Data analysed by ETMarkets showed that FIIs increased their stake sequentially in 15 private banks and four state-owned banks in the last quarter.
They increased their holding in all the frontline private banks namely Axis Bank, HDFC Bank, ICICI Bank, Kotak Mahindra Bank, and IndusInd Bank.
In both Axis Bank and Kotak Mahindra Bank, the stake increase was quite significant when compared to others.
The cumulative holding of FIIs in Axis Bank increased by a sharp 295 basis points sequentially to 52% as of June end. In Kotak Bank, their holding went up by 213 bps to 21.03%.
FIIs have been steadily increasing their stake in Axis Bank in the last few quarters. In September quarter last year, they were holding 46% stake in the bank, and their current holding is likely at an all-time high.
Among second rung banks, those which have seen an increase in FII holding are YES Bank, City Union Bank, Karnataka Bank, IDFC First Bank, Bandhan Bank, CSB Bank, AU Small Finance Bank, and Ujjivan Small Finance Bank. In the public sector space, FIIs increased their stake in State Bank of India in the June quarter, after reducing it in the preceding quarter.
They held 10.36% stake in the country’s largest lender as of June end, compared to 9.89% a quarter ago.
FII holding went up significantly in Bank of Baroda, as they held 12.29% stake as of June end, compared to 10.92% stake a quarter ago.
While FIIs were showing high interest in bank stocks, mutual funds turned sellers, as they cut their stake in as many as 13 private banks and six public sector banks, data showed.
Mutual funds sold stakes in all the frontline banks in the June quarter, and among the midcap ones, they reduced their ownership in names like YES Bank, City Union Bank, Karur Vysya Bank, DCB Bank, RBL Bank, and Bandhan Bank.
Among public sector banks, MFs reduced their stake in SBI, Bank of Baroda, Bank of India, UCO Bank, and Central Bank of India.
What should investors do?
Given the healthy loan growth and steady improvement in the asset quality, most analysts remain bullish on the banking pack as a whole. They expect this sector to continue to drive earnings growth among Nifty 50 constituents.
Within the banking space, analysts have turned more positive on public sector banks given
the stark improvement in their earnings and return ratios.
“There is indeed scope for the premium between PSBs and private banks to narrow further. The macroeconomic and rate cycle perspective indicates that the worst is behind us,” said Anand Varadarajan, director at Asit C Mehta Investment Intermediates.
In the past 1 year, all listed public sector banks have given more than double-digit returns to investors, with four turning multibaggers.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)