Kotak Mahindra Bank slips after MSCI exclusion

Kotak Mahindra Bank fell 3.87% to Rs 894.60 at 14:41 IST on BSE after index provider MSCI said it will delete the stock from its Global Standard Index with effect from 8 July 2014.

Meanwhile, the BSE Sensex was down 114.46 points, or 0.46%, to 24,991.05.

On BSE, so far 1.03 lakh shares were traded in the counter, compared with an average volume of 4.78 lakh shares in the past one quarter.

The stock hit a high of Rs 929.50 and a low of Rs 891 so far during the day. The stock hit a record high of Rs 971.80 on 18 June 2014. The stock hit a 52-week low of Rs 588 on 28 August 2013.

The stock had outperformed the market over the past one month till 20 June 2014, rising 3% compared with 2.99% rise in the Sensex. The scrip had also outperformed the market in past one quarter, rising 24.39% as against Sensex's 15.48% rise.

The large-cap private sector lender has an equity capital of Rs 385.23 crore. Face value per share is Rs 5.

Morgan Stanley Capital International (MSCI) Barra is a leading provider of benchmark indices and risk management analytics products. Many global mutual funds are linked with MSCI indices. Hence, deletion of a stock from the MSCI index leads to outflow of passive funds that use the MSCI index to benchmark their portfolios.

Media reports suggested that MSCI may have deleted Kotak Mahindra Bank stock from its index after the bank's foreign shareholding reached trigger limit of 37%.

On 18 June 2014, the Reserve Bank of India (RBI) notified that the foreign share holding in Kotak Mahindra Bank by Foreign Institutional Investors (FIIs) under Portfolio Investment Scheme (PIS) had reached the trigger limit. Hence, further purchases of equity shares of this company would be allowed only after obtaining prior approval of RBI.

Kotak Mahindra Bank proposed to raise the ceiling for Foreign Institutional Investors (FIIs), Foreign Portfolio Investors (FPIs) and Qualified Foreign Investors (QFIs) investments in the bank to 40% from 37% to help it comply with RBI directive to bring down its current promoter stake by one-fourth in little over next two and half years.

The private sector bank in its notice to shareholders for the upcoming annual general meet on 16 July 2014 has sought members' approval to pass a resolution to this effect.

On 30 May 2014, Kotak Trustee Company, a promoter group entity of the Kotak Mahindra Bank, sold 2.49 crore shares, or 3.24% equity, of the bank. After the sale of the shares, the shareholding of promoters in the bank has declined to 40.33%.

Earlier in May 2014, RBI had ordered Kotak Mahindra Bank to bring down its promoter shareholding to 40% by 30 September 2014. Kotak Mahindra Bank will then have until 31 December 2016 to cut its promoter shareholding to 30%.

As on 31 March 2014, promoters held 43.58% stake in Kotak Mahindra Bank. Among the promoter group, Uday Suresh Kotak held the largest stake of 39.76%.

Kotak Mahindra Bank's net profit fell 6.7% to Rs 407.18 crore on 0.7% decline in total income to Rs 2552.96 crore in Q4 March 2014 over Q4 March 2013.

Kotak Mahindra group is one of India's leading financial services conglomerates.

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