HDFC Bank Off Record High After Foreign Shareholding Limit Breached Again
HDFC Bank stock pare gains after foreign investment cap in shares get triggered once again
Shares of the country’s largest private sector lender HDFC Bank dropped from record highs as the Reserve Bank of India (RBI) once again barred foreign investors from buying additional shares of the bank.
The central bank’s action said in a notification on Friday that foreign shareholding in the HDFC Bank crossed the overall limit of 74 percent of its paid-up capital. This came just four hours after revocation of the previous ban.
Shares pared gains to 2.7 percent after rising as much as 9.5 percent during the day to Rs 1,454.
Analysts at Morgan Stanley and CLSA had expected the stock to be back on the FPI ban list within a few trading sessions given the limited headroom for further purchase, both brokerages said in separate reports. CLSA had estimated HDFC Bank’s foreign shareholding at 71.8-71.9 percent, just a tad below RBI’s 72 percent ceiling.
Foreign ownership in private banks in India is restricted to 74 percent and RBI places these banks on caution list when ownership touches 72 percent.
In our view, the headroom to 72 percent is likely to be very small. Depending upon foreign interest, the foreign ownership can go up fairly quickly given the likely low FII headroom. This is an opportunity for foreign investors to buy the stock on local line, which is likely to last for a very short period of time. Fundamentally, there is no change in our view on the stock and we remain Overweight.Anil Agarwal, Equity Analyst, Morgan Stanley
CLSA echoed the same thought.
The stock can get included in RBI’s caution list once foreign shareholding crosses 72 percent. .we believe that liquidity will be limited as investors will need explicit RBI permission beyond 72 percent. Hence the FII premium may settle somewhere in the middle and rollover cost for futures (5-6 percent per annum) might be a good benchmark. Maintain Buy.CLSA On HDFC Bank
On Thursday, the Reserve Bank of India had removed restrictions on foreign investors from buying HDFC Bank shares. The aggregate foreign shareholding in the bank has fallen below the prescribed limit under the foreign direct investment policy, the central bank had said in a notification.
Foreign investors seemed to have used this window to lap up shares of HDFC Bank, triggering the upper limit once again.
The morning rally in HDFC Bank shares had lifted the NSE Bank Nifty index to its all-time record high of 21,042.