Mutual funds load up on ICICI Bank shares in March after Chanda Kochhar concerns drag stock price

Domestic mutual fund houses loaded up on ICICI Bank shares buying 42 million shares in March, after concerns regarding impropriety involving CEO Chanda Kochhar in Videocon loan dragged the shares sharply last month. Notably, the shares had closed at Rs 313.28 on February 28th. At the end of March, the shares had fallen to Rs 278 as on March 28th (the last trading day in March), implying a near 12% fall. According to data from Accord Fintech, compiled by ETIG, mutual funds collectively bought 42 million shares in March-18. Out of the total, ICICI Prudential mutual fund bought 8.08 million shares in the company.

Brokerages point out that the valuations seem to be comfortable. According to Morgan Stanley, the key for long-term investors will be the improvement is asset quality. The global firm said that newsflow around Chanda Kochhar will drive volatility in the stock. Currently, the bank’s shares are trading flat at Rs 286.35. Interestingly, the shares had hit an all-time high of Rs 365.69 on January, 29th 2018.

Apart from ICICI Prudential mutual fund HDFC AMC, Reliance Nippon AMC, Aditya Birla Sun Life AMC and SBI Funds Management have also loaded up on the stock. Notably, mutual funds held a total 22.7 per cent stake in the lender at the end of December. Interestingly, the stock has been on a rise of late, despite reports that CEO Chanda Kochhar’s brother-in-law Rajiv Kochhar is under the radar of investigative agencies, with CBI ordering a preliminary enquiry.

“The ICICI Bank board has offered full support to the leadership team. However, if allegations against the management prove to be true, they could hit the bank’s reputation and expose it to legal and financial risk,” S&P said in a recent note. Last week, Fitch Ratings said that the ongoing investigation into allegations that ICICI Bank extended a loan with a potential conflict of interest raises questions over the bank’s governance and creates reputational risks.

However, brokerages and investors remain upbeat on the stock. “ICICI Bank has got one of the largest liability franchise with a CASA of more than 40%. These things cannot be ignored. The valuations are very mouth-watering. It’s about 0.8 times copre book value. I think these kind of events help long-term investors to get into the stock, and that too with quantity,” Nischal Maheshwari of Edelweiss told in an interview to ET Now. According to the expert, investors must start buying the shares, and in case of more bad news, it gives them a good opportunity to accumulate the stock.