HDFC Bank shares climbed nearly 4 per cent in Wednesday trade, adding about Rs 38,000 crore to the private lender's market capitalisation (m-cap) on hopes the stock would see increase in MSCI weight. As the lender declared its June quarter shareholding pattern, analysts believe HDFC Bank's weightage in MSCI Global Standard index could double in the August MSCI rejig, leading to over $3 billion in passive inflows for the counter.
The stock rose 3.54 per cent to hit a high of R 1,791.90 on BSE. HDFC Bank accounted for 11.95 per cent weight in Nifty at the end of June. The stock helped the index rise 128.70 points or 0.53 per cent to 24,252.55.
"The foreign holding in HDFC Bank has favoured the stock (25.9 per cent headroom against requirement of 25 per cent) , leading to a potential weight doubling in the MSCI August 2024 review. Currently, HDFC Bank's weight in the MSCI EM Index is around 3.8 per cent. Post-rejig, this could jump to 7.2-7.5 per cent, potentially bringing in $3.2 billion to $4 billion in inflows over 6 days (base case) , according to Nuvama Alternative & Quantitative Research," it said.
According to the current methodology, the increase happens all at once. If MSCI makes an exception, it will only be announced on August 13.
"As we’ve highlighted multiple times, we expect the stock to gain momentum (cross Rs 1,900 level) until the official announcement on August 13 (IST). Domestic funds, having bought HDFCB because of its reasonable valuation amidst an expensive market, should continue to hold," Nuvama said.
On fundamentals, Nuvama expects loan and deposit growth of less than 2 per cent QoQ for HDFC Bank in Q1. It expects deposit growth of Rs 50,000–55,000 crore and incremental LDR of 90 per cent.
"We are building in flat NIM with lending rate hikes in Q4FY24 and change in loan mix. But NIM remains a key variable to monitor given that repricing of e-HDFC borrowings is still not yielding any cost benefit while the cost on new deposits has also increased. Rs 15,600 crore of e-HDFC borrowings—mostly CPs—have matured in Q1FY25. In addition, there will be normal attrition of e-HDFC deposits," it said.