After offloading financials worth over Rs 30,000 crore in January, nearly Rs 10,000 crore in February, FIIs were net buyers in the sector in March before pressing the sell button once again in April. Last month’s selling was worth around Rs 9,300 crore.
In the March quarter, HDFC Bank saw the highest selling by FIIs as they offloaded 29 crore shares of India’s largest private sector lender. FIIs also sold 4.26 crore shares of Kotak Mahindra Bank and 2.8 crore shares of Axis Bank.
Also read | Why Saurabh Mukherjea isn’t losing sleep over stress in HDFC Bank, Kotak and Bajaj Finance
In recent months, a spate of regulatory actions against NBFCs like Bajaj Finance, IIFL Finance and JM Finance, banks like Kotak Mahindra Bank, Bank of Baroda, Federal Bank and South Indian Bank and fintechs like Paytm have left investors worried about increase in cost of capital and impact on credit growth.With the RBI showing diminishing tolerance for non-compliance, customer complaints, data privacy, governance, know-your-customer (KYC), and anti-money laundering issues, ratings agency S&P Global said the increased transparency will create additional pressure on the entire financial sector to enhance compliance and governance practices.Domestic investors are, however, not as bearish. When asked to comment on the underperformance of Bajaj Finance, Kotak and HDFC Bank, PMS fund manager Saurabh Mukherjea said all the three lenders are in an economic upcycle, well-capitalized, have long track records of good capital allocation and good asset quality management. It’s difficult to ask for more than that while investing in a lender, he said.DSP Mutual Fund’s Vinit Sambre is also optimistic that exercising patience with financial giants will yield rewards, given the strong franchises they’ve built.
“While they’re currently grappling with short-term setbacks, once they navigate through these challenges, they’re likely to resume their journey of wealth creation. Importantly, these banks have become quite attractively priced compared to their recent history, with many of their fundamental business dynamics remaining sound,” Sambre said.
RBI’s recent draft guidelines on imposing stringent provisioning requirements to all categories of lenders (banks and NBFCs) is seen as another deal-breaker.
“The punitive provisioning requirements, if implemented by RBI, could significantly impair the long-term banking sector loan growth outlook. It also increases the cost of capital for project loans, as the day-1 provisioning requirement on any amount disbursed is set at 5%,” Nomura said.
The government is now said to be evaluating the implications of the draft rules. Banks are also set to lobby with the central bank against the sharp increase in provisions, arguing that it may stall the momentum that’s made India the fastest-growing major economy amid a climate of global uncertainty, ET has reported.
How was Q4’s result season?
In the March quarter results, earnings growth for private banks has remained healthy, with Axis Bank, Kotak Bank and RBL reporting better-than-expected earnings.
However, the likes of HDFC Bank, Axis Bank and ICICI Bank registered a mixed margin performance. The overall pace of NIM compression has moderated, even though funding costs continue to inch up, Motilal Oswal said.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
Reference :
Reference link
+ There are no comments
Add yours