Banks/FIs, top gainers of record FPI flows

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Banks and financial institutions (FIs) gained the most from the record inflow of foreign portfolio investment (FPI) into Indian equities this financial year.

According to depositories data, the net FPI into Indian equities stood at ₹1.98-lakh crore between April 1 and December 15. Of this, nearly 32 per cent, or ₹62,658 crore, went to the financial services sector. While banks received ₹47,248 crore, the balance went to ‘other financial services’ that include FIs, NBFCs, housing finance companies and asset management companies.

 

India’s faster-than-expected economic recovery, India Inc’s better Q2 earnings report and lower non-performing assets (NPAs) due to the RBI’s moratorium and one-time loan restructuring made the sector more attractive to foreign investors.

“Though India’s GDP growth is currently in the negative territory, it is expected to turn positive in FY21 and FY22,” said Kranthi Bathini, equity strategist at WealthMills Securities.

“Banks and FIs, being at the epicentre of the growth, are likely to be a major beneficiary. This is the reason for FPIs’ optimism towards this sector.”

 

The massive FPI inflow also pushed the valuation of many bank and NBFC stocks to their lifetime highs.

Stocks make gains

The Nifty Bank index outperformed even the Benchmark Nifty50 between March 24 (when the market hit a three-year low due to pandemic-led panic sell-off) and December 28. While the Nifty50 recovered 78 per cent to close at 13,873.20 on Monday, the Nifty Bank index recovered 81 per cent to close at 30,880.95.

The stock prices of HDFC Bank, ICICI Bank and Kotak Mahindra have all surged around 80 per cent from their March lows while that of Bajaj Finance has gained more than 133 per cent.

Although both private and public sector bank stocks have rallied over the last few months, the quantum of FPI flows into individual stocks will be clear only when the shareholding pattern for the third quarter is put out.

“Even though PSBs have rallied in recent weeks, much of the appreciation has beenis in private bank stocks,” said VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services.

“Private sector banks are well capitalised compared to the capital-starved PSU banks. So, FPIs, DIIs (domestic institutional investors) and HNIs (high networth individuals) prefer quality private sector banks with a proven track record. PSBs are only short-term trading plays.”



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