Foreign Institutional Investors (FIIs) have been selling Indian stocks relentlessly over several quarters.
As per media reports, the selling so far in 2026 has been to the tune of almost Rs 2,200 billion (bn).
The falling rupee, overvaluation, geopolitical tensions, and shifts to AI-themed markets have accounted for the outflows.
Against this backdrop, it would be intriguing if there were stocks that had seen FII buying for five straight quarters.
That is what has been happening in the stock of South Indian Bank, where FIIs have bought stocks for five straight quarters.
South Indian Bank – FII Shareholding Pattern
| Quarter | Holdings % |
| March 2025 | 11.96 |
| June 25 | 17.58 |
| Sept 25 | 17.91 |
| Dec 25 | 20.94 |
| March 26 | 24.21 |
Source: Equitymaster
The increase in FII holding from 11.96% in March 2025 to 24.21% in March 2026 reflects strong and sustained confidence from FIIs in the company’s long-term prospects.
The fact that FII ownership has more than doubled within a year suggests that global funds have been consistently accumulating the stock, likely driven by certain factors.
Such persistent buying by institutional investors is generally seen as a positive indicator, as it can enhance market confidence and provide support to the stock over the long term, provided the company’s operational performance continues to improve.
What’s Driving the Interest in the South Indian Bank Stock?
It’s always hard to guess the mind of investors but some of the reasons could be:
- Valuations
| PE | PB | |
| South Indian Bank | 8.0 | 1.1 |
| CSB Bank | 9.9 | 1.3 |
| Federal Bank | 16.5 | 1.9 |
| Tamilnad Mercantile Bank | 8.9 | 1.2 |
| Karnataka Bank | 7.6 | 0.8 |
Source: Equitymaster
South Indian Bank appears attractively valued when compared with its mid-sized private sector peers. Trading at a PE of 8 and a PB of 1.1, it is cheaper than CSB Bank, Federal Bank, and Tamilnad Mercantile Bank.
Only Karnataka Bank trades at a lower valuation, with a PE of 7.6 and PB of 0.8, reflecting the market’s relatively cautious stance toward traditional old-generation private banks.
In contrast, Federal Bank commands a substantial premium at 16.5 earnings and 1.9 book value, supported by its larger scale and stronger growth profile.
South Indian Bank’s valuation suggests that the market is yet to fully price in its turnaround story.
- Robust Financial Performance
| Rs m | FY23 | FY24 | FY25 |
| Net Interest Income | 30,121 | 33,321 | 34,856 |
| NII Growth % | 34.5 | 10.6 | 4.6 |
| Net Profit Margin (%) | 10.7 | 12.4 | 13.8 |
| Profit After Tax | 7,753 | 10,702 | 13,031 |
Source: Equitymaster
Net profits over the last three years have grown by a whopping 203% at South Indian Bank.
During FY26, total business for the bank grew 15% to Rs 2,236.2 billion (bn). The bank was able to show a healthy growth in the average advances during the period with a growth of 14%.
The bank declared its highest ever net profit for the year at Rs 14.55 bn for FY26, a growth of 12% compared to Rs 13.03 bn in the prior year. Total deposits grew 15% to Rs 1233.46 bn
- Drop in NPAs
Overall gross NPA in FY26 reduced by 177 basis points from 3.2% to 1.43%. Net NPA reduced by 63 basis points from 0.92% to 0.29%. Slippage ratio for the year was at 72 basis points.
- Positive Indicators
The bank’s SMA1 and SMA2 numbers have continued to improve. Slippage is at an all-time low. The management in a recent earnings call have stated that the CASA balances have grown significantly, demonstrating the quality of its liability franchise.
This apart, there is a material increase in branch productivity which is reflected in the retail and MSME businesses are growing.
South Indian Bank has also seen improvement in processes and systems. The focus on digital channels is helping it to improve its business and operating efficiency. This is the second year in which the bank has delivered positive operating leverage.
- Strong regional franchise
The bank enjoys a well-established presence in South India, particularly in Kerala, with long-standing customer relationships and a stable deposit base.
All of these factors may have led to accumulation in the stock by institutional investors.
Conclusion
South Indian Bank is an interesting stock in the mid-sized private sector banks space as it has a combination of improving fundamentals and reasonable valuations, versus peers.
The bank has steadily increased profits in the past three years backed by improved asset quality, better margins and disciplined cost management. Furthermore, its entrenched regional franchise, stable deposit base, and growing institutional interest make its case stronger.
But the bank has its own challenges to deal with, including a relatively concentrated presence in South India and fierce competition from well-capitalised banks and fintech players.
While this has been a promising turnaround, the key for the stock to get a meaningful re-rating it will be to sustain the momentum in earnings while improving return ratios.
Investors should evaluate the company’s fundamentals, corporate governance, and valuations of the stock as key factors when conducting due diligence before making investment decisions.
Happy investing.
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