Foreign investors’ holdings in many of the private sector banks went down marginally in FY23 as they pulled out nearly ₹30,000 crore from banking and financial services sector.

According to latest shareholding data, foreign portfolio investors’ (FPIs’) holding in RBL Bank went down by 4 per cent in the previous fiscal to 25 per cent as of March 2023 quarter. In IndusInd Bank too, FPIs have trimmed their exposure by 4 per cent to 42.16 per cent during this period. 

The FPIs stakes in India’s largest private sector bank HDFC Bank went down by 3 percent while their stake in Bandhan Bank and Kotak Mahindra Bank reduced by 2 per cent and 1 per cent, respectively. FPI shareholding in ICICI Bank remained unchanged at 44 per cent in FY23.

Kranthi Bathini, Director - Equity Strategy, WealthMills Securities says the decline in shareholding in the banking sector is mainly due to FPI sell-off in the overall banking and financial services sector in the previous fiscal and not on account of any concerns over the performance of any of these private banks or the Indian banking system.

“In fact, banking is the sector that is holding the markets currently. ICICI Bank, HDFC Bank, RBL Bank and IDFC First Bank have all posted stellar results for the March quarter,” he added. 

Net buyers

VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, said FPIs were sustained sellers in the Indian market during the fourth quarter of FY23. “When they sell, they sell in segments where they are sitting on big profits. This explains the reduction in exposure in private banks,” he added. 

In FY23, FPIs pulled out ₹29,921 crore from the banking and financial services sector. The sector was the third highest loser of FPI money in FY23 after IT Services (₹51,138 crore) and Oil & Gas (₹37,674 crore). 

However, the foreign investors have turned net buyers in the Indian equity market since the beginning of the current fiscal. In the first fortnight, FPIs were net buyers in the financial services sector, mainly in the banking, to the tune of ₹4,410 crore.

FPI favourites

In the previous fiscal, FPIs increased their stakes in banks such Yes Bank (by 12 per cent), IDFC First Bank (6 percent) and Axis Bank (2 per cent). FPIs’ holding in Yes Bank went up to 23.1 per cent as of March 2023 from 10.97 per cent in March 2022. The spike in FPI holding in Yes Bank was on account of private equity majors Carlyle and Advent picking up a 9.99 per cent stake in Yes Bank for about ₹8,896 crore during the December quarter. 

Although Axis Bank posted a net loss of ₹5,728 crore for the March quarter due to acquisition of Citibank’s consumer banking business, Bathini feels FPIs would have raised their stake in Axis Bank considering the long-term growth prospects that would arise from the acquisition.