Top banks witnessing aggressive buying from the FIIs; do you hold them?

Although the FIIs were net sellers in the previous quarter, but have aggressively bet on these banking stocks. Read on to find out more.

When FIIs grow their ownership in a corporation, it is seen positively by the market since these big institutions have an abundance of resources and funds to conduct research on a company. Small investors regard those enterprises as possible winners when they put their money on the line, however, an FII holding does not ensure outperformance.

Banks are in high demand at the moment. If you're looking for banks that are also on FIIs' shopping lists, here's a list of three that had the most FII interest in the previous six months, ending September 2022.

Karnataka Bank Ltd.

Karnataka Bank Ltd, with a market value of Rs 5,111 crore, is a private sector institution. In line with the rest of the banks, this stock has gained almost 21.5% in the previous month and is presently trading near a multi-year high of Rs 168.5. However, it is still offered for a P/E ratio of 6.4, which is lower than the sector average of 17.4.

The bank earned Rs 411.47 crore in net income in Q2 FY23, accounting for almost 81% of total FY22 earnings of Rs 507.99 crore. FIIs raised their investment from 11.92% to 18.16% in the previous six months, making it the most aggressive FII investment in the banking sector during this time period.

IDFC First Bank Ltd.

The next private bank on the list is IDFC First Bank Ltd which has a market value of Rs 37,496 crore. Although the bank has only gained 4.16% in the last month, it has been the sixth straight month of positive returns, during which the stock has doubled. Aside from the upward run, the stock is expensive with a P/E ratio of 23.2.

Nonetheless, it has been one of the FII's favourites, with their holding increasing from 13.48% to 19.28% in the previous six months. In fact, mutual fund interest has risen from 3.65% to 4.09% during the same time period.

DCB Bank Ltd.

DCB Bank Ltd has the smallest market capitalization on the list of Rs 4,317 crore. The stock has increased 17.2% in the last month and is presently trading at a P/E ratio of 10.8. DCB Bank, like IDFC First Bank, is in its sixth straight month of gains, having risen from around Rs 73 to the current market price of Rs 137.

Despite a 14.3% drop in earnings in FY22 to Rs 287.52 crore, it remains on the FIIs' wishlist. They increased their share from 8.82% in March 2022 to 12.51% in September 2022, making it the third most-purchased bank during this time period.