IndusInd Bank shares jump 4%, top Nifty gainer amid potential MSCI inflows

MSCI weight doubling is expected to attract inflows of around $250 million to $300 million

Shares of IndusInd Bank surged by 4 percent to Rs 973 on January 13, becoming the top gainer on the Nifty 50 index, after its foreign headroom increased in its December shareholding pattern following a foreign institutional investor (FII) sell-off.

According to the bank’s latest shareholding details, its FII stake has decreased to 46.6 percent in December from 55.5 percent in the September quarter. This reduction means that the foreign headroom now significantly exceeds the 25 percent threshold, with MSCI currently applying a half-float factor.

Following the recent FII sell-off, the foreign headroom remains comfortably above the 25 percent level, which could potentially lead to a doubling of the bank’s MSCI weight in the February 2025 review, with an increase of around 50 basis points.

This potential rise in weight is expected to attract inflows of around $250 million to $300 million, which could influence the stock over the next 3 to 5 trading days, according to Nuvama Alternative Research. If this occurs, the rebalancing, along with the associated inflows, will be reflected on February 28.

Catch all the market action on our LIVE blog

In contrast, last week, brokerage firm Goldman Sachs downgraded IndusInd Bank’s shares to "neutral" from "buy" and reduced its price target to Rs 1,090 from over Rs 1,300.

Goldman Sachs cited concerns about slowing revenue growth in the bank's operations over the past two quarters and predicted that these trends would likely continue, citing rising delinquencies in the bank's commercial retail portfolio and slower loan growth.

Additionally, the bank’s Q3 business update was seen as unimpressive. InCred Equities noted that IndusInd Bank has faced difficulties in maintaining lending growth, particularly in its retail lending segment, over the past few quarters.

The bank's microfinance segment has been hit by severe macroeconomic headwinds, while its auto finance business has struggled due to the ongoing downturn in auto demand. Furthermore, the bank's non-vehicle retail loans primarily consist of personal loans and credit cards, which remain less in demand at present.

Out of the 50 analysts currently covering IndusInd Bank, 36 have a "buy" rating on the stock, 12 analysts have a "hold" rating, and 2 analysts have a "sell" rating.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.