HDFC Bank shares up 11% in 1 month. MSCI review could be the next trigger
Shares of underperforming heavyweight HDFC Bank, which have bounced back by 11% in the last one month amid value buying by large foreign investors, can jump another 10-15% if its weightage in MSCI increases in August review.
Shares of underperforming heavyweight , which have bounced back by 11% in the last one month amid value buying by large , can jump another 10-15% if its in MSCI increases in August review."The Street is eagerly awaiting HDFC Bank's June 2024 shareholding, which should be out anytime this week. The critical number to monitor is the holding dropping below the 55% mark. According to base case calculations, the weight increase should lead to approximately USD 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 of Nuvama Alternative & Quantitative Research.
If the shareholding favors a weight increase (which has a higher probability), the stock could see a further 10-15% jump until the official announcement in August, he said, adding that in case of an unfavorable outcome, the stock could cool off to around Rs 1,600, at which point we could see good interest from domestic funds.
Currently, HDFC Bank's weight in the index is approximately 3.8%. If 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. As the FII shareholding moves below 55%, this will necessitate an FII headroom of 25%, causing the half-factor to move to full, Nuvama said.
MSCI EM rebalancing will be in August, with the official announcement on August 13. However, price action is likely to occur preemptively, as speculation builds ahead of the release of the shareholding data.
"Domestic funds have been consistent buyers of HDFC Bank, while FII flows into India have picked up, potentially indicating purchases of private banks, particularly HDFC Bank," the brokerage said.
Source: Stocks-Markets-Economic Times
