FIIs raise holdings in public sector banks' stocks

Raise holdings in Union Bank, OBC, Canara and Indian bank among others

The counters of state-owned banks have been bleeding daily for some weeks. Almost all of these on the stock exchanges are either at a 52-week low or close to their post-Lehman crisis levels.

Brokerage houses, market participants and sector analysts are busy advising investors to refrain from such terribly hit scrips, with some of the latter having lost as much as 60 per cent of their values (year-to-date).

Amid this, foreign institutional investors (FIIs) seem to be taking a contrarian call and have mustered courage to raise their holdings on selective counters, mostly mid-cap and small-cap public sector banks (PSBs).

The counters where they have reduced exposure are marginal cuts. This means foreign investors are not as bearish on PSBs as local investors at this point of time.

Union Bank of India, Oriental Bank of Commerce (OBC), Canara Bank and Indian Bank have witnessed FII holdings going up from 35 to 104 basis points (bps, each of these being a hundredth of a percentage point). Others getting more FII money include Bank of India (BoI), IDBI Bank, Corporation Bank and Vijaya Bank.

U R Bhat, managing director of Dalton Capital Advisors, says: "The market seems to have over-reacted on banking stocks. Such a harsh treatment looks overdone."

Interestingly, during the year-to-date period, India's benchmark stock indices have lost barely half a percentage-point. But the BSE Bankex has fallen 20 per cent so far this year; it would be much more if only PSB scrips were measured, since private heavyweight banks such as HDFC, Axis and ICICI did not fall as much.

Vaibhav Agrawal, the banking sector expert at Angel Broking, had earlier told Business Standard: “Several PSBs are available at dirt-cheap valuations. One should adopt a strategy of basket buying on the sector.”

Only foreign investors seem to have listened.

The situation is like the time of the Lehman collapse in end-2008. All banking counters had crashed to abysmal low levels by March 2009. However, by November 2010, banks were the first to recover from these lows.