In a major boost for HDFC Bank, MSCI has announced a significant increase in the bank’s weight within its Global Standard index, set to draw $1.8 billion in inflows. This move, detailed in MSCI’s August index review, will be executed in two phases.
Effective September 2, MSCI will raise HDFC Bank’s Foreign Inclusion Factor (FIF) from 0.37 to 0.56, a change that will result in inflows equivalent to 93 million shares. Nuvama highlights that this adjustment will have a market impact of about 4.5 days. The remaining adjustment will be applied during the November index review, provided that foreign room remains at a minimum of 20%.
Nuvama commented on the development, stating, ‘MSCI has made an exception by raising with a lower adjustment factor. The inflow of $1.8 billion, or 93 million shares, is expected to impact the market for about 4.5 days. The final adjustment will be communicated officially in November 2024, assuming the foreign room criteria are met, which we anticipate should not be an issue.’
MSCI’s decision is underscored by the bank’s current Foreign Ownership Limit (FOL) of 74% and an adjustment factor of 0.5. According to MSCI, the foreign room is presently above 25%, aligning with the criteria for maintenance in the MSCI Global Investable Market Indexes (GIMI) with an adjustment factor of 1. However, given HDFC Bank’s significant weight in the MSCI India Index, MSCI will apply a factor of 0.75 initially, with a potential increase to 1 in November if foreign room conditions remain favorable.
MSCI will continue to monitor the foreign room of HDFC Bank and provide updates if there are significant changes.
