Sell-off in HDFC twins as MSCI plan sparks fears of fund outflow

The fall in share prices of Housing Development Finance Corporation and HDFC led to a decline in key indices.

Mumbai | Updated: May 6, 2023 12:46 AM IST

2 min read

MSCI said that post the merger of HDFC and HDFC Bank, it will include the merged entity in its large-cap index, however, instead of using the adjustment factor of 1, the adjustment factor would be 0.5. (File image)

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Domestic equity indices Sensex and Nifty dropped around one per cent on Friday led by a sell-off in the merger-bound HDFC Bank and HDFC Ltd.

The 30-share BSE Sensex plunged 695 points, or 1.13 per cent, to 61,054.29 while the broader Nifty ended 187 points, or 1.02 per cent, down at 18,069 on Friday.

“MSCI’s clarification on inclusion of HDFC Bank to MSCI Global Standard Indices led to a sell-off in financials,” HDFC Securities’ Head of Retail Research Deepak Jasani said.

Market participants said MSCI intends to add HDFC Bank to the large cap segment of MSCI Global Standard Indexes with a foreign inclusion factor (FIF) of 0.37 after applying an adjustment factor of 0.5.

They feel the move could result in fund outflow after the merger of HDFC Ltd and HDFC Bank.

Motilal Oswal Financial Services Ltd’s Head (Retail Research) Siddhartha Khemka said that losses in HDFC twins dragged benchmark and banking indices down.

Bank Nifty closed 1,024.25 points, or 2.34 per cent, down at 42,661.2. Nifty PSU Bank ended 0.97 per cent at 4,153.6.

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HDFC Bank fell 5.9 per cent to Rs 1625.35 apiece while HDFC Ltd ended 5.63 per cent down at Rs 2701.15 apiece.

IndusInd Bank, Tata Steel, Kotak Mahindra Bank, Mahindra & Mahindra, Bajaj Finserv, HCL Technologies, Infosys, Wipro and NTPC were other major laggards.

On Friday, foreign portfolio investors (FPIs) were net buyers of Rs 777.68 crore of shares from the domestic market, according to the BSE’s provisional data.

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