Banks and financial services firms remain favourite bets of foreign investors in the Nifty50 universe, according to data on foreign ownership as of the last quarter of the previous fiscal. Of the top-10 entities in the Nifty pack with the highest shareholding by foreign institutional investors (FIIs), five are from the financials space.
Interestingly, the two companies to witness the maximum increase in FII holding in percentage terms were from the Adani group, primarily because of the stake sale to GQG. This is despite the plunge in share prices of Adani Group firms since the Hindenburg Research report in January.
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Between January 25 and March 31, Adani Enterprises lost Rs 1.93 trillion in market capitalisation, experiencing a 49.1% slump in its share price. Adani Ports & SEZ saw an erosion of Rs 27,931 crore in investor wealth, with shares sliding 17% during the said period.
“The Adani family sold promoter stake in four group firms worth over Rs 15,500 crore ($1.87 billion) to US-based GQG Partners in March. This explains the rise in foreign ownership,” said Deepak Jasani, head of retail research at HDFC Securities.
Rajiv Jain, chairman of GQG Partners, had said at the time that the firm had decided to invest in Adani Group entities as it saw substantial long-term growth prospects in them.
Of the $1.87-billion investment, $662 million was in Adani Enterprises for a 3.4% stake, while $640 million was in exchange for a 4.1% stake in Adani Ports and
Special Economic Zone.
“Further, the sharp fall in stocks was an opportunity for FIIs to snap up some stake, as they saw value in buying the shares at attractive price points,” said Jasani.
Yet, the financials space remains FIIs’ preferred choice. Data show that five of the top 10 Nifty companies with maximum foreign ownership were from the banking and financials space.
Despite a 1.01% fall in the FII ownership during the quarter, HDFC holds the top slot with a 66.2% holding, while Axis Bank — which saw a dip of 0.4% in holding to 49.05% — was the second. IndusInd and Kotak were the other banks in the top 10.
“Indian banks offer a great proposition to foreign investors given their attractive P/BV metrics. With the cleanest balance sheets in years, they will continue doing well and attracting interest,” said Santanu Chakrabarti, analyst (banking and finance), BNP Paribas.
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Both Jasani and Chakrabarti said foreign players will always have a keen interest in a growth story, which Indian banks offer at the moment. In addition, given that banking and financial stocks have the highest weight in the indices, one will be positive on the BFSI space if they are positive on India.
As of April 26, HDFC was trading at a price-to-book value (P/BV) of 4.12, according to exchange data, while Kotak Bank had a P/BV of 4.99. Among others, Axis Bank was trading at a P/BV of 2.12, while the same was 3.19 for ICICI Bank and 1.64 for IndusInd Bank.