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High FII holding makes private banks vulnerable after Fed - analysts
June 20, 2013 / 5:53 AM / 4 years ago

High FII holding makes private banks vulnerable after Fed - analysts

Reuters Market Eye - Shares of large cap private banks fall as traders fear that high foreign holding in these stocks makes them more vulnerable, as a sell-off after the Federal Reserve heralded an eventual end to free money.

Customers use ATM machines at an ICICI Bank branch in Mumbai January 30, 2013. REUTERS/Vivek Prakash/Files

ICICI Bank Ltd (ICBK.NS), with 37.94 percent FII holding, falls 4 percent, while HDFC Bank (HDBK.NS), where FIIs hold 34.07 percent of total shares, is down 3 percent.

”A liquidity squeeze by Fed if US economy grows will obviously reduce the flows that were coming to EMs like India, making stocks with high FII holding vulnerable for the short term, analysts say.

Traders also worry an end to the U.S. monetary stimulus could lead to portfolio outflows, pushing the rupee lower and, in turn, delaying any rate cuts from the Reserve Bank of India.

Multiple analysts, however, say that they would look to add high-quality- large-cap stocks in such a fall.

Asian markets buckled badly on Thursday after the Federal Reserve heralded an eventual end to free money and China turned the screw on credit even as factory activity in the world’s second largest economy hit a nine-month low.

Reporting by Abhishek Vishnoi

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