The impact of the HDFC Bank crisis can be seen beyond banks. Jefferies has cut its exposure to HDFC Bank across its three portfolios: Asia (excluding Japan), Global, and International long-only equity portfolios. The global brokerage house removed its investment in HDFC Bank, replacing it with a 4% weight in HSBC.
Jefferies, in the report, didn’t explicitly provide a reason for this substitution. However, this came soon after the private lender’s part-time, now former chairman, Atanu Chakraborty, resigned, citing “ethical differences” at the firm.
In a recent report, the Financial Times said that the former chairman and current chief executive officer, Sashidhar Jagdishan, were in a rift over a power struggle, citing sources. This raised eyebrows over stability in leadership at HDFC Bank.
Other Indian stocks in portfolio
Apart from replacing HDFC Bank, Jefferies’ Asia ex-Japan long-only portfolio features Indian companies across different sectors, which include Eternal (Zomato) for consumer, SBI Life Insurance for insurance, Lodha Developers for property, PolicyBazaar (PB Fintech) for financials, GMR Airports for travel, and JSW Energy for the energy sector.
Maintained ‘Overweight’ position
Despite the recent reduction, India still holds a 13% recommended weightage in the Asia Pacific ex-Japan asset allocation, representing a modest 0.5 percentage point overweight compared to the MSCI AC Asia Pacific ex-Japan benchmark of 12.5%.
SEBI checks inside HDFC Bank
India’s markets regulator, Securities and Exchange Board of India (SEBI), has begun a preliminary review of the resignation letter of former HDFC Bank chairman Atanu Chakraborty for possible violations of rules governing directors of listed companies, two sources familiar with the matter said.
India’s market regulator has started an initial examination of the resignation letter by the former chairman for potential breaches of regulations governing directors of publicly listed firms, reported Reuters, citing sources.
However, Chakraborty said to Reuters that he does not have any information about an examination by the regulator.
HDFC Bank share price performance
The share price of HDFC Bank has changedf a little in the last five trading days. The stock has declined by over 14% in the past one month and 20% in the last six months. HDFC Bank’s share price has erased over 16% of investors’ wealth over the previous one year.