South-based banks on a roll as stocks surge on valuation

The financial landscape in South India seems to be growing greener. Scrips of some of the banks based in the South have gained as much as 29% since April this year.If the market whispers are anything to go by, the rise in the stock prices has mainly been triggered by their attractive valuations.

Most of these banks have very little or no promoter holdings in them, making them attractive to punters. Big banks and corporate houses, in a bid to acquire these banks, have been knocking the doors of the regulators to get their approvals. The big honchos scouting the southern market for ?value buys? reportedly include HDFC Bank and Axis Bank.

The rally in these bank stocks comes at a time when the benchmark Sensex provided an average yield of just 1.57% and Bankex, the index that represents the publicly traded banking institutions, providing a negative return of 0.85% during the period.

Topping the chart of gainers is Karnataka Bank, which has seen a spike of 29.43% during the first quarter of the current fiscal. A close second is Karur Vysya Bank, the stock price of which has appreciated to Rs 610.95 from Rs 485.30, an increase of 25.89%.

Similarly, the stock of Kochi-based Federal Bank has gone up by 25.53% while that of Dhanlaxmi Bank by a little over 18% to Rs 180.15, up from the average price of Rs 152.60 in April. Other major gainers are City Union Bank (13.2%), Lakshmi Vilas Bank (12.92%) and South Indian Bank (7.75%).

?The trend seems to have been triggered by ICICI Bank?s takeover of Bank of Rajasthan two months back. Other big banks like HDFC Bank and Axis Bank have made it clear that they are looking for potential acquisition targets in the South. Their interest may have triggered the rally in these stocks,? an analyst with a local brokerage house said.

Besides, big financial houses like L&T Capital Finance, which holds substantial stake in some of these banks, may also be interested in potential buyouts, he added.

While there is no promoter holdings in City Union Bank, Dhanlaxmi Bank, Federal Bank, Karnataka Bank and South Indian Bank, it is about 0.82% in Lakshmi Vilas Bank and 3.64% in Karur Vysya Bank.