The downturn was triggered by investor dissatisfaction over the MSCI Global Standard Index's decision to increase the bank's weightage in two phases rather than a single step, along with a lower-than-anticipated weight change.
MSCI has outlined a two-stage process for enhancing HDFC Bank's foreign inclusion factor (FIF), a metric representing the proportion of shares accessible to international investors. The first phase, elevating the FIF from 0.37 to 0.56, is scheduled for September 2, coinciding with the current rebalancing. The second phase, aiming for a FIF of 1, is slated for November, contingent on HDFC Bank maintaining a foreign portfolio investment (FPI) headroom exceeding 20%.
Despite the weightage increase, which was expected to attract $1.8 billion in inflows, the low adjustment factor employed by MSCI dampened investor enthusiasm. This factor reduces a company's index inclusion weight in MSCI's calculations.
June's shareholding data indicated foreign ownership in HDFC Bank at 54.83%, qualifying the bank for the upcoming MSCI weight increase in August. Market experts had anticipated MSCI inflows of up to $5 billion due to this inclusion.
HDFC Bank is private sector lender, As of 30 June 2024, the bank's distribution network was at 8,851 branches and 21,163 ATMs across 4,081 cities / towns as against 7,860 branches and 20,352 ATMs across 3,825 cities / towns as of June 2024.
The private lender's net profit increased 35.33% to Rs 16,174.75 crore on 44.77% jump in total income to Rs 83,701.25 crore in Q1 FY25 over Q1 FY24. The bank's provisions and contingencies rose 9.02% YoY to Rs 2,602.06 crore during the quarter under review.