Foreign investors were net sellers of India’s banking and financial services sector in eight out of 12 months of the previous calendar year, earning ₹55,415 crore in net investments. While the exit caused the participation of foreign portfolio investors (FPIs) in large private banks to shrink, they increased their participation in small private lenders during this period.
According to the latest shareholding data, FPI’s stake in Yes bank experienced the largest year-over-year (yoy) increase since December. From 8.17% in December 2021, FPI’s stake in Yes Bank increased to 23.24% in December 2022. The increase in stake in Yes Bank is due to large private equity firms Carlyle and Advent acquiring a 9.99% stake in Yes Bank. for around ₹8,896 crore.
In December, Yes Bank announced that it has allocated a total of Rs 369.61 crore shares of par value ₹2 each and 255.97 share warrants convertible into equity shares of par value ₹2 each on a preferential basis to CA Basque Investments, a Carlyle Group entity, and Verventa Holdings Ltd, an Advent group entity.
FPIs also increased their stake in IDFC First Bank to 19.76% as of December 2022 from 14.77% at the end of the same quarter of 2021. Foreign investors’ stake in the federal bank also increased by 2% during this period.
“There is some type of revival in the small and mid-cap banks and that is why the FPIs are increasing their position in these stocks,” said Kranthi Bathini, director of equity strategy at WealthMills Securities.
large private banks
On the other hand, FPI’s participation in the large private banks remained unchanged or decreased. HDFC Bank experienced a 5% year-on-year decline in FPI holdings as of December 2022. Foreign investor holdings in the bank fell to 32.1% (37.47%) during this period.
Foreign investors reduced their stake in Kotak Mahindra Bank by one percent, while their stake in ICICI Bank remained unchanged at 45 percent. In Axis Bank, they increased their stake by 200 basis points to 49.45 percent.
Bathini attributes the reduction of FPI’s stake in HDFC Bank to the excess of the bank’s merger with Housing Development Finance Corporation (HDFC Ltd). However, he added that the combined entity will see increased allocation from foreign investors, as HDFC Bank’s weighting will rise sharply in the MSCI global index after the merger.
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