HDFC Bank Set to Replace HDFC on MSCI Global Standard Index from July 13
HDFC Bank’s inclusion in the MSCI Global Standard indexes marks a significant milestone for the bank and reinforces its position as a leading player in the Indian financial sector. With its robust financial performance, extensive branch network, and strong customer base, HDFC Bank has emerged as a key player in the banking industry. The merger with HDFC further strengthens its market presence and opens up new opportunities for growth and expansion.
The MSCI Global Standard indexes are widely recognized benchmarks used by investors around the world to assess the performance of global equity markets. Being included in these indexes enhances HDFC Bank’s visibility among international investors and may attract increased investment flows. This development showcases the bank’s solid reputation and paves the way for potential value appreciation for its shareholders.
The announcement by MSCI regarding the adjustment factor for the weightage of the merged entity had an impact on the share prices of HDFC and HDFC Bank. The adjustment factor of 0.50 was seen as a potential cause for a combined outflow of $150-$200 million from the stocks.
As a result, both companies experienced a decline in their share prices in May. However, it is important to note that market dynamics and investor sentiment can have short-term effects on stock prices, and the long-term prospects of the merged entity will depend on various factors such as financial performance, market conditions, and investor confidence.
In addition to being included in the MSCI Global Standard indexes, HDFC Bank will also replace HDFC on the FTSE All-World index from July 13. This decision was announced by FTSE Russell, with HDFC Bank being added to the index with a total of 3,082,056,076 shares and an investability weighting of 95.98 percent.
This inclusion in the FTSE All-World Index further highlights the significance of HDFC Bank as a prominent player in the global financial market. The move is expected to attract increased attention from international investors and potentially contribute to the bank’s growth and visibility on a global scale.
As per the announcement by the index aggregator, HDFC Bank will continue to be included in the FTSE MPF-All World, FTSE Global Large Cap, and FTSE Emerging indices, while HDFC will be removed from these indices. Additionally, HDFC will be removed from the All-World Comprehensive Factor, All-World ex-CW Balanced Factor, and All-World ex-CW Climate Balanced Factor indices.
This adjustment reflects the repositioning of the index constituents following the completion of the merger between HDFC and HDFC Bank. The changes in index composition signify the evolving landscape of the financial sector and highlight the dominant position of HDFC Bank in the global market.
Following the merger between HDFC and HDFC Bank, shareholders of HDFC Ltd will receive 42 shares of HDFC Bank for every 25 shares held in HDFC Ltd. This swap ratio reflects the consolidation of the two entities and provides shareholders with an opportunity to benefit from the combined strength and potential of the merged company.
With this merger, HDFC Bank will maintain its position as the second largest bank in India, trailing only the State Bank of India (SBI), while also solidifying its position as the largest private bank in the country. The merger is expected to unlock synergies and create a stronger entity in the Indian banking sector.
The merger between HDFC and HDFC Bank will result in a joint market capitalization of ₹14,73,953 crore, surpassing Tata Consultancy Services (TCS) and making HDFC Bank the second most valuable company in India, after Reliance Industries Ltd. This significant market capitalization highlights the strength and potential of the merged entity in the Indian market.
HDFC Bank’s managing director and chief executive, Sashidhar Jagdishan, expressed optimism about the future and the bank’s growth prospects. In a letter to the employees from HDFC who joined HDFC Bank, Jagdishan emphasized the bank’s goal of doubling its growth every four years. He highlighted that the merger provides a platform to leverage the strengths of both organizations and unlock new opportunities. With a positive outlook, HDFC Bank aims to maximize the potential of the merger and continue its growth trajectory in the banking sector.
In his statement, HDFC Bank’s managing director and chief executive, Sashidhar Jagdishan, emphasized the vast opportunities in the underserved and underpenetrated financial services and mortgage sectors. He expressed confidence that HDFC Bank, as the combined entity, is well-positioned to capture this growth due to its extensive distribution network, expanding customer base, strong capital position, and robust asset quality and profitability.
Jagdishan highlighted the ambitious growth plans of the bank, stating that they aim to create a new HDFC Bank every four years. This reflects the bank’s commitment to sustained expansion and its ability to leverage its strengths to tap into untapped market potential. With a clear focus on growth and a positive outlook for the future, HDFC Bank aims to further solidify its position as a leading financial institution in India.
HDFC Bank’s shares have witnessed a modest increase of two percent year-to-date, while HDFC’s shares have seen a slightly higher gain of five percent. However, both stocks have underperformed the broader Nifty 50 index, which represents the performance of the top 50 companies listed on the National Stock Exchange of India.
On July 7, HDFC Bank’s shares closed 0.84 percent lower at ₹1,660.75 on the Bombay Stock Exchange (BSE) compared to the previous closing price of ₹1,674.75 per share. It is important to note that stock prices can fluctuate based on market conditions, investor sentiment, and various other factors.
