This has increased the foreign room to 20.3% from 18.4% on 14 June, according to Abhilash Pagaria, head of Nuvama Alternative & Quantitative Research. Foreign room is a measure used by global index provider MSCI to determine the proportion of shares still available for foreign investors to buy.

HDFC Bank is part of the MSCI Emerging Markets Index along with companies such as Taiwan Semiconductor, Tencent Holdings and Samsung Electronics. Its weightage on the index as of August-end was 0.79%.

The minimum foreign room is 15% for inclusion in the index. If the foreign room increases to 25%, the weightage of the security rises and passive index trackers will have to buy it to adjust for the weightage increase.

This means that for investors who track the MSCI indices to buy, foreign selling in HDFC Bank should continue until the foreign room hits 25%, said Pagaria. Since the maximum foreign ownership in a private Indian bank is 74%, the current foreign room of the bank is 20.3%.

Selling by foreign investors has made HDFC Bank the biggest contributor to Nifty’s fall from its record high of 20,222.45 to 19,436.10 on 4 October. Of the 756 points shed over this period, HDFC Bank accounted for 192.34, followed by Reliance Industries at 107.

FPIs and sovereign wealth funds hold 3,427 million shares, while those holding global depositary receipts hold 1,028 million of the 7,582 million outstanding shares, Nuvama said, citing BSE data for September.

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Updated: 04 Oct 2023, 08:08 PM IST