The latest foreign ownership pattern of HDFC Bank, released on July 2, implies that the bank's shares are eligible to be considered for a weight increase at the upcoming MSCI index revision, potentially leading to inflows worth $3-4 billion.
The foreign ownership as on July 2 has been recorded at 54.83 percent, which is below the MSCI's eligibility requirement of 55.5 percent to be considered for a weight increase.
HDFC Bank's weight in the MSCI EM index is at 3.8 percent, and the drop in foreign ownership in the bank to just below 55 percent opens headroom for potential inflows. The decision on weight increase is expected to be announced by MSCI on August 13, and a Nuvama Research note had recently projected that in case HDFC Bank qualified, it could see inflows worth $3-4 billion between now and end of August.
Another recent note by BofA too had suggested that a drop in foreign shareholding limit is likely to ensure the stock turns eligible for MSCI weight up, leading to inflows worth Rs 34,000 crore from MSCI funds.
Shares of HDFC Bank had managed to hold firm through the session on Tuesday, ending with a gain of 1.34 percent.
Domestic funds have been consistent buyers in the bank in recent past, taking it higher by 18 percent from the lows of May, showing increasing confidence in the lender's growth and profitability.
It should be noted that the foreign investment limit in HDFC Bank is currently at 74 percent.
Analysts at Nuvama had projected further upside in the share price of HDFC Bank, once its eligible for increase in weightage.
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