Sunday, February 12, 2012

Banking Sector - Book Profits

Overseas investors seem to be on a selling spree when it comes to the Indian banking stocks, as they have pared their holdings in at least 28 public and private sector banks of the country in the past few months.
Various foreign investors have together sold banking stocks worth an estimated Rs 10,000 crore (over USD 2 billion) in about four-and-a-half months since October 2011.

While foreign investors have sold shares of at least 28 Indian banks, they have purchased fresh shares of only nine banking stocks during this period. The value of fresh banking shares purchased during this period is also much less at just about Rs 600 crore, as per an analysis of shareholding pattern and open-market transaction data available with stock exchanges.

The banks where foreign investors have pared their holdings include private players like ICICI Bank, Axis Bank, Kotak Mahindra Bank, Yes Bank and DCB, as also public sector giants like SBI and Punjab National Bank. Those having seen an increase in the holding of overseas investors include HDFC Bank, South Indian Bank and IDBI Bank.

In one of the biggest share-sale transaction in the banking sector during this period, a unit of Singapore government's investment arm Temasek Holdings sold shares worth about Rs 1,500 crore in ICICI Bank on
Market analysts said the shares could have been sold to book profit after a sharp rally of about one-third in ICICI Bank shares since the beginning of 2012.

Indian banking and financial sector stocks have witnessed many share transactions in the recent past, given a sharp surge in their value since the beginning of 2012.   While US-based Carlyle group sold shares worth about Rs 1,350 crore in HDFC on February 1, Warburg Pincus sold shares accounting for about 2.4 per cent stake in Kotak Mahindra Bank for about Rs 800 crore on the same day.

Besides, the shareholding pattern data for the October- December 2011 quarter shows that FIIs (Foreign Institutional Investors) lowered their holding in 26 banks.  These included ICICI Bank, SBI, Axis Bank, DCB, Yes Bank, Allahabad Bank, Indian Bank, Corporation Bank, Bank of Baroda, Canara Bank, Dhanlaxmi Bank, Karnataka Bank, among others.

In fact, the banking sector witnessed the highest level of share sale by FIIs during that quarter. Also, a few like PNB, SBI, Syndicate Bank, Allahabad Bank and Central Bank have seen their FII holdings declining for four consecutive quarters now.  On the other hand, the FII holding increased during the last quarter of calendar year 2011 in banks like South Indian Bank, Bank of India, City Union Bank, IDBI Bank, Indian Overseas Bank, Federal Bank, Andhra Bank, HDFC Bank and ING Vysya Bank.

Our Recommendation :
With  most of the banking shares clocking decent gains of 30-50% gains, it is time to book profits and stay away from the sector as it faces stiff resistance at higher levels.  Long term investors can however utilize steep falls to add banking scrips to their portfolio.

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