Following a large sell-off prompted by the Reserve Bank of India's prohibition on new customer onboarding by the bank via online and mobile banking, combined with the suspension of new credit card issuance, mutual funds acquired shares in Kotak Mahindra Bank for approximately Rs 8,100 crore in April.
After acquiring more than 96 lakh shares in the December quarter, these funds bought almost 4.62 crore bank shares throughout the month. This was Kotak Mahindra Bank's ninth straight month of mutual fund purchases.
The RBI's order prohibiting Kotak Mahindra Bank from taking on new clients on April 29th caused the stock to plunge more than 11%, wiping away more than Rs 40,000 crore in market capitalization in a single day. The stock fell 9% in April alone; thus far in 2024, it has down more than 15% year over year. On the other hand, it increased by 4.4 percent in 2023.
Shares of Kotak Mahindra Bank were held by 39 mutual funds combined in April 2024, up from 25.63 crore in March. These shares were worth Rs 53,186 crore as opposed to Rs 41,663 crore. Of these funds, one, NJ Mutual Fund, kept its holding at Rs 24.5 crore, while 29 raised and 9 decreased their investments.
With 9.24 crore Kotak Mahindra Bank shares valued at Rs 15,000 crore in April, up from 7.52 crore shares valued at Rs 13,420 crore in March, SBI Mutual Fund became the top holding. Next, with 3.71 crore shares valued at Rs 6,011 crore as opposed to 2.77 crore shares priced at Rs 4,939 crore, was HDFC Mutual Fund. From 2.77 crore shares valued at Rs 4,936 crore to over 3.13 crore shares valued at Rs 5,082 crore, ICICI Prudential MF owned more shares. PGIM India MF and Tata MF were two of the sellers, selling their shares in the lender for about Rs 381 crore and Rs 250 crore, respectively.
Several brokerages kept their ratings and goals for Kotak Mahindra Bank despite RBI limitations when the stock breached in late April as a result of the RBI move, believing that the impact would be minimal.
Because of IT problems, the RBI forbade Kotak Mahindra Bank from onboarding new customers or issuing credit cards, and ordered an outside examination. Kotak Bank was downgraded by Brokerage Emkay, which also reduced its target price by 10%. Morgan Stanley anticipates a brief impact on the stock price but not much on earnings.
Only 4% of loans are made through Kotak Bank's credit card business, and growth is constrained. Analysts keep an eye on branch expansion and IT investment. Macquarie said that the RBI's directive was more stringent than others, which might lead to a medium-term depreciation. HSBC projects that growth in other portfolios will balance a 2–5% decline in EPS and a 5–6% loss in ROA in the credit card business. For FY25–27, EPS forecasts have been lowered.
Axis Bank, Vodafone Idea, Reliance Industries Ltd, Infosys, HUL, and HDFC Bank were the other top selections for mutual funds, aside from Kotak Mahindra Bank. These companies saw purchases totaling Rs 3,243 crore, Rs 3,113 crore, Rs 2,597 crore, Rs 2,110 crore, Rs 1,950 crore, and Rs 1,716 crore, respectively.
Mutual funds withdrew Rs 1,666.94 crore from State Bank of India, followed by around Rs 1,166 crore from Bajaj Finance and about Rs 979 crore from L&T. Mutual fund sales were from Rs 550-850 crore, while other equities that saw selling included Mahindra & Mahindra, Divi's Lab, Interglobe Aviation, ICICI Bank, and Nestle India.
