March was a month of much action by mutual funds in banking stocks, with funds having bought top banking shares worth Rs 5,029 crore and having sold shares in them worth Rs 2,135 crore, reveals data shared by mutual fund research & ratings agency Morningstar with FE. On the sell side, Axis Bank’s stock was the most heavily sold among all stocks, with shares worth Rs 1,538 crore being sold. News about the central bank opposing a longer-term for the present CEO is likely to have nudged fund managers to lighten their holdings.
On the buy side, banks dominate the list of top 5 stocks bought in the month with only the first spot being acquiesced to Tata Consultancy Services (TCS), which saw net purchases worth Rs 4,162 crore. Bandhan Bank was the second-most-bought stock, followed by State Bank of India (Rs 1,280 crore), ICICI Bank (Rs 1,275 crore) and Kotak Mahindra Bank (Rs 1,067 crore).
Bandhan Bank raised Rs 4,473.75 crore from the public through sale of 11.93 crore equity shares, making it one of the biggest IPOs of a private sector bank. On the final day of the IPO, Bandhan Bank was subscribed by 14.59 times.
Analysts suggest that TCS spoilt the banking party with a transaction initiated by the promoter. “In mid-March, Tata Sons, the promoter group of Tata Consultancy Services (TCS), sold 1.48% stake in TCS for Rs 8,127 crore ($1.2 billion), which influenced fund managers to buy this stock,” said an analyst. Other non-banking gainers of fund attention in March include RIL, Tata Steel, ITC, Hindalco and Grasim Industries. On the selling side, mutual funds offloaded shares in Larsen & Toubro (Rs 960 crore), IndusInd Bank (Rs 338 crore), HCL Technologies (Rs 286 crore) and Dalmia Bharat (Rs 230 crore). Other prominent stocks on the sell list of mutual funds in March include ICICI Lombard General Insurance, InterGlobe Aviation, Bank of Baroda, Zee Entertainment Enterprises and Federal Bank.
The optimism around investing in banking stocks even as they lost value following the revelation of several frauds and governance lapses is summed up well in a report by Jefferies, which argues that although the recent fraud incidences led to tightness in the offshore market, trade is slowly moving to Letter of Credit/Guarantees or domestic credit. “Recent guidelines on stressed assets should result in bunching up of NPLs in next two quarters, and management hopes for an early cleanup/recognition and to allay further concerns may put up overdue amounts in current quarter earnings,” it added in specific reference to State Bank of India.
With regard to ICICI Bank, an analyst explained that despite the Videocon controversy, ICICI bank does not carry any financial implications of any large amount as such. “More importantly the bank is cheap on valuations. If we exclude the value of subsidiaries, then also the P/B value is trading at around 40-50% lower than its peers,” added an analyst.