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BL Research Bureau
Indian equities, along with other global markets, went into a tailspin owing to the Covid-19 outbreak over the past month. After investing (net) a little over ₹1 lakh crore into the Indian equity market in 2019, foreign portfolio investors (FPIs) have pulled out half of that amount — about ₹55,600 crore — in the month of March alone this year.
Hence, stocks with huge FPI holdings have been on a free fall, touching new lows every day amid the market mayhem over the past month. Many of these stocks are banks and financials that have been hammered mercilessly.
For instance, IndusInd Bank — the market darling not long ago — has lost an eye-popping 71 per cent in March alone. FPIs held 55 per cent in the bank as of December 2019. In the case of HDFC Ltd, the leading housing finance player, FPIs held 72.7 per cent as of December 2019. The stock has fallen about 31 per cent in March.
The FPI holding in Shriram Transport Finance is 64.2 per cent and the stock has plummeted 62 per cent so far this month. Indiabulls Housing (47 per cent FPI holding), Axis Bank (48 per cent), ICICI Bank (45.7 per cent), HDFC Bank (37.9 per cent), Kotak Mahindra Bank (39.7 per cent) and Bajaj Finance (22 per cent) are other stocks in the finance space that have a significant FPI holding. These stocks have lost about 30-68 per cent in March.
Stocks in other sectors that have high FPI holdings have also taken a hit. UPL (43.5 per cent FPI holding), M&M (33.9 per cent), and Zee Entertainment (67.3 per cent), within the Nifty 100 basket, have taken a hard knock due to massive FPI outflows over the past month. These stocks have lost over 40 per cent since March 3.
Sell-off
Owing to the perceptibly higher impact of Covi-19 on banks and financials, stocks in this space have been facing the heat over the past few weeks. The sell-off triggered by FPIs has only made matters worse. Some of the marquee names in the finance space, possibly offered good value and liquidity to foreign investors looking for a quick exit.
HDFC ltd, Bajaj Finance, ICICI Bank, HDFC Bank, Axis Bank and IndusInd Bank have been one of the better performing companies within the financials space. Many of these stocks were trading at a relatively premium valuation until the beginning of March, indicating the high investor interest in them. For instance, Bajaj Finance was trading at a pricey 8.7 times price-to-book in the beginning of March; the valuations have corrected sharply to 4.5 times price-to-book currently. Kotak Bank, which was trading at 6.7 times price-to-book, is trading at 4.6 times after its sharp fall. IndusInd Bank has been the worst hit with its valuation plummeting to 0.7 times price-to-book from 2.3 times a month ago.
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