HDFC Bank’s share price closed at an all-time high on Wednesday, driven by optimism regarding a potential doubling of its weightage in the MSCI Emerging Market index. The bank’s share price closed at Rs 1,768.35, marking a 2.18% increase from the previous day's close.
The rally was sparked after foreign portfolio investor (FPI) holdings in HDFC Bank dropped below 55%, the threshold set by the global index provider MSCI. This development raised expectations that the bank’s weightage in the MSCI Emerging Market index could be doubled.
In the U.S. market, the bank’s American Depositary Receipts (ADR) also performed strongly, rallying 4.48% overnight to close at $66.97.
According to the bank’s disclosure, as of June 2024, foreign shareholding in HDFC Bank decreased to 54.83% from 55.54% in March 2024. This reduction in foreign shareholding positions the bank to potentially benefit from an increased adjustment factor in MSCI, moving from 0.5x to 1x. A report by Macquarie Research indicated that this could lead to HDFC Bank’s weightage in MSCI India doubling from 3.9% to 7.8%, which could attract passive inflows of approximately $5.2 billion.
Since June 4, HDFC Bank’s share price has risen by 19%, overcoming a period of prolonged underperformance. During this period, the stock has outperformed both the Nifty Bank Index and the Nifty benchmark index, which gained 13% and 11%, respectively.
Analysts are optimistic about further upside potential for HDFC Bank’s stock in anticipation of the MSCI index rebalancing in August. IIFL Alternative Research predicts that HDFC Bank’s share price could see an additional gain of 4–6% leading up to the weightage adjustment event.
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