HDFC Bank share price down almost 3% today, know why?

HDFC Bank shares fell by almost 3% on August 13 following the announcement of MSCI’s India Standard Index rebalancing. The index changes will be implemented by the close of August 30, 2024, and are expected to significantly impact several stocks.

Key Highlights:

• HDFC Bank’s Weight Increase:
  • HDFC Bank’s weight in the MSCI Global Standard Index is set to nearly double due to a technical factor triggered by the bank’s foreign shareholding dropping below 55% at the end of the June quarter.
  • The bank’s weight is expected to rise from 3.8% to between 7.2% and 7.5%, which could attract inflows of around $3.2 billion.
  • Analysts predict that passive Foreign Institutional Investors (FIIs) could purchase up to ₹25,000 crore worth of HDFC Bank shares by September 2, with positioning likely to start on August 13.
• MSCI Index Additions:
  • Eight stocks are expected to be included in the MSCI India Standard Index as part of the August review. These include:
    • Dixon Technologies
    • Railway Vikas Nigam (RVNL)
    • Vodafone Idea
    • Oil India
    • Zydus Lifesciences
    • Oracle Financial Services Software
    • KPIT Technologies
    • Cochin Shipyard
  • The inclusion of these stocks is estimated to attract passive inflows worth $1.239 billion, according to JM Financial.
• Market Reaction:
  • HDFC Bank shares traded 2.54% lower at ₹1,618.00 as of 9:20 am on August 13.
  • The outcome of the MSCI rebalancing has fallen short of market expectations, particularly as the adjustment will occur in two tranches instead of one, as anticipated.

Impact of MSCI Rebalancing on HDFC Bank:

• Foreign Inclusion Factor (FIF):
  • MSCI will increase HDFC Bank’s Foreign Inclusion Factor from 0.37 to 0.56 by the close of August 30, 2024.
  • A further adjustment is expected in November, which could see the inclusion factor rise to 0.75.
• Market Estimates:
  • The two-tranche adjustment has tempered expectations, but analysts believe the second tranche of inflows is not at risk.

The MSCI rebalancing has triggered significant market activity, especially for HDFC Bank, with expectations of substantial inflows from passive investors.