REITs reduce stake in private sector banks

The participation of foreign investors in private sector banks has declined in the range of 2-6% as they withdrew nearly ₹35,000 crore from the banking sector in the first three quarters of the current financial year.

Amid concerns over credit growth due to the novel coronavirus variant and expensive sector stock valuations, foreign portfolio investors (REITs) withdrew ₹34,406 crore from banking sector stocks between April and December 2021.

A comparison between the holdings of REITs in banking stocks at the end of March 2021 and December 2021 shows that private banks have supported this massive outflow of foreign funds as much as possible.

Yes Bank has witnessed the maximum reduction in the REIT’s stake. The participation of foreign investors in Yes Bank decreased from 13.77% in March 2021 to 8.17% in December 2021. Their participation at the end of December 2020 was 15.01%.

While FPI’s stake in Axis Bank fell 4% to 47.44% in December 2021 (from 51.43% in March 2021), foreign investors cut 3% each in ICICI Bank, RBL Bank and IndusInd Bank during the comparable year. period.

HDFC Bank, India’s largest private sector lender, and Kotak Mahindra Bank saw their stake in FPI decline by 2% in the first three quarters.

Federal Bank and IDFC First Bank were the only two private lenders to see an increase in REIT participation. While FPI’s stake in IDFC Bank increased to 14.77% in December 2021 (11.88% in March 2021), the foreign stake in Federal Bank’s portfolio increased slightly to 25.23% (24. 05%) during this period.

Market experts said that within the banking sector, REIT selling has been intense in private sector banks compared to PSU banks as the latter have performed well due to improved quality assets and in the hope of privatization.

While the Nifty PSU banking index increased by 17% between March 2021 and December 2021, the Nifty Private Bank index only gained 2% during this period.

Power banks

While FPI’s stake in State Bank of India and Bank of Baroda remained stable, their stake in Canara Bank increased by 3%. Union Bank of India and Indian Bank also saw FPI’s stake increase by 1%. The Punjab National Bank alone saw a 2% decline in its REIT holdings.

Ajit Mishra, VP-Research, Religare Broking said, “The banking and financial sector has the highest weighting in the REIT portfolio as well as in the benchmark. We believe there is no stock- or sector-specific reason why FPI is reducing its position in private banking, but selling off on a large scale. At the same time, their exposure to the PSU banking pack is relatively very small, so the possibility of further reducing their stake, especially when things change for good, seems unlikely.

Published on

January 22, 2022

About Vicki Davis

Check Also

Explainer: after Russia swerved to avoid default. What is the next? | Business and economy

Russia may have averted default by announcing it had made several overdue dollar payments on …