FIIs reverse bets on public sector banks in Q1

During Q1, FII holdings in Dena Bank and Syndicate Bank rose 150-200 bps. In Oriental Bank of Commerce, FIIs raised their stake by 240 bps

India’s state-owned banks are back on the radar of foreign institutional investors (FIIs), with these investors turning buyers of several public sector bank stocks during the June ended quarter. FII buying was the strongest in the case of mid- and small-sized banks.

Earlier, FIIs had cut positions in these banks, owing to a rise in their non-performing assets. The recent buying comes at a time when, despite a surge in the broader markets, several market participants have been cautious on public sector banks, barring a few large names. Instead, they have advised clients and investors to concentrate on private banks, including HDFC Bank, ICICI Bank, YES Bank and IndusInd Bank.

The investment trend of FIIs, it appears, isn’t in line with what experts had expected. Not only have FIIs increased their stake in large lenders such as State Bank of India and Bank of Baroda, they have also bought stakes in many mid- and small-sized government-owned banks. IDBI Bank, Indian Overseas Bank, Allahabad Bank, Canara Bank, Dena Bank and Syndicate Bank saw high participation from FIIs.

During the June quarter, FII holdings in Dena Bank and Syndicate Bank rose 150-200 basis points. In Oriental Bank of Commerce, FIIs raised their stake about 240 basis points.

 

For long, shares of state-owned lenders have been avoided by investors, owing to issues related to asset quality.

However, as India got into election mode and it became increasingly clearer that the Narendra Modi-led National Democratic Alliance would form the government at the Centre, these stocks rose.

During a time when benchmark indices could gain merely 13%, shares of PSU banks took a big leap and surged anywhere between 20 and 82%.