HDFC Bank-HDFC Merger May Trigger Outflows Of Up To $2.4 Billion From Indices, Funds, Say Analysts

Exclusion of the HDFC stock will make way for another stock in the Nifty 50 index. Likely contenders include Pidilite Industries Ltd. and Ambuja Cements Ltd., which may bring inflows of nearly $140-170 million, Investec said in a note.

Apart from these, according to Nuvama Alternative and Quantitative Research’s note, Tata Power Co. and SRF Ltd. are the other likely additions.

“All the next possible contenders are quite close in terms of free-float market cap for the period under consideration. The next few months will be crucial in determining which stocks holds a best chance,” it said.

Emkay Global Financial Services also ranked Pidilite Industries as the top candidate for inclusion in the Nifty 50 followed by Ambuja Cements. “Each would have around 0.45-0.50% weightage in Nifty 50 which would entail an inflow of $110-140 million,” it said.

Based on past rebalances in the index, analysts expect HDFC to be excluded at the end of December or at the end of January.

Unlike Nifty, shareholder approval plays no role in exclusion of the stock from the S&P BSE indices. It will take place only closer to the effective date of the merger.

Going by the current pace of approvals, HDFC will continue to be a member of the BSE index till the entire process is over, around the first quarter of FY24, Investec said.

Global Indices, such as MSCI and FSTE, too, will only take any action around the effective date.