S&P Global Market Intelligence has released a report indicating that Indian banks are becoming more appealing to global investors seeking higher returns. Factors such as robust credit growth, improved margins, and stable asset quality have enhanced the outlook for these financial institutions.
Rising Foreign Institutional Investment:
According to S&P Global, foreign institutional investors (FIIs) have been increasingly investing in Indian banks, with their total holdings reaching ₹8.36 trillion as of June 30, up from ₹7.71 trillion the previous year. This marks a significant growth from ₹6.73 trillion in June 2020.
Concentration in Private-Sector Banks:
The report highlights that a substantial 93.5% of FII holdings in Indian banks, as of June 30, were concentrated in the country’s largest private-sector banks. This concentration underscores the attractiveness of these banks to global investors.
Top Picks for FIIs:
Among the preferred choices for FIIs, the top three investees are ICICI Bank Ltd., HDFC Bank Ltd., and Kotak Mahindra Bank Ltd. These banks have been particularly appealing to foreign investors, contributing to the growth in FII holdings.
Private-Sector Banks’ Ascendancy:
The market value of FII holdings in Indian private-sector banks witnessed a notable increase, rising to ₹7.82 trillion as of June, up from ₹7.29 trillion the previous year, and ₹6.37 trillion in June 2020. This trend indicates the strengthening appeal of privately-owned banks.
State-Owned Banks on the Rise:
While private-sector banks have attracted significant FII investment, state-owned banks have also seen growth. The market value of FII holdings in Indian state-owned banks reached ₹541 billion as of June, compared to ₹422 billion a year earlier. This suggests an expanding interest in state-owned financial institutions.
Leading Foreign Investors:
The list of top foreign investors in Indian banks, based on market value, is led by U.S.-based Capital Research and Management Co., followed by BlackRock Inc. and Singapore’s GIC Private Ltd. Capital Research and Management Co. holds a substantial stake of more than 6% in Kotak Mahindra Bank, with a total value of ₹542.90 billion in Indian bank holdings as of June.