Street Signs: PSU Bank exchange-traded funds, Yum! Brands stocks, and more

PSU Bank ETFs: Winners too early, losers too long

Exchange-traded funds (ETFs) tracking the public-sector undertaking (PSU) bank index delivered 30 per cent returns in 2022-23 (FY23) — the maximum among all mutual fund schemes. By comparison, the more popular ETFs tracking the benchmark Nifty50 Index fell 0.7 per cent. The performance may be encouraging, but betting on a single sector or theme is fraught with risks. Despite sharp outperformance in FY23, PSU Bank ETFs remain underperformers over 10-year and 15-year periods, delivering annualised returns of just 2.5 per cent and 4.3 per cent, respectively. Only two schemes are in the PSU Bank category — the Kotak Nifty PSU Bank ETF and the Nippon India ETF Nifty PSU Bank BeES (benchmark exchange-traded scheme). Together, they encompass assets worth Rs 2,800 crore, reveals data from Value Research.

Ample yield servings make AIFs the flavour so far

The capital markets regulator — the Securities and Exchange Board of India — has received over 50 new applications thus far this calendar for setting up alternative investment funds (AIFs). Over half of these applications are for setting up Category II AIFs, which include private credit funds, real estate funds, special situation funds, and distressed funds. Such funds target an internal rate of return between 8 per cent and 20 per cent. By comparison, most debt mutual funds (MFs) tend to deliver returns between 4 per cent and 8 per cent. Industry players say following the tax blow to debt MFs, wealthy investors and family offices are likely to move their investments from MFs to high-yielding AIFs. “We see the number of applications for setting up AIFs go up further in the months to come,” observed industry players.

Fast food’s feeding frenzy whets Yum! franchisees’ appetite

Stocks of Yum! Brands, Inc. (formerly Tricon Global Restaurants, Inc.) franchisees in India — Devyani International and Sapphire Foods India — are likely to gain amidst increasing preference for fast food and brand penetration. Analysts say Yum!’s — which operates Kentucky Fried Chicken (KFC), Taco Bell, and Pizza Hut food chains — performance has improved, driven by aggressive store expansion vis-a-vis other players. Also, there has been a profitability improvement with a focus on prudent cost management and operating leverage. “Over the next two years, KFC will continue to be the growth driver for Devyani International and Sapphire Foods with store expansion of 17 per cent/14 per cent compound annual growth rate (CAGR) and steady improvement in profitability. For Pizza Hut, despite current headwinds due to increase in competitive intensity and raw material price inflation, we expect the store network to grow at 14 per cent CAGR with moderate profitability improvement,” reads a note by Antique Stock Broking.