Kotak Mahindra Bank’s stock up by 6%

11 Apr 2023 , 12:06 PM

On Tuesday, Kotak Mahindra Bank witnessed a surge of almost 6% in its stock price. This surge happened after it came to light that Foreign Portfolio investors have reduced their shareholding in the company by 1.47% at the end of March quarter. This reduction means that proportion of shares that are available for purchase by Foreign Portfolio Investors (FPIs) has increased to 25.05% of the total available shares of the company in the equity markets. FPIs or FIIs can hold a maximum of shares making up 49% stake in a bank, as per prevailing government regulations. This has raised the possibility of more foreign investments in the stock of the bank. 

It has also increased the possibility of the stock getting a higher weight in MSCI index when it is revised on 23rd May. If the percentage of shares that is available for foreign investors is more than 25% of the free float then an adjustment factor of 1 is used for determining the weight of the stock in the index. If the percentage of shares available for foreign investors is less than 25% of the free float then an adjustment or multiplying factor of 0.5 is used while determining the weight of that stock in the index. Free Float is the total number of shares that are available for trading in the market. It does not include those outstanding shares that are not available for trading in the market. In order to be included in the MSCI index, at least 15% of the free float shares should be available for foreign investors. 

If Kotak Mahindra’s weight in MSCI Index is increased then also it will result in more inflows in the stock. These inflows will come from passive investment funds that track the MSCI index. At around 11.54 AM, Kotak Mahindra Bank is trading at Rs 1,845 per share, up by 4.87% against the previous close of Rs 1,759.30 on NSE. The stock  touched day’s high of Rs 1,859.

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