MSCI August rejig: HDFC Bank weightage in Global Standard index to increase in two tranches; stock falls 3%

According to MSCI, the weightage increase of HDFC Bank in the Global Standard Index will be made in August. However, the upward revision in the weightage could be done by a lower adjustment factor.

According to reports, the weightage increase would lead to inflows of an estimated $1.8 billion, or around 93 million shares.

The second and final tranche of float adjustment is likely to be implemented in the November 2024 rejig if there is a foreign room of at least 20%. However, MSCI has not announced the timeline for the second tranche of the weightage increase.

Currently, HDFC Bank has a weightage of 3.8% in the MSCI EM Index. After the August rejig, the weightage will increase between 7.2% and 7.5%.

Experts estimate that the weightage increase would lead to around $3.2 billion to $4 billion of fund inflows over six days, In its August reshuffle, MSCI included seven Indian stocks – Vodafone Idea, Dixon Technologies India, Oil India, Oracle Finl Svcs Softw, Prestige Estates Project, Rail Vikas Nigam and Zydus Lifesciences to The MSCI India Index, which is part of the MSCI Global Standard Index. Bandhan Bank will exit the index as per the MSCI reshuffle.

“MSCI will maintain HDFC BANK in MSCI Indexes with an increase in the Foreign Inclusion Factor (FIF) from 0.37 to 0.56 as of the close of August 30, 2024 (effective September 2, 2024) coinciding with the August 2024 Index Review,” said MSCI in its note.

MSCI stated that HDFC Bank is subject to a foreign ownership limit of 74% and an adjustment factor of 0.5. The foreign room is above 25% as per the latest shareholding pattern, making the bank eligible for the weightage increase in the index.

HDFC Bank shares dropped 3.18% to ₹1,607.25 apiece on the NSE in morning trade. However, the bank stock recovered some losses to trade at ₹1,616 apiece on the NSE at 12:30 pm.