Terrific Tuesday

Nifty50: 17,759 ▲ 446 (+2.5%)
Sensex: 59,537 ▲ 1,564 (+2.7%)

Hello, people!

Markets were flying high today after Monday’s slump. But guess who else is all set to fly? 24-year-old Aathira Preetharani, a queer woman from Kerala, has been selected for astronaut training by the International Institute of Astronautical Sciences. Kudos to her!

• Benchmark indices took off today after Monday’s crash landing. 
• All of the Nifty50 stocks closed in the green.
• Investors await India’s Q1 GDP data to be released on Wednesday.

All of the Nifty sectoral indices closed in the green, with Realty (+3.4%) and Financial Services (+3.4%) witnessing maximum gains.

What’s trending

⭐ Coforge’s meta moment

COFORGE (NSE): 3,559 ▲ 47 (+1.3%)

The IT company announced that it has opened a centre of excellence for the metaverse and Web3. Through these technologies the company will tap opportunities in its core (banking, financial services, insurance, and travel & hospitality) and new verticals (retail, manufacturing, healthcare, and public sector). The company also aims to upskill over 1,000 employees to cater to customers requirements for the metaverse and Web3.

⭐ KIMS Hospital acquires new hospital 

KIMS (NSE): 1,201 ▲ 10 (+0.8%)

KIMS Hospital which operates a network of 13 hospitals across 3 different states, has entered into an agreement to acquire a 51% stake in SPANV Medisearch Lifesciences. SPANV operates 300+ bed multi-speciality Kingsway Hospitals at Nagpur. The deal will be completed through a fund infusion of ₹80 crore, which will be used to repay existing debt and to strengthen the balance sheet. This is KIMS’ second acquisition in Maharashtra.

⭐ Nazara Tech acquires US firm

NAZARA (NSE): 660 ▲ 29 (+4.6%)

Gaming and sports media company Nazara Technologies  has acquired US-based WildWorks for $10.4 million. Nazara has bought a 100% stake in the children’s interactive entertainment provider from existing shareholders in an all-cash transaction. With this deal, WildWorks is likely to expand into new products and territories in 2023.

⭐ Oil prices rise

Brent crude oil prices in the international market touched $105 per barrel on Monday. However, the rise in oil prices was limited by a strong US dollar, which hit a 20-year high on Monday. Last week, prices surged 4% after Saudi Arabia said it would cut oil production to support prices. Besides this, the conflict in Libya raises concerns and disruptions in oil supply from OPEC nations. 

In Focus

Public sector banks outshine

In the past couple of months, investors seem to be lapping public sector banking stocks. Between 1 July and 30 August 2022, the Nifty PSU Bank index has gained over 22%, while the benchmark Nifty50 index is up 12.2%. Wondering why PSU banks have become investors’ favourites? Let's find out.

Government-owned banks have been traditionally known for their non-performing assets (NPAs) or bad loans. In March 2018, PSU banks had gross NPA (GNPA) levels around 15%, much higher than the ~5% GNPA levels of private banks

However, the banking reforms undertaken by the government and RBI such as the Insolvency and Bankruptcy Code (IBC) helped push large-ticket NPA cases to faster resolution. Further, other strategies such as one-time settlement (OTS) of loans and sale of bad loans to asset reconstruction companies (ARCs) have improved recoveries within PSU banks. 

Thanks to these timely reforms, the overall GNPA of PSU banks stood at 7.2% in June 2022, a fall of 2.2% year-on-year. This is a steeper decline as compared to private banks, which witnessed a reduction of 1.1% to 3.1%. 

Besides industry reforms, a gradual pickup in credit growth after the pandemic has also contributed to lower GNPA levels. In addition, high caution exercised by lenders in awarding fresh loans has helped in averting major NPA problems.

A trend of better NPA recoveries leads to lower requirement of provisions and improved profitability for the banks. This shift in focus seems to be attracting investors once again towards PSU bank stocks.

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Good to know

What are non-performing assets?

Non-performing assets (NPAs) are loans or advances for which the interest payment is overdue for a period of 90 days. NPAs can be classified as a substandard asset, doubtful asset, or loss asset, depending on the length of time overdue and probability of repayment. NPAs are generally a financial burden on lenders as large amounts of NPAs have a negative impact on their profitability.

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