Reasons Behind the Surge
The rise in HDFC Bank shares is attributed to expectations that the stock's weight in the MSCI Global Standard index will increase. Analysts believe this could happen in the upcoming MSCI review in August, potentially leading to over $3 billion in passive inflows.
June Quarter Shareholding Pattern
The bank's June quarter shareholding pattern has sparked optimism among analysts. With foreign holding in HDFC Bank at 25.9%, exceeding the required 25%, the stock's weight in the MSCI Emerging Markets Index could potentially double. Currently, HDFC Bank's weight in this index is around 3.8%. Post-rejig, this could jump to 7.2-7.5%, possibly attracting $3.2 billion to $4 billion in inflows over six days, according to Nuvama Alternative & Quantitative Research.
Future Projections
If the increase in weight happens all at once, it will be announced on August 13. Nuvama suggests that the stock could gain further momentum, potentially crossing the ₹1,900 level before the official announcement. Domestic funds, which have invested in HDFC Bank due to its reasonable valuation in an expensive market, are expected to hold onto their shares.
Fundamental Analysis
On a fundamental level, Nuvama expects HDFC Bank to see less than 2% growth in both loans and deposits in Q1. The bank is projected to achieve deposit growth of ₹50,000–55,000 crore and an incremental Loan-to-Deposit Ratio (LDR) of 90%.
Nuvama also anticipates a flat Net Interest Margin (NIM) with lending rate hikes in Q4 FY24 and changes in the loan mix. However, the repricing of e-HDFC borrowings has not yet provided cost benefits, and the cost of new deposits has increased. In Q1 FY25, ₹15,600 crore of e-HDFC borrowings, mostly in Commercial Papers (CPs), have matured, along with the normal attrition of e-HDFC deposits.
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