The sharp fall in HDFC Bank and Housing Development Finance Corporation (HDFC) has opened a new opportunity for investors to take fresh position as the long-term prospects of the merged entity appears bright, said analysts. Both the stocks plunged six per cent each on Friday after an institutional investor report suggested that the weightage of both the entities in MSCI would be cut to 6.50 per cent from 6.74 per cent.

Incidentally, HDFC is a part of the global MSCI index with a weight of 6.74 per cent, while HDFC Bank is not a part of the index. Both these entities are on the verge of merger.

The merged HDFC entity could see $150-200 million in outflows, as the index aggregator MSCI, in an update to clients, said it will use an adjustment factor of 0.50 to compute HDFC merged company weightage.

Following this, HDFC and HDFC Bank dipped six per cent each to ₹2,701 and ₹1,625. The market capitalisation of the two companies fell by about ₹63,800 crore.

Prospects bright

VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services, said it is important to understand that the sharp correction in HDFC twins by over 5 per cent each has nothing to do with the fundamentals of these stocks, but was due to the concern caused from the expected outflows of about $150-200 million from the merged entity.

The recent financial performance of both these entities were good and the medium to long-term prospects of the merged entity are also bright, he added.

Shreyansh Shah, Research Analyst, Stoxbox, said the sharp fall in HDFC and HDFC Bank shares due to a reduction in MSCI weightage is a technical reason and it is a temporary phenomenon as the fundamentals of both the companies has not changed.

“We believe that the dips should be used as a buying opportunity for the core portfolio as the merged entity would emerge stronger due to the sheer economies of scale and synergies emanating from the deal,” he added.

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