An increase in India’s weightage in the MSCI Global Standard Index has failed to fire up foreign portfolio investors as the benchmark Sensex tumbled nearly 700 points on Tuesday with star performer HDFC Bank losing its allure among overseas players.

Shares of India’s largest bank by market capitalisation tumbled 3.46 per cent on Tuesday as the August rejig of the MSCI index triggered apprehensions of lower than expected fund inflows into HDFC Bank.

The bank was the largest contributor to the fall in the Sensex, which also fell prey to persistent selling by FPIs amid mixed cues from overseas markets.

MSCI in its August review announced that HDFC Bank’s weightage in its Global Standard Index will increase in two tranches against investor expectation of a rise in one go.

MSCI added the first adjustment will be done after the rejig in August, with the details of the other to be announced in November.

Nuvama Alternative and Quantitative Research estimates the current adjustment will result in inflows of $1.8 billion in HDFC Bank.
Analysts had earlier expected portfolio inflows of up to $4 billion into the bank.

Shares of HDFC Bank settled at ₹1,603.60 on the BSE. During the day, it crashed 3.60 per cent to ₹1,601.20.

“HDFC Bank is currently under pressure after outperforming the market in the days leading up to the MSCI rebalancing, driven by expectations despite its weak earnings. The stock is now facing profit-booking as investors react to the phased inflows,” Santosh Meena, head of research, Swastika Investmart Ltd, said.

Muted FPI inflows

FPI investment saw exits on Tuesday to the tune of ₹4,631.60 crore and ₹1,172 crore on Monday — belying expectations of a surge in inflows with the rise in country weights from August to 19.8 per cent from 19.2 per cent.

FPIs, in fact, withdrew ₹13,400 crore from August 1 to August 9.

While the Sensex opened on a positive note at 79552.51, it came under pressure in post noon trades and tanked more than 759 points to hit 78889.38. It closed at 78956.03, a fall of 692.89 points or 0.87 per cent.

On the NSE, the broader Nifty plummeted 208 points to finish at 24139.

``The domestic market plunged into red terrain in the latter half, amidst mixed global sentiments. Recent IIP data indicates a lacklustre growth in the major manufacturing sector. Persistent selling by FIIs and elevated valuations are further contributing to the decline,” said Vinod Nair, head of research, Geojit Financial Services.

Adani prop

Meanwhile, in what should come as a relief to investors of the Adani group amid the latest Hindenburg salvo, MSCI removed the restrictions on the treatment of its stocks which include their free float status.

``MSCI clarifies that starting from the August 2024 index review, MSCI will implement the index review changes, including changes in the number of shares (NOS), foreign inclusion factor (FIF) and domestic inclusion factor (DIF) of Adani Group and associated securities that have been previously postponed,” MSCI said in a statement.

It added that regular implementation of corporate events for Adani group stocks will come into effect from September 2, 2024. ``MSCI continues to monitor Adani Group and associated securities, including related to free float, and will issue further communication if appropriate,’’ MSCI said.

However, there was no let-up on the pressure on the Adani group stocks on Tuesday, with seven of the 10 listed stocks ending in the red.