In the March quarter, foreign investors (FIIs) made huge withdrawals from the Indian banking sector, in which HDFC Bank and ICICI Bank were most affected. There was selling of about Rs 45,000 crore in both the banks together, which is about 75% of the total outflow of Rs 60,000 crore from financial stocks. During this period, fall in shares, global tension, new rules of RBI and bank-specific incidents weakened the confidence of investors. However, despite strong results, shares of these big banks remained under pressure, which has increased concerns in the market.
The March quarter was challenging for Indian banking stocks, especially HDFC Bank and ICICI Bank. Foreign investors (FIIs) made huge sales of about Rs 45,000 crore in these two banks together, which is about 75% of the total investment from the entire financial sector. According to the data, there was selling of about Rs 35,000 crore in HDFC Bank, due to which FII stake came down from 47.66% to 44%. At the same time, about Rs 10,000 crore was withdrawn in ICICI Bank and the stake came down from 43.87% to 34.48%.
Why are there so many sales
There were many reasons behind this heavy selling. In the case of HDFC Bank, the sudden resignation of the Chairman increased the concern of investors. This raised questions about corporate governance and increased pressure on the stock. Additionally, rising geopolitical tensions globally such as trade wars and conflicts in West Asia forced investors to move away from risk assets. Its impact was clearly visible on Indian banking shares also.
At the domestic level, the new forex rules of the Reserve Bank of India also became a big factor. RBI limited the Net Open Position (NOP) of banks to $100 million, which affected the treasury income of big banks. Earlier this position used to be up to 250300 million dollars, which had to be reduced.
During this period, the decline in equity and bond markets also increased the weakness of banking shares. The result was that the shares of HDFC Bank fell by about 26% and the shares of ICICI Bank fell by about 10%, which is more than the fall of BSE Sensex and Nifty 50. However, despite these challenges, the fundamentals of both the banks remain strong. Good profit growth, stable asset quality and strong balance sheets show that banks are still in a strong position at a fundamental level. The management has also expressed confidence about the future, which indicates that the current decline may be temporary.
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