Impact of HDFC-HDFC BANK merger

what is the impact of HDFC-HDFC bank merger to index funds and ETF’S? So fund managers has to sell all the HDFC as well as HDFC bank shares? will it impact the returns of NIFTY 50 index fund & ETFS? will it increase the tracking error?

Mumbai: ICICI Securities said the upcoming semi-annual changes to the Nifty wherein Adani Enterprises NSE 0.13 % is likely to replace Shree Cement NSE 0.56 % could be ‘dwarfed’ by the impact of the impending HDFC Bank-HDFC merger. The brokerage said the merger will likely result in an unprecedented 14% of the Nifty’s weight (HDFC+HDFC Bank) getting replaced by two new stocks with a combined w …

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The new HDFC will be out of Nifty?


That’s how it works I think. I remember even motherson Sumi was first removed from all indices before it’s Demerger. Once the entire process is completed, if it satisfies the conditions then it will re enter nifty50.

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yes i think HDFC itself will be completely removed from Nifty 50 i think… so 14% of HDFC-HDFC Bank allocation will go to other stocks in Nifty 50 and 2 more stocks will be moved from NN50 to N50

What will happen to Bank Nifty? HDFC Bank has massive weightage and most allocation. I wonder if the bank nifty index behaviour will change for good, as there will no longer be an entity named hdfc bank commanding tat much weightage.

I feel bank nifty will become more volatile. When HDFC bank is there it doesn’t usually move more than 3 percent on either side per day. And since it has highest weightage it was controlling the movement to some extent.

But when it comes to nifty I feel volatility will reduce. Once the merger was announced both HDFC and HDFC bank had to move in the same direction. The combined weight is 14 percent. Unless reliance moved in the opposite direction, it was difficult for other scrips to nullify this movement.

Whatever I have said above is just out of observation and I have not verified it with real data removing HDFC out.

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@ShubhS9 will the same happen for HDFC too

Likely yes. But currently, there is no communication regarding changes from exchanges. Will update here when they do.


Currently Bank Nifty Is weighted like this

HDFC Bank Ltd. ~26
ICICI Bank Ltd. ~24
State Bank of India ~12
Axis Bank Ltd. ~12
Kotak Mahindra Bank Ltd. 11

Post the merger, bank nifty could probably look something like

ICICI Bank Ltd. ~30%
State Bank of India ~17%
Axis Bank Ltd. ~17%
Kotak Mahindra Bank Ltd. 16%

Company weighted in indices are on free float market capitalization and currently kotak mahindra bank is out performing in bank nifty, then hdfcbank, indusindbk, icicibank, sbin, axisbank and so on.

looks like merger will happen sooner than expected

Big news

Both the stocks up 4% now

Pretty sure HDFC Bank (acquirer) won’t be removed from any of the indices. HDFC (acquiree) will be removed from Nifty 50 and other indices once the merger date draws closer. That is still 1-2 quarters away I think.

This is similar to how Mindtree (acquiree) was removed from Nifty IT, Nifty Next 50 and other indices, but L&T Infotech (acquirer) wasn’t removed from any index.

By combining with HDFC Ltd, HDFC Bank will be able to offer mortgages to customers through its main products, allowing it to quickly expand its housing loan portfolio. Mortgage exposure for the bank currently stands at 11%, but after the merger, it will increase to 33%, a 200% increase.

hey folks, what can be impact of merger on Bank nifty? Will weightage of HDFC bank increase in bank nifty ? If that happens, will bank nifty not behave like mini-HDFC bank?