HDFC foreign legroom rises but misses index provider MSCI threshold

The rally was on the back of an encouraging business update for the March quarter where HDFC Bank's deposit growth remained robust and the loan-to-deposit ratio fell

The investment legroom for foreign portfolio investors (FPIs) in HDFC Bank rose to 24.95 per cent during the quarter ended March 2024. However, it fell short by only 5 basis points (bps) of the threshold required for index provider MSCI to hike its weightage in its global indices.

“The foreign holding now stands at 55.54 per cent versus the requirement of 55.5 per cent. Thus, it misses by about 5 bps. With the potential for further selling this quarter, there may be a possibility of a weight-up adjustment in the August review,” said Abhilash Pagaria of Nuvama Alternative Research in a note.

Hitting the 25 per cent threshold would have meant doubling of HDFC Bank’s weightage in MSCI indices—leading to billions of dollar of inflows from passive trackers. 
 

“The Stock still trades at about two times FY25E price-to-book (core) which is much lower than its historical averages. We believe this is a great time to add a quality franchise like HDFC Bank,” said a note by global brokerage Macquarie.