HDFC-HDFC Bank Merger: Due to the news of the merger of HDFC Ltd with HDFC Bank, the rise in the shares of both the companies may end soon. Experts say that after the merger, there is no possibility of HDFC Bank entering the MSCI index. In such a situation, the huge jump in the shares can be braked soon.
HDFC said in a notice sent to the stock exchanges on Monday 4 April that the company is merging itself with HDFC Bank. After the merger, HDFC Bank will become one of the largest financial institutions in the country with a market capitalization of over 12.5 lakh crores. This figure of market capitalization is based on the closing price of the shares of both the companies on Friday.
Shares of both HDFC Ltd and HDFC Bank climbed up to 15 per cent at one point of time after the announcement of the merger. However, later these declined slightly and at the time of writing the news both the stocks were trading with a jump of around 8 per cent.
Also read- How will the merger of HDFC with HDFC Bank affect the shares of the bank?
The MSCI index is closely watched by foreign exchange traded funds (ETFs) and this is the reason why the companies included in this index usually see more foreign investments. However, on Monday, when investors realized that even after the merger, HDFC Bank was unlikely to be included in the MSCI index, they started profit-booking. For this reason, the gains in its shares decreased as the day’s trading progressed.
Currently, HDFC Ltd is part of the MSCI index, but not HDFC Bank. In fact, to be included in the MSCI index, there should be a margin of foreign investment of up to 15% in the shares of a company and HDFC Bank does not fulfill this condition.
Brokerage firm Macquarie Securities India said that even after the merger, there will be only 10.58 per cent room for foreign equity in HDFC Bank, which is well below the 15 per cent limit.
After the merger, the foreign ownership in HDFC Bank is expected to remain at 66 per cent. At present, the foreign investment limit in private banks is 74 per cent.
A Macquarie dealer said, “HDFC has merged with HDFC Bank. So, it seems to me that HDFC will now move out of MSCI India and HDFC Bank will not find a place in MSCI India as there is scope for foreign investment in it.” % is less than.”
Some analysts said that the non-inclusion of HDFC Bank in the MSCI indices could have a huge impact on the stock.
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