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Breaking the vault: Will MSCI grant HDFC Bank access?

By Samie Modak, Abhishek Kumar & Sundar Sethuraman
April 17, 2024 21:58 IST
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HDFC Bank’s latest shareholding data showed that the room for foreign investment has fallen just 5 basis points short of the threshold set by Morgan Stanley Capital International (MSCI) to fully include the stock in its indices.


Photograph: Shailesh Andrade/Reuters

Currently, the index provider has applied an adjustment factor of 0.5 since the foreign room is less than 25 per cent.

Removal of the adjustment factor will result in inflows of a massive $4.8 billion (Rs 40,000 crore) into HDFC Bank, according to Brian Freitas, a New Zealand-based analyst with Periscope Analytics.


The recent run-up in the stock is an indication that the Street expects MSCI to remove the adjustment factor in May.

However, some experts believe that the index provider will remove the adjustment factor in phases.

It means HDFC Bank could see potential $4.8 billion inflows in phases from passive trackers.

EPFO’s equity gambit: Fuelling MFs’ bull run

The National Stock Exchange Nifty 50 and the S&P BSE Sensex exchange-traded funds (ETFs) used by the Employees’ Provident Fund Organisation (EPFO) for equity exposure saw a 3.7 per cent jump in assets in March, indicating heavy deployment by the retirement fund body during the month.

Nifty 50 and Sensex ETFs offered by SBI Mutual Fund (MF), UTI MF, Nippon India MF, and ICICI Prudential MF added a net of Rs 15,320 crore to their assets under management.

Adjusted for 1.6 per cent mark-to-market gains in March, these schemes received inflows of an estimated Rs 8,800 crore. In 2023–24, the monthly net inflows into all ETFs averaged Rs 2,900 crore until February.

ETF inflows are predominantly institutional, with the EPFO being the largest investor.

In February, Business Standard reported that EPFO was considering reinvesting 50 per cent of its ETF redemption proceeds back into equity.

March also saw a sharp surge in MFs’ equity buying at Rs 45,120 crore.

Unlocking IPO potential: 13 stocks ready to shake off their shackles

The initial public offering-related lock-up on shares is set to expire in the case of 13 companies this week.

These include RK Swamy, JG Chemicals, Gopal Snacks, Medi Assist, Krystal Integrated Services, Plaza Wires & Cables, and Mukka Proteins.

In most cases, it is the end of either the 30-day or 90-day anchor lock-up for shares held by anchor investors.

The send in lock-up comes at a time when sentiment towards smallcap stocks has ebbed and flowed.

Already, shares of most of these newly listed companies have come off their highs.

It remains to be seen how anchor allottees go about their holdings in these companies.

Market watchers say stocks might come under pressure if institutional investors divest a bit after the end of the lock-in.

Disclaimer: This article is meant for information purposes only. This article and information do not constitute a distribution, an endorsement, an investment advice, an offer to buy or sell or the solicitation of an offer to buy or sell any securities/schemes or any other financial products/investment products mentioned in this article to influence the opinion or behaviour of the investors/recipients.

Any use of the information/any investment and investment related decisions of the investors/recipients are at their sole discretion and risk. Any advice herein is made on a general basis and does not take into account the specific investment objectives of the specific person or group of persons. Opinions expressed herein are subject to change without notice.

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Samie Modak, Abhishek Kumar & Sundar Sethuraman
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