The stock gained as much as 6 per cent intra-day before ending up 2.2 per cent at Rs 578.25. From its March 19, 2020 low of Rs 381.05, the stock is up nearly 52 per cent.
The company had received approval from the Department of Telecommunications last January to increase its foreign investment limit to 100 per cent of the paid up capital, but some subsidiary companies were still waiting for certain government and regulatory approvals, which led to MSCI rebalancing its index in August. This rebalancing had led to significant outflows.
At least $600 m of inflows into stock likely with MSCI rebalancing index
This revised foreign investment limit is likely to lead to higher inflows amounting to $600 million and higher weightage in the MSCI quarterly index review in February.
“Developments on this front could help reverse the underperformance that followed the rebalancing in August 2020,” said foreign financial services firm Morgan Stanley which has an overweight rating on the stock with a target price of Rs 680.
Sanjiv Bhasin, director, IIFL Securities said he would advise against chasing the stock after the run-up. “The stock has run up 50 per cent, but there is a lot of pent-up demand to own stocks. The sell Reliance, buy Bharti story has played out on expectation of ARPU increases, but the market is overbought and now we are not chasing the stock,” said Bhasin.