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FIIs build a new Banking XI without the usual heavyweights. Will the big banks return?
Economic Times 1 hr ago·4 Aug 2026, 3:54 am
Foreign institutional investors (FIIs) have recently shifted their focus within the banking sector, reducing stakes in some of the market's largest public sector banks while increasing holdings in mid-sized and smaller private lenders. This move suggests a strategic re-allocation of capital towards entities that may offer higher growth potential or better valuations compared to the traditional market leaders. For investors, this trend highlights a growing appetite for risk and a preference for banks with strong balance sheets and specific growth triggers.
While large banks continue to provide strong franchises and reasonable valuations, the current rotation indicates that FIIs are betting on the faster expansion of smaller lenders. Investors should monitor the quarterly earnings reports of these mid-sized banks to see if the inflows translate into actual growth. The key factor to watch is whether the valuation premium on these smaller banks remains sustainable or if it corrects as the market matures.
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