FII stake in HDFC Bank falls below 55%, ADRs rally on likely inflows

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American Depository Receipts (ADRs) of HDFC Bank rallied more than 3.5% in early trading on the New York Stock Exchange Tuesday driven by expectations that its weighting on the MSCI Standard Index could double in the August reshuffle.

This anticipation follows a decline in foreign investors' stakes to below 55% in the June 2024 quarter. The change in MSCI weighting could potentially lead to an inflow of up to $4 billion from passive funds, analysts' estimates showed.


Legroom for foreign holding in the bank has now gone up to 25.9%, against the MSCI requirement of 25% for increasing the weighting.

"Currently, HDFC Bank's weighting in the MSCI EM Index is around 3.8%. After the rejig, this could jump to 7.2-7.5%, potentially bringing in $3.2 billion to $4 billion in inflows," said Abhilash Pagaria, head - Nuvama Alternative & Quantitative Research.


On the NSE, shares of the bank had closed at ₹1,728 after a gain of 1.34% on Tuesday. The shares have returned 10% in the past one month.As of March-end, FIIs held a 55.54% stake in HDFC Bank, and a fall below 55% would allow an FII headroom of 25%, causing the half-factor to move to full, according to Nuvama Alternative & Quantitative Research.The MSCI August review will be announced on August 13, and the adjustment will take place on August 30.
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