Shares of HDFC Bank and HDFC plunged substantially on Friday on rumors that the combined business may face major cash outflows. HDFC Bank’s shares dropped 5.90 percent to Rs 1,625.35 on the BSE. It decreased 6% during the day to Rs 1,622.
HDFC shares fell 5.63 percent to close at Rs 2,701.15. During the day, the stock fell 5.84% to Rs 2,695. The benchmark indexes were also driven down by a large sell-off in index major HDFC twins. The 30-stock BSE Sensex fell 694.96 points, or 1.13 percent, to 61,054.29. The NSE Nifty dropped 186.80 points, or 1.02 percent, to 18,069.
The Indian market was dragged down by heavy selling in HDFC twins on fears of post-merger fund outflow, Vinod Nair, Head of Research at Geojit Financial Services, said. HDFC Bank’s market capitalization decreased by Rs 56,228.1 crore to Rs 9,07,505.07 crore, while HDFC’s fell by Rs 29,572.72 crore to Rs 4,95,541.41 crore.
Markets were in a bear hug as a result of massive profit-taking in the HDFC twins, US banking woes, and weak Wall Street cues. The negative takeaway was that Nifty Bank fell 2.3% on reports that the merger of HDFC twins may result in outflows of USD 150 to 200 million, said Prashanth Tapse, Senior Vice President (Research), Mehta Equities Ltd.
According to Aditya Gaggar, Director of brokerage company Progressive Shares, the MSCI proposes to add HDFC Bank to the large-cap section of the MSCI Global Standard Indexes with an adjustment factor of 0.5 against the market estimate of 1, implying no new inflows. Rather, it might result in USD 150-200 million in outflows. (Had the adjustment ratio has been set at 1), it would have resulted in an extra inflow of about USD 3 billion, Gaggar added.
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