FIIs cut stake in banks in March 2015 quarter

Foreign institutional investors (FIIs) reduced their stake in most banks during the financial year’s fourth quarter ended March, on concerns over asset quality and poor financial performance.

Of the 40 listed banks, 28 have so far declared their January–March 2015 quarter (Q4) shareholding pattern data. Data reveal FIIs have reduced their stakes in 20 banks, including in State Bank of India (SBI), ICICI Bank, Bank of India (BoI) and Canara Bank Free Stock Share Tips

In public sector banks (PSBs) such as Punjab National Bank (PNB), Bank of Baroda (BoB), Allahabad Bank, Indian Overseas Bank and Canara Bank, their stakes declined one percentage point each. In Jammu & Kashmir Bank, South Indian Bank, Federal Bank, Karur Vysya Bank and DCB Bank, these stakes went down by two-five percentage points.

Mayuresh Joshi, vice–president (institutional), Angel Broking, says, “Investors are unsure how the asset quality issues will pan out. The asset quality of banks, we feel, will continue to remain under pressure in Q4 and Q1 of FY16, especially the mid-cap PSB lot, where they have been catering to the metals, iron and steel and select real estate companies. More, the credit growth for the entire banking sector remains muted. The selling pressure will continue if the banks report bad numbers over the next few months.”

Among PSBs, BoB saw the largest decline in FII holding, a dip to 16.53 per cent at the end of March quarter, from 17.96 per cent from December-end Personal Numerology Trading Tips

However, in Kotak Mahindra Bank, FII stake touched a record high at 36.85 per cent, ahead of the merger with ING Vysya Bank. They held 35.26 per cent stake in Kotak Mahindra at the end of December quarter.

Underperformance

Banking stocks have underperformed in the market during the fourth quarter, with the Bank Nifty declining three per cent compared to a 2.5 per cent rise in the NSE 50-stock index, CNX Nifty, during this period.
State-owned banks have seen a sharp fall, with the CNX PSU Bank Index slipping 20 per cent during the quarter. However, thus far, it recovered 7.4 per cent against three per cent gain each recorded by the Bank Nifty and the CNX Nifty Commodity Trading Tips

“Post October-December 2014 (Q3) results, the PSU Bankex has significantly underperformed the broader market. A host of factors like negative surprises on asset quality, weak capital and coverage position and muted growth have led to such an underperformance,” said Darpin Shah and Shivraj Gupta, analysts at HDFC Securities.

The road ahead

Going ahead, analysts expect PSBs to report subdued financial performance in Q4.

Analyst at Ambit Capital, in a Q4 results preview report, said, “We are negative on all PSBs, except BoB, as we believe elevated credit costs and constrained capital would keep the financial performance subdued at a time when the government’s progress on corporate governance is gradual and uncertain.”

Analysts at Edelweiss Securities also feel PSBs’ credit growth is likely to be muted, as cyclical factors will take time to drive growth. As for private banks, they will continue to trend above sectoral growth and, in turn, gain market share Jackpot Trading Tips