Kotak Mahindra Bank's chances of FTSE inclusion brighten

Private sector lender Kotak Mahindra Bank could get added to the FTSE All-World Index during the index rebalancing in September, following an increase in investment legroom for foreign investors.

Foreign portfolio investors (FPIs) have pruned their holdings in the bank over the last five quarters. As a result, the legroom for foreign investment in the stock has increased from 11.88 per cent in December 2020 quarter to 19.8 per cent at the end of March 2022 quarter.

To be eligible to be part of the FTSE index, the minimum room for overseas investment has to be 20 per cent.

“Net selling of around 2.23 million shares ($51 million) from foreign investors by the end of June will increase the foreign room to 20 per cent. The increase in foreign room to 20 per cent or higher will result in Kotak Mahindra Bank being included in the FTSE All-World Index at the September Semi-Annual Index Review, where passive trackers will need to buy 38.2 million shares ($861 million; 11.1 days average daily volume; 22 days delivery volume),” said analyst Brian Freitas of Periscope Analytics.

At present, Kotak Mahindra Bank is a member of indices such as the MSCI India, Nifty50 and S&P BSE Sensex. The stock is, however, not a part of the FTSE All-World Index since the foreign investment room has stayed below 20 per cent in the last few years, says Freitas, a specialist in index computations.

FPI shareholding in the bank has declined from a high of 48.47 per cent in December 2020 to 42.67 per cent in March 2022. Shares of Kotak Mahindra Bank are down 2 per cent in the past one year. In comparison, the Nifty50 index has gained 16 per cent.

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