MSCI Re­jig May Trig­ger .` 1.5k-cr FII Out­flow

HDFC Bank shares worth 2,750 cr may be sold as MSCI re­duces its weightage; NTPC, Sun, HUL & M&M will see in­flows on in­creased weightage

The Economic Times - - Front Page - RA­JESH MASCARENHAS

In­dia would see for­eign in­sti­tu­tional out­flows of nearly .` 1,500 crore from June 2 when changes in in­ter­na­tional eq­uity com­piler MSCI’s global in­dices take ef­fect. While adding Aurobindo Pharma to its large-cap in­dex, MSCI has re­duced the weights of HDFC Bank and Power Grid Cor­po­ra­tion on this mea­sure. Many for­eign in­sti­tu­tional in­vestors (FIIs), mainly ex­change traded funds (ETFs), bench­mark their In­dian portfolios to the MSCI in­dex. So, when there is a re­duc­tion or in­crease in weightage of a stock, these in­vestors also trim or in­crease their stakes ac­cord­ingly. HDFC Bank, which has been banned by the RBI from sell­ing more stake to for­eign in­sti­tu­tional in­vestors (FIIs), will be the big­gest loser be­cause of the MSCI change. MSCI has re­duced the weightage of In­dia’s sec­ond-big­gest pri­vate sec­tor bank from 5.785% to 1.921%. Last De­cem­ber, HDFC Bank’s weightage in the MSCI Emerg­ing Mar­ket In­dia In­dex was re­duced from 7.1% to 5.785%. Fol­low­ing this change, HDFC Bank could see FIIs sell­ing 3.54-crore shares, or 1.5% of eq­uity worth .` 2,750 crore. Shares of HDFC Bank, which has gained 18% so far this year, has un­der­per­formed the BSE Bankex by 8% af­ter RBI banned fresh FII pur­chase in the stock af­ter for­eign own­er­ship in it crossed the man­dated 49% limit. The pro­posal to in­crease the FII limit is pend­ing with the For­eign In­vest­ment Pro­mo­tion

Aurobindo Pharma has been added to the MSCI In­dex fol­low­ing an in­crease in its m-cap

Board (FIPB), which wants more clar­ity on whether to con­sider the 22.64% stake held in the bank by its par­ent HDFC as do­mes­tic or for­eign in­vest­ment as HDFC it­self is ma­jor­ity-owned by FIIs. The re­bal­anc­ing could bring in sup­ply of about 3.5-crore shares into the mar­ket. In the semi-an­nual in­dex re­view, MSCI made some changes in its con­stituents for the MSCI Global Stan­dard In­dexes and MSCI Small­cap In­dexes, which will be ef­fec­tive from June 2. Ac­cord­ingly, the weightage of six stocks — NTPC, Sun Pharma, HUL, Dr Reddy’s, M&M and Sesa Ster­lite — will in­crease, while HDFC Bank’s and Power Grid’s will de­crease, MSCI said in a state­ment.

For­eign In­sti­tu­tional In­vestors (FIIs) have in­vested nearly .` 37,000 crore in In­dian eq­ui­ties so far this year, re­sult­ing in 13% rise in bench­mark in­dices. In­dia’s largest power com­pany NTPC will be the big­gest ben­e­fi­ciary of the MSCI change as FII hold­ing in it could go up by 0.3%, which will likely trans­late into an in­flow of .` 338 crore. Shares of NTPC have de­clined 9% so far this year against the 11% rise in the BSE Power in­dex. FIIs held 9.33% stake in the com­pany as on March 31. Aurobindo Pharma has been added to the MSCI In­dex fol­low­ing an in­crease in its mar­ket cap­i­tal­i­sa­tion. The pharma com­pany’s mar­ket cap­i­tal­i­sa­tion has ris- en 216% in one year from .` 5,662 crore to .` 17,919 crore.

Other stocks that will be pos­i­tively im­pacted with net in­flow over the next few months are Sun Pharma (.`320 crore), HUL (.`310 crore), Dr Reddy’s (.`194 crore), M&M (.`173 crore) and Sesa Ster­lite (.`144 crore). Power Grid Cor­po­ra­tion, whose MSCI weightage has also been re­duced, will see an out­flow of nearly .` 237 crore.

Mean­while, MSCI has added 13 stocks to its In­dia in­dex, in­clud­ing Ba­jaj Corp, Coro­man­del In­ter­na­tional, En­gi­neers In­dia, Ess Dee, In­dian Bank, Jaiprakash Power and Oberoi Realty. The ex­cluded com­pa­nies are Alok In­dusties, Cham­bal Fer­tilis­ers, Eicher Mo­tors, Graphite In­dia.

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