They cut stake in State Bank of India to 9.47 per cent from 10.84 per cent a quarter ago, and in Kotak Mahindra Bank to 39.17 per cent from 39.75 per cent a quarter ago.
Mumbai: Foreign portfolio investors (FPIs) cut their holdings in most large banks during the March quarter on growing concerns over the surge in bad loans and slowdown in lending on account of the lockdown. Analysts said banks were over-owned by these institutional investors because of their dominant weightage on the Sensex and Nifty. Much of the the sell-off may have happened after February 19 — when the market started falling on concerns over the impact of Covid-19 on the economy.
FPIs have lowered stakes in nine out of the 11 Bank Nifty constituents in the March quarter over the previous quarter.
They cut stake in State Bank of India to 9.47 per cent from 10.84 per cent a quarter ago, and in Kotak Mahindra Bank to 39.17 per cent from 39.75 per cent a quarter ago. They have reduced stake in HDFC Bank to 29.8 per cent from 30.8 per cent in the December quarter. They have also lowered stakes in ICICI Bank, Bank of Baroda, Axis Bank, Punjab National Bank, IDFC First Bank and Bandhan Bank. The Bank Nifty is down 34.4 per cent so far in 2020 while the Nifty is down 21.5 per cent. Bank Nifty has recovered 31 per cent from the lows of 16,116.25 reached on March 24..
“The biggest hit (fromCovid-19) will be in the banking sector. Retail and corporates have taken a hit so delinquencies may rise,” said Sanjiv Bhasin, director, IIFL Securities.
Recently, CLSA cut target prices on banks by 20-70 per cent as Covid-19 has disrupted an already struggling credit growth trend in India and raised asset quality risks. UBS has cut target prices by 5-41 per cent as it believes risk-reward remains unfavourable while risks to collections are rising.
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Traders are shifting positions to the pharmaceutical sector, which is seen as part of essential services and have also been under-owned due to regulatory risks over the last few years.
