FIIs cut stake in HDFC Bank
MUMBAI : Foreign institutional investors (FIIs) have reduced their shareholding in the HDFC Bank to 58.75% as of 30 September-end against 60.23% as of 14 June prior to the effective date of HDFC’s merger into it on 1 July. This has increased the foreign room to 20.3% from 18.4% from 14 June, according to Abhilash Pagaria, head of Nuvama Alternative & Quantitative Research. Foreign room is a measure used by global index provider MSCI to determine the proportion of shares still available for investment by foreign investors relative to the maximum limit.
HDFC Bank is part of the MSCI Emerging Markets Index along with shares like Taiwan Semiconductor Mfg, Tencent Holdings and Samsung Electronics. Its weight as of August end in the index was 0.79%. For inclusion on the index, the minimum foreign room should be 15%.
If the foreign room increases to 25%, the weight of the security rises and passive index trackers will have to buy to adjust for the weight increase. This implies that for investors who track the benchmark MSCI indices to buy, the foreign selling in HDFC Bank should continue until the foreign room reaches 25%, said Pagaria. Since the maximum foreign ownership level in an Indian private sector bank is 74%, the current foreign room of the bank is 20.3% (74-59%/74% ).
The selling by foreign investors has caused HDFC Bank to be the biggest points contributor to Nifty’s fall from a record high of 20,222.45 to 19,436.10 on 4 October. Of the 756 points shed by Nifty over this period, HDFC Bank tops the list of losers, accounting for 192.34 points, followed by Reliance Industries at 107 points. FPIs and sovereign wealth funds hold 3,427 million shares while those holding global depositary receipts hold 1,028 million shares
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