IndusInd Bank shares: Why Nuvama sees $300 million passive inflows ahead

IndusInd Bank Ltd is likely to see doubling of its MSCI weight in the February review, leading to $250-300 million inflows, Abhilash Pagaria of Nuvama Alternative & Quantitative Research said on Monday.

Pagaria said IndusInd Bank's latest shareholding pattern for the December 2024 quarter suggests a substantial reduction in foreign portfolio investor (FII) stakes, with holdings down to 46.63 per cent from 55.53 per cent in the September quarter.

He said the foreign headroom now meaningfully exceeds the 25 per cent threshold, with MSCI currently applying a half-float factor.

"Following the recent FII sell-off, the headroom stands comfortably above 25 per cent, potentially leading to a doubling of the bank's MSCI weight in the February 2025 review (close to 50 bps + probable weight)," he said.

This weight increase is expected to attract inflows of approximately $250 million to 300 million, which may impact the stock for 3-5 trading days, Nuvama Alternative Research said.

IndusInd Bank target price

In its 2025 outlook note on Sunday, Emkay Global said IndusInd Bank's microfinance stress is in the price, even though the bank may need to make provisions for another 1-2 quarters.

"The other positives are overlooked, mainly the progress that is made in improving the deposit franchise. The stock is attractive at 1.2 times PBV (FY26) with a strong potential to rerate from a 1-year perspective. Improved system liquidity and any easing of lending regulations by the RBI would be strong catalysts," it said.

The brokerage suggested a buy rating on IndusInd Bank and suggested a target of Rs 1,500.

The bank's Q3 business update for unimpressive.

InCred Equities said IndusInd Bank has been struggling on lending growth front, especially on retail lending, since past few quarters whereby MFI segment of the bank has been facing severe macroeconomic headwinds whereas auto finance business is struggling with adverse auto demand cycle. The bank’s non-vehicle retail loans book mainly consists of personal loans and credit cards which also remains out of flavour for now, it noted.

"We expect margin to be stable in 3Q FY25 as improvement due to LDR to be knocked off by rise in secured products. We are closely monitoring the asset quality trend for the bank considering large MFI and vehicle finance portfolios as well as recent surge in small corporate portfolio of the bank. We maintain HOLD rating on the stock with a target price of Rs 1,350 or 1.4 times FY26F BV," it said.