MFs up their stake holding in mid-sized banks

Experts said that banks reported strong growth and profit in the last few months, increasing interest and confidence among the investors.

Some mid-size private sector banks of India have seen a jump in shareholding from mutual funds, a Moneycontrol analysis of five banks showed. Of the five - Federal Bank, RBL Bank, South Indian Bank and Bandhan Bank - have seen a rise in stake holding from mutual funds. IDFC First Bank, alone saw a drop in stake holding by mutual funds. However, they continue to hold a reasonable stake in the bank.

Data showed that the stake of mutual funds in Federal Bank jumped from 32.64 percent in June FY23 to 34.91 percent in June FY24. In RBL Bank, the mutual funds increased their stake to 11.64 percent in the April-June FY24 quarter. In the corresponding quarter last year, the stake was at 6.71 percent.

Bandhan Bank saw a jump in stake holding from mutual funds too. The stake increased from 6.73 percent to 7.49 percent in a year. In the case of South Indian Bank, in April-June FY24, mutual funds bought a 0.91 percent stake in the bank. Previously, mutual funds had no stake in the bank.

IDFC First Bank was the only bank which saw a drop in stake holding from mutual funds. Mutual funds dropped their stake holding to 2.78 percent in June FY24 from 5.19 percent in June FY23

Why the increase?

Experts said that banks reported strong growth and profit in the last few months, increasing interest and confidence among the investors.

Also read: After a strong rally, mutual funds pare holdings in Indian banks in June quarter

For example, lender Federal Bank reported a net profit of Rs 854 crore for the April-June 2023 quarter, a jump from Rs 600 crore in the corresponding period last year. South Indian Bank reported a net profit of Rs 202.3 crore for the April-June FY24 quarter compared to Rs 115 crore in the corresponding quarter last year.

IDFC First Bank recorded a 61 percent on-year growth in profit at Rs 765 crore for the June FY24 quarter. RBL Bank reported a net profit of Rs 288 crore for the April-June FY24 quarter, up from Rs 201 crore in the year-ago period.

Bandhan Bank was an exception, reporting a net profit of Rs 721 crore for the April-June 2023 quarter, down from Rs 886 crore in the corresponding period last year.

“Banks have been reporting strong growth and healthy asset quality in the past few months. With this, a positive sentiment has been making investors look at the banking space,” said Vijay Singh Gaur, Lead Analyst, BFSI, CareEdge.

Additionally, experts believe that the rise in holdings by mutual funds is aided by a boost in the stock prices of the mid-size banks.

For instance, Federal Bank’s share price has jumped from Rs 80.40 in June FY23 to Rs 119.71 in June FY24.

South Indian Bank’s share jumped to Rs 15.09 in June FY24 from Rs 7.25 in June FY23. RBL Bank too saw a jump in its share price in the same period, to Rs 102.25 from Rs 71.89.

Bandhan Bank was an exception where the bank’s share price fell to Rs 206.98 as on June 30, 2024 from Rs 258.49 on June 30, 2023.

A banking analyst said that an uptick movement in share prices alongside strong fundamentals and overall growth will aid investor interest.