IndusInd Bank Shares Surge 4%, Leading Nifty on Hopes of MSCI Inflows

On January 13, IndusInd Bank's stock price climbed by 4% to ₹973, making it the leading gainer on the Nifty 50 index. This rise followed the bank's updated December shareholding pattern, which revealed an increase in foreign headroom due to a reduction in Foreign Institutional Investor (FII) holdings.

As of 5:00 pm IST, January 13, the Induslnd Bank share price was at ₹943.00 on the NSE.

The bank’s latest shareholding data indicates that the FII stake fell to 46.6% in December from 55.5% in the previous quarter. As a result, the foreign headroom significantly exceeded the 25% threshold, with MSCI continuing to apply a half-float factor.

Following the FII sell-off, the available foreign headroom remains well above 25%, raising the potential for the bank’s MSCI weight to double during the February 2025 review, with an estimated increase of 50 basis points.

Nuvama Alternative Research anticipates that this weight increase could attract inflows between $250 million and $300 million, potentially impacting the stock's performance over the next 3 to 5 trading days. The rebalancing effect and related inflows are expected to be reflected by February 28.

However, Goldman Sachs recently downgraded IndusInd Bank’s rating from "buy" to "neutral" and lowered its price target from ₹1,300 to ₹1,090. The downgrade reflects concerns about the bank's slowing revenue growth over the past two quarters, rising delinquencies in its commercial retail portfolio, and subdued loan growth.

IndusInd Bank’s Q3 business update was also met with lukewarm responses. InCred Equities highlighted the bank's challenges in maintaining retail lending growth amid a weak microfinance environment and the ongoing slowdown in auto finance demand. Additionally, personal loans and credit card lending, which form a large part of the bank’s non-vehicle retail loan segment, have experienced lower demand.

Out of the 50 analysts tracking IndusInd Bank, 36 have assigned a "buy" rating, 12 recommend holding the stock, while 2 advise selling.