MSCI August Review: Vodafone Idea, Dixon Tech among 8 stocks likely to be included; HDFC Bank shares to see weight hike

Vodafone Idea, Dixon Technologies and Cochin Shipyard are among the eight stocks that are expected to be included in the MSCI India Standard Index in its August rebalancing.

MSCI India Standard Index rebalancing announcement is scheduled on August 12, post the market hours. All changes to the index will be made as of the close of August 30, 2024.

Based on the price prevailing in the last week of July, JM Financial expects eight stocks to be included in the MSCI India Standard Index. These eight stocks are Dixon Technologies, Railway Vikas Nigam (RVNL), Vodafone Idea, Oil India, Zydus Lifesciences, Oracle Financial Services Software, KPIT Technologies and Cochin Shipyard.

All these eight stocks are likely to attract passive inflows worth $1.239 billion, according to the brokerage estimates.

The highest expected passive inflow is projected for Dixon Technologies shares at $192 million, followed by RVNL shares with anticipated inflows of $174 million. Vodafone Idea shares may see inflows of $165 million, while Zydus Lifesciences is expected to attract $146 million. Both Oil India and OFSS shares are likely to receive inflows of $144 million each.

Inflows for KPIT Technologies and Cochin Shipyard are estimated at $142 million and $132 million, respectively.

HDFC Bank Weight Increase

Meanwhile, HDFC Bank’s weight in the MSCI Global Standard Index is expected to nearly double as its foreign shareholding dropped below 55% at the end of June quarter. This has triggered a technical factor on the HDFC Bank’s weight in the MSCI Global Standard Index.

HDFC Bank’s weight in MSCI Index is set to increase from 3.8% currently to 7.2% to 7.5%, potentially leading to inflows of around $3.2 billion, according to Nuvama Alternative & Quantitative Research.

An estimated ₹25,000 crore worth HDFC Bank shares will likely be bought by passive Foreign Institutional Investors (FIIs) tracking the index by September 2. The positioning will likely start from August 13 itself, analysts said.

HDFC Bank share price has risen marginally in the past one month. The stock hit a 52-week high of ₹1,791.90 apiece on July 3 after the release of its shareholding pattern for the quarter ended June 2024, in anticipation of probability of its weight doubling in MSCI India index.

However, HDFC Bank stock succumbed to profit taking and is now trading nearly 7% below its 52-week high.

The weak performance of HDFC Bank shares also comes on the back of tepid business growth. HDFC Bank Q1 results were largely in-line with street estimates despite weak business momentum, amid sequentially stable margins and lower credit costs.

HDFC Bank Q1 results were characterized by weaker business growth but better net interest margins (NIM) as the bank alluded to preference for profitable growth outcome. Qualitatively, better NIMs (up 3bps QoQ), LCR improvement (to 123% versus 115% in Q4FY24) and lower LDRs were silver linings.

“We had earlier argued about HDFC Bank’s conundrum to manage growth versus NIM balance, and it was perceivably visible in Q1 that the bank prefers the latter. The key discussion point hereon will be growth outcome given management preference to accelerate the dip in CD ratio, systemic challenges in deposit accretion and the lower base set in Q1FY25. We believe HDFC Bank is going through a period of adjustments and near-term outcomes will be onerous,” said Elara Capital.

The brokerage firm had revised HDFC Bank shares rating to ‘Accumulate’ from ‘Buy’ and pared target price to ₹1,843 per share.

At 12:20 pm, HDFC Bank shares were trading 1.12% higher at ₹1,667.90 apiece on the BSE.

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