Concerns over high inflation in India, coupled with some recovery in the global markets, seems to have prompted foreign fund houses to reduce their exposure in banking stocks such as ICICI Bank, HDFC Bank and SBI in the domestic market at the end of March quarter.
A study of the banking indice, which comprises 14 stocks, says foreign institutional investors (FII) reduced their shareholding in 11 banks, while increasing in the remaining three at March-end.
"FII reduce their stakes in banking stocks due to rising inflation along with a marginal recovery in the global market,"
Global Securities Strategist & Head of Research Jagannadham Thunuguntla said.
Indusind Bank saw the maximum decline in FII holding. FII stake in it went down to 34.78% at the end of March quarter, down 2.15% from December-end.
Concerned over high inflation, the Reserve Bank through its monetary policy is likely to prompt the lenders to hike interest rates which could impact banks' bottom lines, analysts said.
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FIIs cut stake in ICICI Bank by 0.61% to 38.62 per cetn and in HDFC Bank by 0.84% to 28.53%. In State Bank of India, they holding came down by 0.56% to 12.80%
In Bank of India, their holding came down by 0.92%.
FII reduced exposure in Federal Bank by 2.2%, in Union Bank by 1.75%, Bank of Baroda by 1.63% and IDBI Bank by 1.46% at March-end.
Interestingly, FII hold maximum stake in Yes Bank, which is 45.54% and the minimum in IDBI Bank that is 3.88%.
As far as PSU banks are concerned, FIIs reduced their stake as mounting pension liabilities of state-run banks was a concern, Thunuguntla added.
Apart from the 14-banks which comes under banking indices, FII have offloaded stake in Punjab & Sind Bank, Bank of Maharashtra, Indian Overseas Bank, Syndicate Bank and Allahabad Bank.
FII holding went in in Axis Bank by 1.12% to 37.68%, Canara Bank (1.46% to 14.93%) and Kotak Mahindra Bank (1.41% to 25.4%).