FPIs reduce stake in financial sector, the worst performer in March quarter

In HDFC Bank, HDFC, ICICI Bank, SBI, Axis Bank and Bandhan Bank, FPIs reduced their holdings in the range of 100 bps to 300 bps.

Foreign institutional investors (FPIs) have cut their stake in majority of large-cap financials including banks, housing finance and non-banking finance companies (NBFCs) by up to 4 percentage points during January-March quarter (Q4FY20).

In HDFC Bank, Housing Development Finance Corporation (HDFC), ICICI Bank, State Bank of India (SBI), Axis Bank and Bandhan Bank, FPIs reduced their holdings in the range of 100 basis points (bps) to 300 bps during the quarter. In Jammu & Kashmir Bank, their stake was declined by 402 bps at 10.4 per cent at the end of March quarter. The 100 basis points is equivalent to 1 per cent. Bajaj Finance and IndusInd Bank have not disclosed their latest shareholding pattern data with the stock exchanges.

The S&P BSE Sensex reported its sharpest quarterly fall during the period, with the benchmark index slipping 28.6 per cent following panic selling triggered by the rampant spread of Covid-19. The Nifty50, which declined 29.3 per cent, recorded its sharpest quarterly fall since the June 1992 quarter, when it had fallen 32.2 per cent. In comparison, the Nifty Bank and Nifty Financial Services indices tanked 40.5 per cent and 36 per cent, respectively, during the quarter.

A sharp sell-off by the FPIs saw the market value of these financials decline between 30 per cent and 60 per cent. The fall, analysts say, has been on concerns that the financial industry will be the worst hit among sectors, given the disruptions to the country’s economic activity caused by Covid-19 outbreak.

The stock price of Axis Bank tanked 50 per cent, as FPIs cut their stake by 264 bps to 44.60 per cent during the quarter. ICICI Bank, in which they reduced their holdings by 209 bps, had fell 40 per cent. The S&P Global Ratings last week, revised the rating outlook on Axis Bank and ICICI Bank to negative from stable due to worsening operating condition on account of Covid-19.

The foreign rating agency believes Indian banks face increasing risks stemming from challenging operating conditions following the Covid-19 pandemic. It expects a flattish U-shape economic recovery. Risks remain on the downside and could lead to few banks being downgraded, it added.

The negative outlook on Axis reflects our expectation that heightened economic risks facing India's banking system will likely affect the bank's asset quality and financial performance. On ICICI Bank, the agency said the bank is exposed to economic headwinds faced by India's banking system. It expects ICICI Bank to maintain its strong market position and better asset quality (despite deterioration) than many peers over the next 18 months.

	FPIs		Chg	Mutual funds		chg
Name	201912	202003	Bps	201912	202003	Bps
J&K Bank	14.42	10.40	-402	4.57	2.80	-177
South Indian Bank	22.34	19.10	-324	4.31	3.54	-77
Axis Bank	47.24	44.60	-264	18.46	20.11	165
ICICI Bank	45.79	43.70	-209	25.98	27.61	163
L&T Fin.Holdings	12.49	10.60	-189	0.80	0.56	-24
HDFC	72.75	70.88	-187	8.99	9.52	53
City Union Bank	22.63	20.79	-184	26.20	27.43	123
DCB Bank	24.57	22.82	-175	24.19	26.85	266
IDFC First Bank	15.10	13.56	-154	3.08	3.17	9
SBI	10.84	9.47	-137	13.57	13.45	-12
PNB Housing	23.14	21.80	-134	4.48	3.78	-70
HDFC Bank	30.80	29.80	-100	11.68	12.19	51
M & M Fin. Serv.	24.85	23.94	-91	11.79	12.14	35
Bandhan Bank	13.92	13.05	-87	3.51	2.75	-76
Karnataka Bank	13.54	12.80	-74	4.45	4.56	11
FPIs, Mututal Funds stake in %
BPS - Basis points
Source: CapitalinePlus