Dalal Street has seen a slew of bulk deals in recent times, with banking and finance companies accounting for the lion’s share of the transactions.
Kotak Mahindra Bank tops the list, with shares worth over Rs 8,300 crore being offloaded by two institutional investors.
Other prominent names include Shriram Finance and HDFC AMC.
Significantly, many of these stocks have fallen since their block/bulk deal dates.
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Does this mean institutional investors have timed their exits to coincide with the market top?
Siddhartha Khemka, VP - Head of Research (Retail) at Motilal Oswal Financial Services, said this is one of the factors behind the current block deals, but not the only one.
“Most institutional investors have a time horizon for their investments. At the end of that holding period, say 3 or 5 years, they will look to sell their stake. Of course, they would want to sell when the market is in a bull run. But to say this is the only factor would be misleading, as we have to remember that the buyers are also institutional investors,” he told Moneycontrol.
Also Read: Canada Pension Fund pares stake in Kotak Bank. Will its weight in MSCI go up?
He further said in some cases, for example, Abrdn, the investors were already paring their stake in the target firms (HDFC group, in this case).
Another fallout of the bulk deals has been FTSE increasing the weights of HDFC AMC, Shriram Finance and Timken India in its indices.
After the stake sales by promoters and strategic investors, the chunks have been added to free float market capitalisation, which has resulted in a weight increase.
This will lead to a cumulative inflow of $44 million into these scrips, according to Nuvama Alternative & Quantitative Research.
Shriram Finance is expected to see inflows to the tune of $19 million, HDFC AMC of $16 million and Timken India of $9 million. This will happen as passive funds tracking FTSE indices will rebalance their portfolio on June 23, added Nuvama Alternative & Quantitative Research.
"Sale of stakes held by Piramal and TPG remove a key overhang on valuation. Thus, we upgrade the stock to buy and raise the target to Rs 2,130 from Rs 1,445 per share," said foreign broking firm Jefferies in a recent note.
Some analysts also attributed the recent block deals, especially by midcap and smallcap firms, to the current bull run in these segments, which presents an attractive opportunity for promoters, FIIs and other large investors to take some money off the table.
Investor Churn
On June 9, Canada's state-run Canada Pension Fund sold 3.3 crore shares of Kotak Mahindra Bank, amounting to a 1.7 percent equity stake, at an average price of Rs 1,855.64 per share.
Canada Pension Fund held 4.3 percent equity in Kotak Mahindra Bank as of March 2023 end.
Earlier, on May 31, BNP Paribas Arbitrage sold 1.12 crore shares at an average price of Rs 2,011.74 per share.
As of the quarter ended March 2023, foreign investors held 36.7 percent stake in the lender. Among other public shareholders, LIC has a stake of about 6.21 percent and mutual funds of 10.99 percent. The promoter holding stood at 25.95 percent.
Shriram Finance too has seen two bulk deals in the past week.
Piramal Enterprises sold 3.12 crore shares of Shriram Finance on June 21 at Rs 1,545.00 per share – marking its exit from the non-banking finance lender.
Also Read: Prashant Khemka bullish on banking, consumption, IT but bearish on real estate
This came just a couple of days after private equity firm TPG offloaded its entire 2.65 percent stake in the shadow bank for Rs 1,390 crore through open market transactions.
Another prominent name on the list is HDFC AMC.
UK-based Abrdn Investment divested its entire 10.2 percent stake in the country’s third-largest mutual fund house.
Abrdn, formerly known as Standard Life, has been consistently paring its stake in HDFC companies for some time now. The UK-based investment firm had sold off its entire 1.66 percent stake in HDFC Life Insurance for Rs 2,036.7 crore through a block deal on May 31.
Despite the recent bout of selling in frontline stocks, many analysts see pockets of opportunities.
"The banking sector has a large number of well-managed private banks, financial institutions and non-lending banking finance companies, offering a multitude of opportunities," White Oak Capital Management founder Prashant Khemka said.
The Nifty Bank index, which has the highest weight in the Nifty, has delivered a return of over 10 percent over the past three months. Bank stocks have been some of the best performers in the past year. This is also a space where analysts see value.
Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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