MSCI tweak: What triggered the sell-off in HDFC twins?

This means that the weight of the merged entity will be lower than what HDFC Ltd currently has in the MSCI India Index.

“Currently HDFC Ltd weight is 6.74 per cent in MSCI India Index and as per our preliminary calculations the merged entity would have slightly lower weight of about 6.5 per cent. We had estimated the foreign room for the merged entity to be around 18 per cent which is above 15 per cent and above the MSCI threshold to maintain stock with full factor,” Abhilash Pagaria, Head, Nuvama Alternative & Quantitative Research said in a note.

Why did the HDFC twins stocks fall?

“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 on Friday.

MSCI’s decision may lead to an outflow in the range of $150 million to $200 million from the merged entity, Nuvama Alternative & Quantitative Research Pagaria said. Earlier, there was an expectation of an inflow of $3 billion in the merged entity, analysts said.

HDFC Bank fell 5.9 per cent to close at Rs 1,625.35 apiece on Friday. HDFC Ltd ended 5.63 per cent lower at Rs 2,701.15 apiece.