The government’s Foreign Investment Promotion Board (FIPB) has rejected HDFC Bank’s proposal to increase foreign portfolio investment limit for the bank. This could lead to the bank facing a reduction in weightage at MSCI India Index, which would in turn lead to overseas investors cutting down their holdings in the stock. The bank’s weightage in the MSCI Emerging Market Indian index in December 2013 was reduced from 7.1% to 5.4%. Since the government has rejected the proposal to increase the FII investment in the bank, the weightage may be reduced further, possibly to 1.9%. HDFC Bank has applied to increase foreign holding to 67.55%, while the FIPB is seeking further clarity on its parent HDFC’s 22.7% holding in the bank, as foreign holding in the parent housing finance company is high at 75.7%.
