Mumbai: Public sector lenders, even those beyond the top rungs of the business and market-capitalisation leaderboards, found favour with foreign institutional investors (FIIs) over the past year, showed an ET analysis, while they reduced exposure to top-tier private banks. Analysts believe the trend mirrors the diminishing premiums for private lenders as state-run rivals quickly close the performance gap.

HDFC Bank, India’s biggest by value and largely considered the benchmark-setter in prudential banking over the past two decades, has seen its FII ownership shrink more than 6 percentage points to 36.26%. The story is similar at Kotak Mahindra Bank, where overseas fund ownership has fallen 5.48 percentage points by the end of June.

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FII equity in ICICI Bank is down 4.21 percentage points, Axis Bank 2.45 percentage points, and IndusInd Bank 4.31 percentage points. By contrast, their stake has climbed 4 percentage points in the Bank of Maharashtra. Bank of India (up 3.34 percentage points) and Bank of Baroda (up 2.06 percentage points) appear to be the other two major PSU lender beneficiaries from the shift in focus by FIIs. Analysts say that the FIIs are moving their money based on the returns they are getting. The premium that private sector banks enjoyed has diminished as public sector banks have caught up on a lot of parameters.

Vanishing Premiums
“In asset quality, underwriting and loan growth there is not much to choose between both these groups which means the thesis of PSU underperformance is no longer valid,” said Siddharth Rajpurohit, an analyst at Systematix Shares and Stocks. “Large private banks are enjoying lower spreads on their retail loans like home and auto loans because of competition. The lines are now blurred, and investors have to cherry pick between banks – not merely PSU or private.”

To be sure, FII holding in PSU banks is largely low, compared with their overall exposure to top-tier private banks, with the 12.68% stake in Canara Bank being the largest for this category of lenders.
To be sure, FII holding in PSU banks is largely low, compared with their overall exposure to toptier private banks, with the 12.68% stake in Canara Bank being the largest for this category of lenders. By contrast, they collectively own nearly 40% in Axis Bank, in which FII ownership is the largest among private lenders. The shift by FIIs toward PSU banks has boosted their share prices, which have climbed for the past two years as better PSU performance has also coincided with corporate governance issues at some of the large private sector banks.

Analysts say that the stock market performance of some private banks with high FII holdings — HDFC Bank, IndusInd and Kotak Mahindra — has been below average in the past few years because of diverse reasons.

“On the other hand, PSU bank profitability has improved as they have come out of their asset quality issues and subsequent restrictions imposed by the regulator,” said Anmol Das, research head, Swyon Advisors, an alternative investment fund.

“The government’s assertion that they will have to manage their own capital has also helped in a way. Corporate growth has also slowed; so there are no bulky defaults and the shift toward retail also means higher yields. All these factors are reasons FIIs must have taken a liking to these banks.”

Data analysed by ET shows that the Nifty PSU Bank index has risen 14.42% Since July 1, 2024, beating the 4.51% growth in the private bank index in that period. Indian Bank is the top gainer in that period with a 53% rise in its shares followed by a 26% gain by Bank of Maharashtra and Union Bank of India, respectively.

Yuvraj Choudhary, analyst, Anand Rathi Securities, said PSU banks have outpaced their private sector counterparts in return on equity (RoE) in the last two years. “Aggregate PSU RoE is 15% higher than the aggregate private bank RoE of 12%. PSU banks have outpaced their private sector counterparts for the last eight quarters and on course for the ninth one,” Choudhary said. “They have gained market share, improved asset quality and that is reflected in their book value.” Relative improved performance explains the diminishing premiums — and the increasing interest of FIIs toward state-owned lenders.

South Korean stocks were hammered on Tuesday as a global sell-off in chipmakers sent technology heavyweights sharply lower, with rising competition from China and a steep fall in SK Hynix‘s US-listed shares weighing heavily on investor sentiment.

The benchmark Kospi plunged 551 points, or 8.1%, to 6,2505. The steep decline triggered “sidecar” trading curbs on both the Kospi and the junior Kosdaq index, temporarily halting programme trading.

Memory-chip maker SK Hynix dropped 11% after its American depositary receipts (ADRs) in New York fell to a record low and slipped below their initial US offering price. Samsung Electronics, another heavyweight in the index, declined 9.15%. Together, SK Hynix and Samsung Electronics account for more than half of the KOSPI’s weighting, amplifying the impact of the semiconductor sell-off on the broader market.

