Green zone

Nifty50: 17,833 ▲ 34 (+0.1%)
Sensex: 59,793 ▲ 104 (+0.1%)

Namaste, folks!

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• After a strong opening, markets pared most of the early gains but managed to close in the green for the second straight day.
• In all, 26 of the Nifty50 stocks closed in the red. 
• The US Fed chairman, in his speech on Thursday, reiterated that the central bank will continue to take aggressive measures to rein in rising inflation.

Among the Nifty sectoral indices, IT (+2.2%) and Auto (+0.5%) saw most gains, while Realty (-0.4%) and Media (-0.2%) were the top losers.

What’s trending

⭐ NTPC signs pact with Indian Army

NTPC (NSE): 166 ▼ 0.4 (-0.2%)

NTPC has signed an agreement with the Indian Army’s Western Command to draw 25 megawatt of solar power directly from the national solar grid for the next 27 years. The solar energy will reportedly be sourced from Solapur in Maharashtra. This agreement will help the Western Command decarbonise up to 38% of its energy portfolio.

⭐ Miners gain as aluminium prices rise

HINDALCO (NSE): 426 ▲ 5.9 (+1.4%), VEDL(NSE): 266 ▲ 4.1 (+1.5%)

Shares of aluminium producers such as Hindalco and Vedanta rose over 2% intraday after prices of copper and aluminium jumped in international markets. On Thursday, aluminium prices were up 1.6% at $2,271 a tonne, while copper was up 2.5% to $7,811. This comes amid concerns that stoppages at plants in Europe due to high energy prices will lead to supply disruption. 

⭐ Tata Motors to expand EV portfolio

TATAMOTORS (NSE): 446 ▲ 4.3 (+0.9%)

On the occasion of World EV Day, the automaker said that it plans to expand its electric vehicle (EV) portfolio and make EVs more accessible. The company plans to launch 10 EVs in different product segments, to support the government’s vision to achieve 30% EV penetration by 2030. It also announced that it will soon launch the EV version of its Tiago hatchback. 

⭐ Motherson acquires Daimler’s assets

MOTHERSON (NSE): 123 ▲ 0.5 (+0.4%)

Auto component maker Samvardhana Motherson has signed an agreement to acquire the assets of frame manufacturing and assembly from Daimler India Commercial Vehicles (DICV). It has also signed a long-term agreement with DICV for the supply of the complete frame assembly. The transaction is expected to close by Q3 of the current financial year.

⭐ Nazara Tech on a roll

NAZARA(NSE): 735 ▲ 72 (+10.9%)

Shares of the gaming company Nazara Technologies surged on Friday. This comes after Google Play Store announced that it will allow daily fantasy sports (DFS) and online rummy apps to list on the app marketplace. The one-year pilot program, which will start from 28 September, will improve app discoverability and make it easier for users to install these gaming apps. Nazara Technologies runs real-money gaming apps including Halaplay and OpenPlay.

In Focus

Banks go after bonds

In the past couple of weeks, HDFC Bank, State Bank of India, Bank of Baroda and Bank of Maharashtra have issued bonds worth over ₹13,000 crore. Meanwhile, few other banks are in the process of launching their bond issues. But why are banks chasing bonds? Let’s find out.

The recent flurry of bond issues comes after a sharp rise in loan demand from consumers and corporates amid the economic revival. As a result, bank credit growth has witnessed a sharp uptick, while deposits have not grown at a similar pace.

As of 12 August, bank credit grew by 15.3% year-on-year, while deposit growth lagged behind at 8.8% during the same period. As a result, most banks are raising capital through bonds to finance rising loan demand.

Interestingly, healthy loan growth is one of the primary reasons for the rally in banking stocks. The Bank Nifty index has risen by over 19% since July 2022, as compared to the 12% rise in the benchmark Nifty50

Additionally, bond financing is also proving to be a cheaper source of funds for banks. Since June 2022, the yield on a 10-year government bond has corrected by 0.5% to 7.1% due to easing domestic inflation. Government securities are generally taken as a benchmark for bank-issued bonds and a fall in the same is good for banks as it lowers their cost of funds and helps improve margins.

But what does all this mean for retail investors like you? Well, when banks raise funds at lower rates, they are able to offer competitive rates on loans to borrowers, which means lower EMIs! Even investors in bank stocks stand to gain as the rising credit growth drives the rally in banking stocks. 

All in all, bank stocks seem to be the flavour of the season in the equity as well as debt markets.  

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Good to know

What is bond yield?

In simple terms, bond yield is the return an investor gets for a bond over a specific period of time. For example, when you buy a 10-year bond worth ₹10,000 with a coupon rate of 7% you will get an annual return of ₹700. However, when the price of the bond in the secondary market falls to ₹8,000, the yield will fall to ₹569. Bond yields are inversely correlated to bond prices. When prices rise, yields fall, and vice versa. A rise in bond yields is bad news for the stock markets. This is because when the yields rise, debt instruments become relatively more attractive than equities. Bonds provide fixed income to investors and are relatively less risky and volatile.

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