If included, the combined entity’s weight is likely to double from 5.78% to 12-13%, resulting in a net inflow of over $1 billion (₹8,100 crore), said analysts.
“New rules imply that the
will be considered an extension of Ltd post the merger, and the foreign headroom requirement will be that of an examining constituent,” said a sales note by Macquarie. “The net impact will be that the weight of the HDFC merged entity in MSCI could be double the weight of HDFC in MSCI currently.”
HDFC Bank surged 5.69% to close at ₹1,612, while HDFC gained 5.8% to ₹2,650, the highest close since April 4 for both the stocks.
Lack of clarity over MSCI inclusion of the merged entity has been one of the key reasons why the stocks have been under pressure. There were concerns that the merged entity would not have enough headroom for additional foreign investments. The investment headroom for overseas investors in the merged entity was around 12% as on September 30, while the required threshold for MSCI inclusion is 15%.
“As per our understanding of the methodology, the shares of HDFC would be replaced by HDFC Bank in the standard index,” said Abhilash Pagaria, head of Nuvama Alternative & Quantitative Research. “The combined weightage could double to 12% plus as the adjustment factor of 0.5x (times) should not apply, and 1x adjustments factor will be considered.”
