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With foreign room crossing 15 per cent, IndusInd Bank will be eligible for inclusion in indices that have a large amount of passive tracking assets, said analysts.
The bank’s foreign shareholding has decreased to 62.61 per cent for the quarter ended September, meeting the minimum headroom requirement of 15 per cent for global index inclusion. As of end-June, foreign investors owned 63.44 per cent of the shares outstanding for foreign room of 14.27 per cent.
This development is expected to pave the way for its inclusion with a 0.5 factor in the November 2023 review in the MSCI Standard Index.
As per Nuvama Alternative & Quantitative Research, its inclusion is anticipated to bring in an inflow of $280 million, equivalent to approximately 16 million shares or an average daily volume of 5.5 days. “This inclusion event has been widely anticipated, and some of the impacts has already been factored into the stock price, leaving around five-six per cent upside,” said Abhilash Pagaria, Nuvama Alternative & Quantitative Research.
“The low foreign room will mean that the stock is added at a lower weight than what it would have been had the foreign room been higher than 25 per cent. We estimate passive trackers will need to buy 26.45 million shares of IndusInd Bank at the close on November 30,” said analyst Brian Freitas of Periscope Analytics who publishes on Smartkarma.
Passive buying
The bank is already a member of the Nifty50, Nifty 100, Nifty Bank Index and BSE Sensex and the real float is smaller than the headline numbers. The passive buying will be between 4.5-5 per cent of the real float on the stock, said Freitas.
IndusInd Bank has outperformed its peers over the last six months and gone from middle of the pack to top performer. It trades at significantly lower multiples as compared to its larger private sector banking peers.
“Despite outperforming its peers over the last six months, the bank trades at cheaper valuations and there could be more relative upside here,” said Freitas.
IndusInd shares ended at ₹1,448 apiece, up 1.95 per cent on Thursday. The stock has remained flat over the past month but climbed 29 per cent in the last six months.
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