HDFC twins rattle market on MSCI weightage rejig

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Both HDFC Limited and HDFC Bank shares fell more than 5 percent on May 5. A decline of more than Rs 80,000 crore has been recorded in the total market cap. This is because of the announcement of Morgan Stanley Composite Index i.e. MSCI which is related to the merger of these two companies.. Announcement was made on using an adjustment factor of 0.50 for computing the weightage in the MSCI index of the new company formed after the merger. Although the market believed that an adjustment factor of 1.0 would be used, which was expected to buy about $3 billion in the stock. It is believed that the rest of the index may also take a similar step, due to which the stock has seen a sharp decline. But analysts believe that long-term investors should buy the stock on the decline, because this decline will be limited to a short period only.

The Wadia Group, which owns Go First Airlines, could seek a waiver from the Insolvency and Bankruptcy Code (IBC) rules that bar promoters from bidding for their own companies because the cash-strapped carrier’s account with banks is still marked as standard. Defaulters are prevented from submitting a resolution plan for an insolvent company. The Wadia Group, which owns Go First, is likely to push for a one-time settlement with banks under which creditors will take a “substantial haircut”. The Wadia Group has not defaulted on payment to creditors till date,and hence will not be barred from offering a resolution plan. Experts say that in a way, Go First has shown the way for financially struggling firms how to protect itself and work on coming back to life. Meanwhile, lessors on Thursday urged DGCA to deregister 23 Go First aircraft to secure their assets before the insolvency process begins. A moratorium ordered by the NCLT prohibits institution and continuation of suits and recovery of assets by owners and lessors. Go First has blamed engine manufacturer Pratt & Whitney for its woes and said recurring defects and non-availability of spare engines resulted in prolonged grounding of its aircraft and loss of revenue.

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