Street signs: FTSE boost for HDFC Bank, arbitrage gains in Bajaj, and more

‘Exclude China’ trend to fuel surge in India-bound flows

Increasingly, global investors are opting for emerging market (EM)-focused exchange-traded funds (ETFs) that exclude China. According to a recent article in the Financial Times, net inflows into eight US-listed EM ETFs that exclude China surged threefold to $5.3 billion in 2023. Analysts predict that the ‘Exclude China’ trend will help drive more foreign passive flows into the domestic market, the second-largest in the EM basket after China. Additionally, the weighting gap between the two neighbouring countries in the Morgan Stanley Capital International global indices has significantly reduced over the past three years following India’s strong outperformance.

HDFC Bank set for $300 million inflows with FTSE boost

The country’s most valuable lender, HDFC Bank, could receive inflows of $300 million (Rs 2,500 crore) from passive funds tracking Financial Times Stock Exchange (FTSE) indices. Last week, the index provider increased HDFC Bank’s weighting in its indices following an increase in legroom for foreign portfolio investors. Besides the FTSE boost, Morgan Stanley’s latest note is also expected to improve investor sentiment towards the stock. The US-based brokerage believes HDFC Bank’s stock could gain 50 per cent from current levels on the back of improved forecasts for the home loan business. Shares of HDFC Bank last closed at Rs 1,417, down nearly 17 per cent this year. Morgan Stanley has an ‘attractive’ rating on the stock with a price target of Rs 2,110.

Bajaj Auto’s record date sparks arbitrage opportunities

Two-wheeler major Bajaj Auto has set February 29 as the record date for its Rs 4,000 crore buyback. The Pune-based firm plans to repurchase 4 million shares (1.41 per cent equity) at Rs 10,000 apiece through a tender route buyback. Market players say Bajaj Auto’s shares could gain ahead of the ex-date as investors will look to cash in on the 20 per cent arbitrage opportunity. The strong momentum in automotive stocks could also boost prices. Analysts believe the acceptance ratio for the buyback could only be 1.3 per cent for the general category and less than 10 per cent for the retail category.