MUMBAI: Shares of HDFC Bank, India’s largest private sector lender, surged above the Rs 1,800-mark to hit a fresh all-time high of Rs 1,803.55 on Monday, driven by a surge in trading volumes following the implementation of the Morgan Stanley Capital International (MSCI) November rebalancing. More than 21.5 crore shares were traded across the NSE and BSE, nearly 8.6 times its 20-day moving average volume of 2.5 crore shares. The bulk of the trading occurred in the final half-hour of the session, with 19 crore shares exchanged after 3:00 PM.
As a result, the bank’s market capitalisation reached Rs 13.63 trillion, making it the second most valuable company in India, behind TCS, which has a market cap of Rs 15.61 trillion. Following a recent stock split, Reliance Industries, previously the most valuable company, has now dropped to third place with a market cap of Rs 8.71 trillion.
Since the reverse merger with its parent company, HDFC, in July 2023, HDFC Bank's stock had been struggling, even falling to Rs 1,388 earlier this year, despite the broader market reaching historic highs. However, the stock ended Monday's session at Rs 1,785.6, marking a 2.3 percent increase from the previous close.
Over the past year, HDFC Bank’s stock has gained more than 16%, though it has underperformed the Nifty index, which is up 22 percent during the same period.
Monday’s rally comes as part of the quarterly rebalancing of the MSCI indices. This rebalancing is expected to bring net inflows of $2.5 billion into domestic equities from foreign institutional investors. HDFC Bank, in particular, was in focus due to the anticipated increase in its weighting, which is expected to attract around $1.88 billion in passive inflows. MSCI had announced this adjustment earlier in the year, which is being implemented in two stages.
Monday's gains represent the second and final tranche of HDFC Bank’s inclusion in the MSCI indices for 2024. The first adjustment took place in August when the foreign inclusion factor for the stock was raised from 0.37 to 0.56. This change alone is estimated to have attracted $1.8 billion in foreign inflows, as HDFC Bank met the necessary foreign ownership thresholds.
Analysts expect that today's final adjustment will unlock further inflows, provided the bank maintains its foreign portfolio investor (FPI) headroom above the critical 20 percent threshold. As of the latest data, HDFC Bank's foreign ownership remains above the required levels for full MSCI market-cap weight inclusion.