Kotak Mahindra Bank Shares Rise 5% To Rs 1,847.60 As FPI Room Expands

Kotak Mahindra Bank shares surged 5 per cent on Tuesday to close at Rs 1,847.60 on the BSE, as the counter's foreign portfolio investor (FPI) quota grew to 25 per cent. 

Analysts predict that the increased room will raise the private sector lender's weight in the MSCI India index, spurring stock purchases worth nearly a billion dollars.

As of 31 March, FPI holdings in the company had decreased by 147 basis points quarter on quarter to around 41.22 per cent. This corresponds to an FPI headroom of little more than 25 per cent.

The increase in the foreign room to more than 25 per cent should result in MSCI removing the stock's limited investment ability factor (LIF). As a result, Kotak Mahindra Bank's weight in the MSCI India Index should rise from 1.38 per cent to 2.68 per cent, according to Periscope Analytics analyst Brian Freitas.

Freitas believes that passive MSCI trackers must purchase approximately 44.27 million shares of the bank (equivalent to Rs 8,180 crore or USD 996 million at the bank's last closing price of Rs 1,848). The buying will occur on 31 May and the recent surge in stock price was in anticipation of the move.

According to a Nuvama report, Kotak Mahindra Bank's stock has been stagnant for quite some time and the MSCI weight rise trigger could result in substantial momentum.

Analysts believe that a gain in FPI membership could lead to the stock being included in other major indices.