HDFC Bank’s June quarter FII shareholding drops below 55%, MSCI weight set to increase

HDFC Bank released its April-June quarter shareholding data on Tuesday, July 2, which showed that the ownership of foreign institutional investors (FII) in the leading private lender has declined during the quarter-under-review. According to BSE data, the FII ownership in HDFC Bank as of June 2024 stands at 54.8 per cent, below the 55 per cent-mark. This indicates greater MSCI inflows.

LiveMint reported earlier that the FII holding would be a critical number to monitor in HDFC Bank’s June 2024 shareholding pattern. If the ownership drops below 55 per cent, it could lead to an increase in the MSCI weightage. HDFC Bank’s current weight in the MSCI EM index is approximately 3.8 per cent.

Also Read: HDFC Bank share price may jump 10-15% on potential MSCI index weight increase

‘’If the FIIs reduce their holding from 55.50 per cent to below 55 per cent, there could be a significant weight change from 3.8 per cent to 7.2 per cent to 7.5 per cent, potentially leading to inflows of $3.2 billion to $4 billion, said wealth manager Nuvama Alternative & Quantitative Research in a note.

As the FII shareholding moves below 55 per cent, it will necessitate an FII headroom of 25 per cent, causing the half-factor to move to full. The foreign investment ceiling in HDFC Bank is 74 per cent, according to BSE data.

“According to base case calculations, the weight increase should lead to approximately $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, Head - Nuvama Alternative & Quantitative Research.

‘’If the shareholding favours a weight increase (which has a higher probability), HDFC Bank stock could see a further 10-15 per cent jump until the official announcement in August,'' he added. “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,” said Nuvama.

The August review cut-off will be between June 18 to 31 and the official announcement will be on August 13 with the adjustment taking place on August 30, 2024. India's weight in the MSCI emerging market (EM) now stands at 19.2 per cent, which is expected to gradually cross the 20 per cent mark.

Also Read: HDFC Bank vs Axis Bank: Which bank stock should you buy for long-term? Here's a 5-point analysis

HDFC Bank Share Price Trend

In the last one month, HDFC Bank has given 13 per cent returns to investors, and 17.69 per cent in the last three months. However, HDFC Bank stock has been an underperformer this year, with an annual return of 1.72 per cent.

HDFC Bank reported a 0.9 per cent sequential increase in net profit, totaling ₹16,511.9 crore in the fourth quarter of FY24. The year-on-year (YoY) numbers were not comparable due to the bank's merger with Housing Development Finance Corporation (HDFC) on July 1, 2023.

Despite the rise in provisions, the bank's net interest income (NII) grew by 2.1 per cent over the previous quarter, coming in at ₹29,076.9 crore. Asset quality exhibited marginal changes, with gross non-performing assets (NPA) decreasing slightly to 1.24 per cent compared to 1.26 per cent in the previous quarter.