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1. AI spending worries

Fresh concerns over the scale of artificial intelligence spending added to the pressure on semiconductor stocks even as falling oil prices further after potential talks between US and Iran.
The central question for investors is whether companies pouring billions of dollars into artificial intelligence will be able to generate enough returns to justify the spending. Chip stocks remained under pressure in the US as well, with the Philadelphia Semiconductor Index extending its decline for a third consecutive session.

2. China’s new threat

Developments in China added to investor concerns. ChangXin Memory Technologies (CXMT) made a blockbuster market debut, soaring nearly 500%, while reports emerged that a Chinese state-backed company had started producing immersion DUV lithography equipment.”The market’s concern lies less in CXMT’s current earnings and more in its potential for accelerated capacity expansion to rival Korean companies and technology development following its IPO,” Kim Seok-hwan, a Seoul-based market analyst at Mirae Asset Securities, told Reuters.
The broader MSCI Asia Pacific Index fell 2.92%, with technology stocks bearing the brunt of the losses. The Kospi dropped 7.89%, while Japan’s Nikkei declined 3.86%% and the Topix fell 2.77%.

3. US Fed commentary

Investors are also facing a packed week, with interest rate decisions due from the US Federal Reserve, the Bank of Japan and the Bank of England, alongside earnings reports from major technology companies.

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The US Federal Reserve will begin its two-day policy meeting on Tuesday and is widely expected to leave interest rates unchanged on Wednesday.

However, expectations for a rate hike of at least 25 basis points have risen to 36.3%, from 16% a week ago, according to CME FedWatch. Markets are now pricing in an 81% probability of a rate hike at the central bank’s September meeting.

4. Weak global cues

US stock futures also edged lower in early Asian trading on Tuesday as investors braced for a busy week of megacap earnings and awaited the Federal Reserve’s rate decision. S&P 500 futures fell 0.3%, while Nasdaq 100 futures declined 0.2%. Dow futures gained 24 points, or 0.05%.

The moves came after a mixed session on Wall Street. The 30-stock Dow climbed more than 260 points, or around 0.5%, while the S&P 500 posted a modest gain as oil prices retreated following a pause in fighting in the Middle East.

The Nasdaq Composite, however, slipped 0.2% as a sell-off in semiconductor stocks weighed on the tech-heavy index.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)

A Trump administration official is touting the recently launched Trump Accounts as a means to boost young Americans’ financial literacy and appreciation for capitalism by giving them experience that draws them away from “poisonous ideologies” such as socialism.

Comptroller of the Currency Jonathan Gould spoke at a planning meeting for the Financial Literacy and Education Commission on Tuesday and said in remarks reviewed exclusively by FOX Business that Trump Accounts can help Americans understand how the financial system and markets work, showing the benefits of capitalism.

“When Americans understand how our financial system works, they are better equipped to save for the future, protect themselves from fraud, and fully participate in the greatest economy in the world,” he said. “For Americans to believe in capitalism, they need the opportunity to participate in it.”

“If financial illiteracy leads to socialism and other poisonous ideologies proliferating on college campuses and in certain cities, Trump Accounts can be the antidote, minting a generation of capitalists who believe in America, build wealth, invest in their communities, and own a share in our nation’s economic success,” Gould added.

WHAT ARE THE INVESTMENT OPTIONS FOR TRUMP ACCOUNTS?

Trump Accounts were created by the One Big Beautiful Bill Act last year and were formally launched on July 4. 

The initiative creates tax-advantaged investment savings accounts for eligible children, with those born between 2025 and 2028 given $1,000 in seed money from the federal government. Parents and guardians may contribute up to $5,000 per year to the accounts belonging to their children, while a parent’s employer can contribute up to $2,500 annually without impacting the employee’s taxable income.

Funds in Trump Accounts may be invested into low-cost index funds with broad, diversified exposure to the U.S. stock market. 

Over time, proponents of Trump Accounts note that strategy could yield significant returns for Trump Account beneficiaries based on the historical performance of the U.S. stock market.

GOLDMAN SACHS TO CONTRIBUTE $1,000 TO TRUMP ACCOUNTS FOR ELIGIBLE CHILDREN OF EMPLOYEES

An analysis by the White House’s Council of Economic Advisors (CEA) found that based on historical average returns on the U.S. stock market, funds invested in Trump Accounts could grow into a substantial nest egg by the time a child turns 18, depending on how much is contributed over time. The funds could then be used to help pay for education expenses, a down payment on a home, or a jump start on retirement savings.

CEA found that if maximum contributions are made to an account belonging to a child born in 2026, the account balance would reach $303,800 by age 18 and $1,091,900 by age 28 in a medium-returns scenario. 

