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IFPs reduced their stake in private banks


Private lenders have faced the brunt of a record outflow of foreign funds from Indian equities since October 2021. This was evident from the sharp decline in the share of foreign entities among major private lenders at the end of the first quarter of FY23.

Foreign portfolio investor (FPI) holdings in the country’s largest private sector lender HDFC Bank fell by more than 7 percent year-on-year to 32.31 percent as of June 2022. Their stake in mortgage lender HDFC also fell to 67.75 percent as of June 2022 from 72.22 in June 2021. The HDFC twins have historically been the favorite stocks for foreign investors.

Foreign investors’ stake in ICICI Bank also fell to 43.54 percent in the last quarter from 48.01 percent in June 2021, while FPIs cut nearly 6 percent stake in Axis Bank to 46.58 percent as of June 2022. Kotak Mahindra Bank saw the lowest decline in FPI share, falling to 40.55 percent (42.77 percent) as of June 2022.

Restructuring the portfolio

Market experts attributed the decline in FPI share among private lenders to portfolio restructuring rather than any concerns over structural bottlenecks in the sector.

“The reason why FPIs sell financial services, especially banks, is that this sector accounts for 33 per cent of the total FPI AUC (assets under custody). They have made good profits in this segment and it is easy to sell large volumes in this highly liquid segment,” said V.K. Vijayakumar, Chief Investment Strategist, Geojit Financial Services.

FPIs were sellers of Indian stocks between October 2021 and June 2022, pulling out over Rs 2.59 lakh crore in the nine months. The banking and financial services sector alone saw an outflow of Rs 1.09 lakh crore during the period, or 43 per cent of the total FPI outflow.

Posted on

July 31, 2022

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