest stake and shareholding of FPI in HDFC Bank will come down gradually. However, RBI will take a call for the time period of divesting stake. Usually give two to three days’ time period for divesting stake.”The source added: “FII trades done in the stock after 1:40 PM will be reversed and it will become the liability of the broker who bought the shares on the behalf of the FIIs."It is learnt that some pending orders in the trading system got executed after 1:40PM, before they could be withdrawn and there is no clarity on extent to which the FII investment limit was surpassed. A little over 7 crore shares — around 3.5 percent of the equity base -- resulted in delivery on both exchanges combined. Market sources say a substantial chunk of the shares would have been bought by FIIs. This is the first time that the RBI had to issue a notification banning FII purchase in the middle of the trading session. Usually such announcements are made after trading hours when custodians submit the details of their purchases to the RBI.