HDFC Bank, IndusInd & Kotak out of FTSE indices | Economic Times

Mumbai: Global index provider FTSE Russell unexpectedly removed three lenders — HDFC Bank, Kotak Mahindra Bank and IndusInd Bank — from its indices.They were kept out for failing to comply with the ‘minimum foreign headroom requirements’, the firm said. Their inclusion could have led to inflows of over $600 million into these stocks, according to analyst estimates.Foreign funds structure their portfolio on the basis of the components of the index providers. Inclusions or exclusions, as a result, lead to inflows or outflows.FTSE announced on August 21, in its the semi-annual review, that it has added nine stocks including HDFC Bank and Kotak, SBI Cards, Adani Green Energy, Aurobindo Pharma, Cadila and Tata Consumer among others to its large-cap index.It also added 17 stocks including IndusInd Bank to its mid-cap index. The proposed changes were to take effect from September 21.On Thursday, FTSE said that the banks will not make it to its respective indices.The inclusion was expected to lead to inflows of $450 million into the stock of HDFC Bank, $160 million into Kotak and $60 million into IndusInd Bank. “All these stocks had witnessed decent amounts of buying since last Thursday. Now we expect some correction,” said Pankaj Pandey, head of research, ICICI Securities.IndusInd had rallied 17 per cent since August 21 while HDFC Bank and Kotak stocks rose 5 per cent and 6 per cent, respectively.On April 1 this year, India entered into a new regime on foreign limits wherein it aligned the foreign portfolio investment (FPI) limits to sector foreign limits.For private banks, the sectoral cap is 74 per cent while the FPI investment limit is 49 per cent of the total paid-up capital through direct route and an additional 25 per cent through government approval route.While both HDFC Bank and IndusInd Bank have taken approval for up to 74 per cent FPI limit, Kotak has taken approval for up to 55 per cent, according to NSDL data.FPIs held 42.15 per cent stake in Kotak Bank, 52.07 per cent in IndusInd Bank and 37.04 per cent stake in HDFC Bank as on June 30.