Rekha Jhunjhunwala cuts Canara Bank stake after profit drop
The portfolio manager for the late Rakesh Jhunjhunwala reduced her holding in the state-owned lender as falling profits and a slumping share price signal a potential shift in the public sector banking trade.
Rekha Jhunjhunwala sold 10 million shares in Canara Bank during the first quarter of fiscal 2027, reducing her stake in the state-owned lender to 1.42%. The sale trims her holding from the 1.54% stake she held at the end of the previous quarter, marking a notable adjustment to the portfolio she inherited from her late husband.
The divestment aligns with a steep downturn in the bank's share price. After delivering returns of 93% over three years and 316% over five years, Canara Bank shares have fallen more than 18% in 2026. The stock dropped 3% on Tuesday to trade at roughly Rs 126 on the National Stock Exchange, extending a one-month decline of over 4%.
Driving this share price weakness is a recent contraction in profitability. For the January-to-March quarter of fiscal 2026, Canara Bank reported a consolidated net profit of Rs 4,506 crore. This figure represents a 10% year-over-year drop from the Rs 5,002 crore posted in the same period a year earlier. While the bank's net interest income improved by 4% to Rs 9,808 crore, this top-line growth failed to prevent the bottom-line erosion.
Canara Bank remains a massive institutional presence in Indian finance. As of March 31, 2026, the lender operated a network of 10,097 branches across India, heavily weighted toward rural and semi-urban markets with over 6,200 locations in those regions. It also maintains an international footprint with four overseas branches in London, New York, Dubai and GIFT City, supported by over 11,300 ATMs and recyclers.
Despite this scale, the current market action reflects a shift in investor sentiment. The original investment was championed by Rakesh Jhunjhunwala, who was widely known for his bullish stance on public sector banks. His thesis rested on the belief that these state-owned lenders were deeply undervalued and primed to benefit from a cyclical recovery in credit growth and steadily improving asset quality.
The recent stake reduction by his widow signals that this phase of the trade may be facing exhaustion. Market analysts anticipate that private banks will outperform their state-owned peers in the first-quarter earnings season as macroeconomic pressures begin to bite. For institutional investors tracking the Jhunjhunwala portfolio, the Canara Bank sale serves as a tactical signal that the easy gains in the public sector banking recovery cycle have likely been realized.
