FIIs turn bullish on financial services; acquire shares worth Rs 8,100 cr in late June

This follows their acquisition of shares worth about Rs 1,000 crore in the same sector in the first half of June.

Notably, in May, FIIs were net sellers in the financial services sector, with total sales amounting to Rs 8,583 crore.

The report said, citing market observers, attribute this change to renewed optimism for the sector, spurred by numerous upgrades from various brokerage firms.

June saw a significant rally in the sector, particularly among private-sector banks.

A recent report by Bernstein analysts commended Indian banks for their robust credit growth, asset quality, and profit margins, with a focus on both large and niche lenders, according to the report.

Similarly, CLSA noted the substantial improvement in bank balance sheets compared to five or ten years ago.

Bank of America Securities issued 'buy' ratings for HDFC Bank, ICICI Bank, Axis Bank, and Kotak Mahindra Bank, citing their strong earnings and valuations, according to the Moneycontrol report.

Further, analysts anticipate that these banks will excel in the first quarter of FY25, driven by strong margins and credit flow.

Macquarie forecasts healthy Return on Assets (ROAs) and Return on Equity (ROEs), pointing to their resilience against Expected Credit Loss (ECL) regulations and stable net interest margins (NIMs).

Nomura pointed out challenges in deposit growth but expects stabilization through increased government credit or RBI forex purchases, according to the report.

CLSA considers the balance sheets of Indian banks to be the strongest they've been in a decade, noting that profits have quadrupled over the last 10 years.

They also highlighted a recent increase in loan growth to 15% and expect deposit growth to follow suit, the Moneycontrol report said.

Private banks, which had previously underperformed, are now expected to offer better returns due to a strong business outlook and low valuations. However, a potential repo rate cut poses a short-term risk as it could impact net interest margins (NIMs), the report said.

Besides financial stocks, FIIs also continued their buying spree in the consumer and capital goods sectors in late June, according to NSDL data.

According to the report, FIIs, in June, invested Rs 6,200 crore in telecom, Rs 3,100 crore in consumer services, Rs 2,900 crore in capital goods, Rs 2,886 crore in healthcare, Rs 2,050 crore in auto, Rs 1,578 crore in IT, Rs 1,475 crore in construction, and slightly over Rs 1,000 crore each in oil & gas, consumer durables, and chemicals stocks.

Conversely, foreign investors were net sellers in power, metals, and FMCG stocks, the report said.

In June, they sold approximately Rs 2,439 crore in power, Rs 1,128 crore in metals, and Rs 677 crore in FMCG.

In May, FIIs had sold over Rs 3,000 crore in power, Rs 953 crore in metals, and Rs 4,173 crore in FMCG, he said.