In a low-returns scenario with maximum contributions, balances would be $187,400 by age 18 and $772,200 by age 28; while in CEA’s high-returns illustration, the balances would be $730,400 by age 18 and $1,904,300 by age 28.

If no contributions are made to a Trump Account belonging to a child born in 2026 beyond the $1,000 seed money from the government, the account balance would reach $5,800 by the time they turn 18, with continued compounding growth taking that total to $18,100 by age 28 in CEA’s medium-returns scenario.

HERE’S HOW MUCH TRUMP ACCOUNT BALANCES COULD GROW OVER TIME

Ahead of the program’s official launch, the Treasury Department unveiled the default exchange-traded fund (ETF) that is available to investors now – as well as four other ETF options that will be added to the accounts as alternatives.

The default investment option is the State Street SPDR Portfolio S&P 500 ETF (SPYM), which is a low-cost ETF that tracks the performance of the S&P 500 Index. 

Treasury explained it provides broad exposure to the U.S. stock market and has a low fee structure that’s well below the expense ratio limit of 0.1% that was established by law.

Ticker	Security	Last	Change	Change %
SPYM	STATE STREET® SPDR® PORTFOLIO S&P 500® ETF – USD DIS	86.99	+0.03	+0.03%
IVV	ISHARES CORE S&P 500 ETF – USD DIS	742.55	+0.19	+0.03%
VTI	VANGUARD TOTAL STOCK MARKET ETF – USD DIS	365.18	+0.38	+0.10%
SPTM	STATE STREET® SPDR® PORTFOLIO S&P 1500® COMPOSITE STOCK MARKET ETF – USD DIS	89.87	+0.07	+0.08%
ITOT	ISHARES TRUST CORE S&P TOTAL US STOCK MKT	162.10	+0.10	+0.06%

Four other low-cost ETFs that track broad indexes will be added to the Trump Accounts lineup of investment options:

• iShares Core S&P 500 ETF (IVV)
• Vanguard Total Stock Market ETF (VTI)
• State Street SPDR Portfolio S&P 1500 Composite Stock Market ETF (SPTM)
• iShares Core S&P Total U.S. Stock Market ETF (ITOT)

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Treasury indicated at the time of the announcement that it expected the functionality for additional investment options to roll out in the coming months, which would let parents or guardians allocate funds across the additional options.

A major rural lifestyle retailer is closing dozens of pet stores in its portfolio around the country as it reevaluates both its existing footprint and growth plans.

Tractor Supply released its latest earnings report last week and revealed plans to close 75 Petsense locations around the country.

The company said in its release that as of late June, there were 209 Petsense by Tractor Supply stores across 23 states.

“Following a disciplined review of Petsense, we’ve decided to close approximately 75 underperforming stores. We believe these actions will improve returns, simplify the business, and allow us to direct resources towards higher growth, higher return opportunities,” said CEO Hal Lawton on the earnings call.

PETSMART’S ONLY SAN FRANCISCO STORE SET TO CLOSE AS ONLINE SHOPPING AND SAME-DAY DELIVERY RESHAPE RETAIL

Lawton noted that the Petsense locations that are closing were negative four-wall cash flow, meaning that those stores’ sales weren’t enough to cover costs that are local to individual stores, such as rent, labor and inventory.

Stemming the losses from those locations will allow the company to reinvest funds back into the core of the business, he added.

Lawton also said that after the closures, he thinks the company will “have a very strong, profitable Petsense business,” and that it will work well within the company’s broader pet ecosystem that includes Allivet and VIP Petcare.

Ticker	Security	Last	Change	Change %
TSCO	TRACTOR SUPPLY CO.	31.80	+0.78	+2.51%

CVS OFFERS NEW PHARMACY OPTION FOR PET OWNERS

He also emphasized that the company doesn’t view the changes with Petsense as affecting the reacceleration of pet products within the core Tractor Supply business, which isn’t directly connected to Petsense.

Tractor Supply CFO Kurt Barton said on the call that the “strategic repositioning of Petsense is expected to create a healthier, more profitable business that better complements our Tractor Supply stores and strengthens our ability to serve pet customers across our integrated pet ecosystem.”

TRACTOR SUPPLY NO LONGER GOING WOKE, ELIMINATES DEI GOALS

Lawton also said that Tractor Supply plans to open dozens of new stores in 2027, though the total number is expected to be approximately 85 to 90 stores as opposed to the company’s previous expectation of opening 100 new stores.

Funds saved from the pared-back store opening plans will be redeployed toward initiatives like remodels under Project Fusion, which aims to improve the performance of Tractor Supply’s existing store base.

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