Shares of Housing Development Finance Corporation (HDFC) Ltd slumped more than five percent to hit Rs 2,720 apiece in Friday's trade after a report by brokerage Nuvama suggested that the merged HDFC entity could see $150-200 million in outflows. The global index aggregator MSCI said it will use an adjustment factor of 0.5 while computing the weightage of the merged entity.

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The stock opened at Rs 2,720, down 4.9 percent from previous closing price of Rs 2,862.35 on BSE. The stock witnessed heavy sell-off and hit an intraday low of Rs 2,710 and intraday high of Rs 2,756.40.

The recent slump has dragged HDFC's market capitalisation (m-cap) below State Bank of India (SBI). HDFC commanded a m-cap of Rs 4,99,467 crore, down nearly Rs 25,573 crore over Thursday's market value of Rs 5,25,114 crore.

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Meanwhile, SBI shares surged over one percent to hit Rs 587.90 on BSE, commanding a market capitalisation of Rs 5,22,536.03 crore against Rs 5,17,627 crore in the previous trading session.

HDFC twins both emerged as top index losers today following the report. HDFC Bank tanked 5.56 percent to hit the day's low of Rs 1,631 on the BSE while HDFC shed as much as 5 percent. The m-cap of the two companies fell Rs 63,870 crore within first few minutes of trade.

What MSCI said

MSCI has announced the potential treatment for the merger of the HDFC twins on the MSCI indices. The index provider intends to add the merged entity of HDFC Bank and HDFC to the large cap segment of MSCI Global Standard index. Addition to the index will come with an adjustment factor of 0.5.

The Street was expecting the the combined entity to see net inflows of $3 billion on account of getting a full adjustment factor of 1 times.

"Based on the estimated post-event foreign room of HDFC Bank and pursuant to the MSCI Corporate Events Methodology, to reduce the risk of reverse turnover, MSCI intends to add HDFC Bank to LargeCap Segment of MSCI Global Standard Indexes with a FIF of 0.37 after applying an adjustment factor of 0.5," MSCI said in a statement.

At present, HDFC's weight is 6.74 percent in MSCI India index and according to Nuvama, the merged entity would have slightly lower weight of about 6.5 percent.

"We had estimated the foreign room for the merged entity to be around 18% which is above 15% and also above the MSCI threshold to maintain stock with full factor. However, as per the current methodology, the weighting of the merged entity would be again reduced in the next quarterly index reviews if the foreign room would have come below 15%," according to Nuvama Alternative & Quantitative Research's report.

Nuvama also said that MSCI intends to further review the adjustment factor of HDFC Bank at a scheduled index review following the completion of the transaction and in accordance with the section 3.1.6.2 of MSCI GIMI methodology.

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HDFC fourth-quarter numbers

HDFC released its fourth quarter numbers on Thursday. The company's standalone net profit for the March quarter rose 20 percent year-on-year to Rs 4,425.50 crore, as against Rs 3,700 crore reported in the same period a year ago.

Net interest income or NII for the non-banking financial company (NBFC) rose 16 percent to Rs 5,321 crore from Rs 4,601 crore in the year-ago period. Net interest margin (NIM) for the quarter came in at 3.6 per cent.

The company's board of directors has also recommended an interim dividend of Rs 44 per share for financial year 2022-23.