HDFC Bank’s June Shareholding Shows FII Holding Decline to 54.83% – May See Upto $4 Billion Inflows

The Housing Development Finance Corporation Limited (HDFC) was amongst the first to receive an ‘in principle’ approval from the Reserve Bank of India (RBI) to set up a bank in the private sector. HDFC Bank is a publicly held banking company, the bank was incorporated in August 1994 under the name of ‘HDFC Bank Limited’, with its registered office in Mumbai, India. It is engaged in providing a range of banking and financial services including retail banking, wholesale banking, and treasury operations Currently, HDFC Bank Ltd. (HBL) is the largest private-sector bank in India.

HDFC Bank Weightage to increase in MSCI

HDFC Bank Ltd. reported a reduction in foreign institutional investors’ (FII) shareholding to 54.83% in the June 2024 quarter, down from 55.54% in the previous quarter. This adjustment aligns with the MSCI Index’s requirement to maintain FII shareholding below 55.5%. Consequently, this decrease is expected to significantly increase HDFC Bank’s weight in the MSCI Index.

During the merger of HDFC and HDFC Bank, MSCI had assigned a lower weight to the merged entity due to a limited headroom for foreign investors, which was close to 15%. Currently, HDFC Bank’s weight in the MSCI Index stands at 3.95%. However, with the recent reduction in FII shareholding, the weight is anticipated to rise between 7.2% and 7.5%, This adjustment is projected to result in substantial inflows, estimated between $3.2 billion and $4 billion.

HDB ADR Jumps 5%

Following the news, HDFC Bank’s American Depositary Receipt (ADR) experienced a significant jump of 5%, reaching a high of 67.16. This recent performance indicates that the ADR is now up by more than 20% from its low in June. The HDB ADR closed with a 4.5% gain yesterday.

Conclusion: The recent reduction in foreign institutional investors’ shareholding in HDFC Bank to 54.83% aligns with MSCI Index requirements and is expected to significantly increase the bank’s weight in the MSCI Index. This could result in substantial inflows estimated between $3.2 billion and $4 billion, bolstering the bank’s market position. The stock opens at Rs.1,791 a piece up by 3.5% from its previous day’s closing price.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.