MFs up their stake holding in mid-sized banks
A recent analysis by Moneycontrol has shed light on shifts in shareholding among five mid-sized private sector banks in India. Notably, four of these banks – Federal Bank, RBL Bank, South Indian Bank, and Bandhan Bank – have witnessed an increase in stakeholding by mutual funds. In contrast, IDFC First Bank experienced a decrease in mutual fund stakeholding, though it still maintains a reasonable level of mutual fund investment.
Specifically, mutual funds’ stake in Federal Bank rose from 32.64 percent in June FY23 to 34.91 percent in June FY24. Similarly, RBL Bank saw a substantial increase in mutual fund stakeholding, with mutual funds holding 11.64 percent in the April-June FY24 quarter, compared to 6.71 percent in the corresponding quarter of the previous year.
These shifts in mutual fund holdings reflect a dynamic and evolving investment landscape, influenced by factors such as market conditions, investment strategies, and the financial performance of these banks. Mutual funds play a significant role in shaping the ownership landscape of Indian banks and businesses, and their decisions can have important implications for the companies involved.
Among the mid-sized private sector banks in India, Bandhan Bank also experienced an uptick in stakeholding by mutual funds. Over the course of a year, the mutual fund stake in Bandhan Bank increased from 6.73 percent to 7.49 percent.
In the case of South Indian Bank, there was a significant development in the April-June FY24 quarter, where mutual funds acquired a 0.91 percent stake in the bank. Prior to this, mutual funds did not hold any stake in South Indian Bank.
However, IDFC First Bank stood out as the only bank among the five to see a decline in mutual fund stakeholding. Mutual funds reduced their stake in IDFC First Bank from 5.19 percent in June FY23 to 2.78 percent in June FY24.
These shifts in mutual fund stakeholding indicate a dynamic and evolving investment landscape within the Indian banking sector, with each bank’s performance and attractiveness to investors playing a role in these changes. Mutual fund decisions can be influenced by a range of factors, including financial results, market conditions, and broader investment strategies.
The recent strong growth and profit reported by banks have bolstered investor interest and confidence in the sector, according to experts. These positive financial results have contributed to a more favorable outlook for banks.
For instance, Federal Bank, a prominent lender, reported a notable increase in net profit for the April-June 2023 quarter, with profits reaching Rs 854 crore. This marked a significant jump from the Rs 600 crore profit recorded in the corresponding period of the previous year.
Similarly, South Indian Bank also reported a substantial improvement in its financial performance. The bank’s net profit for the April-June FY24 quarter amounted to Rs 202.3 crore, which was a substantial increase compared to the Rs 115 crore profit reported in the corresponding quarter of the previous year.
These positive financial outcomes reflect the banks’ ability to navigate challenges and capitalize on opportunities, which has contributed to increased investor confidence in the banking sector. Such financial strength can be an important factor influencing investment decisions and stakeholding by mutual funds and other investors.
IDFC First Bank reported impressive financial results, with a 61 percent year-on-year growth in profit, reaching Rs 765 crore for the June FY24 quarter. Similarly, RBL Bank also showed substantial improvement, recording a net profit of Rs 288 crore for the April-June FY24 quarter, up from Rs 201 crore in the same period of the previous year.
However, Bandhan Bank experienced a decline in its net profit, reporting Rs 721 crore for the April-June 2023 quarter, down from Rs 886 crore in the corresponding period last year.
These strong financial performances by banks have generated positive sentiment among investors and have prompted them to take a closer look at the banking sector. According to Vijay Singh Gaur, Lead Analyst, BFSI, CareEdge, banks have been demonstrating robust growth and maintaining healthy asset quality in recent months, contributing to this positive sentiment.
In addition to the banks’ financial performance, experts point out that the rise in mutual fund holdings may be driven by an increase in the stock prices of mid-sized banks. For example, Federal Bank, South Indian Bank, and RBL Bank have all seen significant gains in their share prices over the past year. These factors, combined with strong fundamentals and overall growth, are likely to enhance investor interest in the banking sector, as suggested by a banking analyst.
