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Informist, Tuesday, Aug 13, 2024

By Alina Geogy

MUMBAI – Domestic benchmark indices ended lower today, led by a sharp decline in shares of private lender HDFC Bank. Shares of HDFC Bank declined after global index provider MSCI's upward revision of the stock's adjustment factor in the quarterly review for August fell short of market expectations.

Investors were eagerly eyeing MSCI's quarterly review for August, which was announced earlier today. Market participants had expected the weightage of HDFC Bank's stock to nearly double in MSCI's indices. However, the index provider opted for an exception and announced it would raise the adjustment factor in a staggered manner in two phases, instead of raising it in one go.

As per its announcement, MSCI will raise the adjustment factor for HDFC Bank in its indices to 0.75 from the current 0.5, which will take effect from Sep 2. The remaining float adjustment to 1 from 0.75 will be announced in its November rejig, provided the headroom for foreign investors continues to be at least 20% at that time, MSCI said.

Nuvama Alternative & Quantitative Research, which in July predicted a weightage increase for HDFC Bank, nearly halved its projection for inflows into the stock post the rejig. Nuvama now expects inflows to the tune of $1.8 bln into HDFC Bank, it said in a note today. In its July report, the brokerage said there would be potential inflows of $3.2 bln-$4.0 bln over six days if HDFC Bank's weight in the MSCI Emerging Markets index doubles. Nuvama in July also said the weightage increases usually happen in one go as per the current methodology.

Investors had been buying the shares in anticipation that the stock's weight in the MSCI's indices would double as part of the August rejig, Shreyansh Shah, research analyst at Stoxbox, said. The lower-than-expected float adjustment may impact investors and portfolio managers who raised their holding of the stock before rejig, Shah said. The stock may fall for a few more sessions till next week, he said.

Shares of HDFC Bank ended 3.4% lower after falling as much as 3.6% during the session. The volume also surged, with over 27 mln shares having changed hands today compared to 19.7 mln shares traded Monday. The bank's stock contributed the highest to the decline in the Nifty 50 and the Sensex and prevented indices from any recovery throughout the session.

The Nifty 50 and Sensex ended 0.9% lower each at 24139 and 78956.03 points, respectively. The indices were also impacted by losses in other banking and financial services stocks. Shares of HDFC Life Insurance Co and Shriram Finance fell over 2% each and were among the worst-hit stocks on the Nifty 50. Shares of State Bank of India, Bajaj Finance, and Kotak Mahindra Bank were also major laggards in the 50-stock index.

Investors also reacted to other changes announced by MSCI as part of its quarterly rejig. Shares of Dixon Technologies and Oil India rose after MSCI said it would add these companies to its global standard indices. Shares of Bandhan Bank fell after they were removed from MSCI global standard indices and added to MSCI global small-cap indices. Shares of Cochin Shipyard also fell sharply after it was removed from the MSCI global small-cap indices. These changes to constituents for the indices will take effect from the close of Aug 30, MSCI said.

The stocks reacting to MSCI changes are primarily sentiment-driven and there will be "no significant impact on these stocks", Shah of Stoxbox said. Several of these revisions in index constituents were already priced in, the analyst said.

Shares of Adani Group stocks were also in the limelight after MSCI said it would implement the index review changes of Adani Group and associated securities that had been previously postponed. Shares of most Adani Group companies gained after the announcement.

On Monday, Adani Group stocks were in focus for another reason. These stocks had fallen sharply in the previous session after fresh allegations by Hindenburg Research regarding a conflict of interest in an investigation by the market regulator against allegations made against the Adani Group last year. The US-based short seller had alleged that the Securities and Exchange Board of India Chairperson Madhabi Puri Buch and her husband Dhaval Buch had invested in offshore funds linked to Adani Group companies.

An application was filed today in the Supreme Court seeking directions to SEBI to finish the pending investigation and give its conclusion in the Adani-Hindenburg case. 

Meanwhile, global markets also failed to boost domestic market sentiment. While major equity indices in the US market ended mixed on Monday, most Asian market indices were higher. European indices were also higher while the domestic market was open, but fell later. Investors now await the consumer price index data for July from the US and the UK, both due Wednesday.

Meanwhile, there were also some stock-specific reactions to quarterly earnings. Shares of Olectra Greentech ended over 7% higher after rising nearly 13% earlier today after the electric bus manufacturer reported healthy on-year growth in its consolidated net profit and revenue for the June quarter. The stock was among the best performers in the Nifty 500 index.

On the other hand, shares of Aarti Industries fell over 15% to a two-month low after brokerages said the ongoing pressure on the margins will likely continue for a couple of quarters due to pricing pressure from China across value chains. The stock was the worst hit on the Nifty 500 despite strong on-year growth in both bottomline and topline.

Shares of housing finance corporations traded lower after the Reserve Bank of India's circular on Monday aimed at making industry norms more stringent, similar to the ones for non-banking financial services, a research analyst at a domestic brokerage firm said. The RBI on Monday directed deposit-taking housing finance companies to increase their minimum percentage of liquid assets to 15% of public deposits in a phased manner from the current 13%. Some housing finance stocks such as Housing & Urban Development Corp and PNB Housing Finance ended lower.

The broader market indices snapped a two-day winning streak. While the Nifty mid-cap indices mirrored losses in the benchmark indices, the small-cap indices underperformed them. The Nifty Smallcap 50 ended 1.5% lower.

Shares of Hindalco Industries, which traded lower for most of the session, continued to trade lower after the company's consolidated net profit for the June quarter missed analysts' estimates even though it reported a 25.3% on-year increase in bottomline. The Nifty 50 constituent's stock ended 1.3% lower.

Shares of new debutants on the NSE, Unicommerce eSolutions and Brainbees Solutions, ended sharply higher after listing at premiums. Shares of Unicommerce eSolutions ended over 94% higher at 210.08 rupees after listing at a premium of 118% to the issue price. Shares of Brainbees Solutions ended 46% higher at 679.10 rupees after listing at a 40% premium to its issue price.

Shares of recently listed electric vehicle manufacturer Ola Electric Mobility ended 1.2% lower. The stock had hit the upper 20% circuit for two consecutive sessions.

* Of the Nifty 50 stocks, 14 rose, 36 fell

* Of the Sensex stocks, 7 rose and 23 fell

* On the NSE, 759 stocks rose, 1,981 fell, and 78 were unchanged

* On the BSE, 1,202 stocks rose, 2,743 fell, and 81 were unchanged

* Nifty Financial Services: down 1.9%; Nifty Metal: down 1.6%; Nifty Consumer Durables: up 1.3%

BSE                                               NSE
Sensex: 78956.03, down 692.89 pts or 0.9%         Nifty 50: 24139, down 208 pts or 0.9%

End

Edited by Saji George Titus

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