HDFC Bank Sees FPI Holdings Decline in Q1, Anticipates $4B Inflows

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HDFC Bank's FPI holdings dropped to 54.83% from 55.54% in the previous quarter, increasing MSCI weightage to 7.2%-7.5%. This could potentially attract $3-$4 billion in inflows. Domestic mutual funds' holdings rose to 24.83% in June from 23.17% in March.

HDFC Bank News Today

HDFC Bank Ltd., India's largest private sector lender, reported a decline in Foreign Portfolio Investors (FPIs) holdings for the April-June quarter. FPIs holdings decreased to 54.83% from 55.54% in the previous quarter.

In March, the Indian entity's share held by FPIs dropped to 47.17%, down from 47.83%, with the remainder in American Depository Receipts (ADR) listed in the US.

Impact on MSCI Weightage

The reduction in FPI holdings is significant as it brings the bank into compliance with MSCI index norms, potentially increasing its weightage. According to BoFA Securities, the bank's FPI shareholding needed to fall below 55.5% to boost its weightage.

With this change, HDFC Bank could see inflows between $3 billion and $4 billion as its weightage in the MSCI Emerging Markets index might rise from 3.8% to between 7.2% and 7.5%.

Explore: Hdfc Bank Ltd Share Price

Increased Foreign Investment Headroom

The decline in FPI holdings has increased the FII headroom for HDFC Bank to 25%. MSCI guidelines indicate that if FPI headroom exceeds 25%, an adjustment factor of 1 is used, raising the stock's weightage in the index and attracting more inflows.

This adjustment factor is crucial for HDFC Bank's potential inflows of $3.2 billion to $4 billion, as estimated by Nuvama Alternative and Quantitative Research.

Rise in Domestic Mutual Funds Holdings

Domestic mutual funds' holdings in HDFC Bank also saw an increase, reaching 24.83% in June from 23.17% in March. This rise contrasts with the sustained selling by FPIs, whose holdings have fallen from 66% over the past five quarters.

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