UBS predicts up to $3.5 inflows for HDFC Bank in August MSCI India index rebalancing

So far this year, shares of HDFC Bank tumbled over 9 percent, underperforming 4 percent rise in the benchmark Nifty 50 index

After Macquarie, analysts at UBS forecasted a relatively tempered boost for HDFC Bank in the upcoming MSCI India index rebalance in August. Its analysis suggested that the upweight could usher around $3-3.5 billion inflows, lower than Macquarie's prediction of $5.2 billion.

UBS added that an additional $2.5-3 billion of buying from other funds with index-tracking characteristics is also likely and a staggered increase will make this inclusion a non-event.

Earlier, Moneycontrol had exclusively reported that Macquarie predicted HDFC Bank's weight in the MSCI India index to double in the August rebalancing, potentially bringing in passive buying of $5.2 billion or 281 million shares into the stock.

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In a sale note circulated to clients, Macquarie said, “HDFC Bank missed MSCI weight increase by a very small margin in the May rebalance. However, looking at the FII selling in the last two months, HDFC Bank's MSCI India weight should double in the August rebalance.”

MSCI index weights are calculated based on the free-float adjusted market cap available for investment by foreign investors.

As of March 2024, the investment headroom for foreign portfolio investors in India’s leading private sector bank was 24.95 percent, just short of the threshold needed for the index provider to increase its weight to a full weight. Foreign holding in the stock was at 55.54 percent, while the required holding is 55.5 percent.

So far this year, shares of HDFC Bank tumbled over 9 percent, underperforming 4 percent rise in the benchmark Nifty 50 index. Earlier, HDFC Bank had hit a 52-week high of Rs 1,757 per share on July 3, 2023 and 52-week low of Rs 1,363 per share on February 14, 2024.

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