Government mulls PSU bank stake sale. Even though the Nifty PSU Bank index outperformed the Nifty 50, bank thematic funds yielded lower returns than other sectors.
The Union government plans to reduce stake by 5-10 percent in six public sector banks where it holds more than 80 per cent share. According to the Economic Times, these banks include the Bank of India, Indian Overseas Bank, Punjab & Sind Bank, Bank of Maharashtra, Central Bank of India, and UCO Bank. Based on market value, a 10 per cent stake sale in Bank of India alone could fetch around Rs 4,400 crore.
Nifty PSU Bank Index saw a 31 per cent increase last year till yesterday but plummeted 2.39 per cent after RBI tightened norms for personal loans and credit cards. Notably, while PSU Banks rose to 31 per cent in a year, Nifty 50 increased only by 8.6 per cent.
In the past year, the stocks of Bank of India, the largest divestment plan, rose 26 per cent. In the past week itself, while Bank of India, Indian Overseas Bank, Punjab & Sind Bank, Bank of Maharashtra, Central Bank of India, and Uco Bank shares escalated by 4 to 6.5 per cent, Nifty Bank, the larger bank index only rose 0.4 per cent.
Thematic mutual funds focusing on banking and financial services that invest primarily in equities related to these sectors support this analysis since bank stocks have yet to perform well.
Despite most mutual funds holding substantial bank shares, their performance must catch up to other thematic funds. Over one year, bank-themed funds provided 14.94 per cent returns, whereas the broader thematic fund category averaged 22.19 per cent.
The financial sector, the backbone of Indian economic growth, is poised for expansion, supported by rising interest rates, enhanced credit growth, and strengthened balance sheets. Experts also anticipate steady retail credit expansion.
Key parameters at various banks, including net interest income (NII) and credit costs, have exhibited positive trends, signifying improvements. Notably, the asset quality concerning non-performing assets (NPAs) has showcased an upward trajectory. In Q2, PSU banks reported a mixed performance, with Bank of India (the largest divestment planned) posting a 52 per cent increase in net profit.