Retail individual investors can invest a minimum of Rs5,000 in the NFO of CPSE ETF, that would track the CPSE Index
CPSE ETF, a new fund offer (NFO) scheme based on central public sector enterprises (CPSE) Index, would open on 18th March for anchor investors and the next day for non-anchor investors.
According to Goldman Sachs Asset Management (India) Pvt Ltd, CPSE ETF’s new fund offer (NFO) is an open-ended index exchange traded scheme that would track the CPSE index.
“CPSE ETF is a unique opportunity for investors to invest in 10 Maharatnas, Navratnas and Miniratnas at a discount of 5% on the ‘Reference Market Price’ of the underlying shares of CPSE Index,” Goldman Sachs said in a release.
Retail individual investors can invest a minimum of Rs5,000 and in multiples of Re1 thereafter up to Rs2 lakh. Non-institutional investors/ QIBs can invest a minimum of Rs2 lakh and in multiples of Re1 thereafter. Maximum amount to be raised during the NFO will be Rs3,000 crore subjected to maximum of 3% of the paid up share capital of each of the constituents of the CPSE Index. The entry and exit load is nil. CPSE ETF offers tax benefits as the scheme is in compliance with the provisions of Rajiv Gandhi Equity Savings Scheme, 2013 (RGESS).
The CPSE Index constituents are as follows: Oil & Natural Gas Corporation Ltd (ONGC), GAIL (India) Ltd, Coal India Ltd, Rural Electrification Corporation Ltd (REC), Oil India Ltd, Indian Oil Corporation Ltd (IOC), Power Finance Corporation Ltd (PFC), Container Corporation of India Ltd (ConCor), Bharat Electronics Ltd (BEL) and Engineers India Ltd.
Results of a survey of top banks by CARE Ratings
The main challenges faced by banks encompass both the prevailing economic and business environment as well as evolving developments of this industry. This is according to a survey of banks taken up by CARE Ratings. The survey results have been summarised below:
(a) Deceleration in economic growth impacting banking sector growth. Quite clearly this is one factor which affects the growth and prospects of this sector. The fact that the Indian economy has slowed down in the last three years is significant here.
(b) Maintaining asset quality in the face of growing NPAs and restructuring of advances. There is a clear link with the overall state of the economy.
(c) Augmenting capital and maintaining prudential capital adequacy in view of the implementation of Basel III.
(d) Preserve and augment profitability of banks in a stressed environment. Banks are witnessing pressure on margins on account of capital requirement, provisioning, regulation, liquidity, volatile interest rates etc.
(e) Achieving desired credit growth in a weak economy.
(f) Implementation of Financial Inclusion & DBT (Direct Benefit Transfer). As the RBI has been reiterating the need for focusing on financial inclusion this factor has become a challenge as it has to be addressed while keeping an eye on capital, quality of assets and profitability.
(g) Increased competition from both within the banking sector with various banks becoming aggressive in the existing space as well as potential competition from new entrants.
(h) Adopting and adapting to technological changes/ innovation to meet regulatory requirements as well as to tap alternative channels in banking
(i) Dealing with technology related frauds and improving risk management systems of banks
(j) Improving quality of human resources for efficient working of banks in view of the latest technological developments.
Banks do expect to see a series of reforms and measures to be implemented by the RBI in the next one year encompassing regulation, financial inclusion, technological focus etc. These have been elaborated upon below:
(a) Stringent norms pertaining to NPAs and restructured assets. The level of NPAs has gone up sharply this year which becomes more worrisome when the restructured assets are also factored in.
(b) Target Consolidation/mergers and entry of new players. This would involve:
- Continuous bank licensing (as has already been voiced by the RBI),
- Conversion of some urban co-operative banks into full-fledged commercial banks,
- Separate licenses for niche/specific banking operations/functions such as wealth management, investment banking, wholesale banking or retail banking. This has been spoken about in some detail by a special Committee set up by RBI on financial inclusion.
(c) Reforms in Corporate debt market, Government Debt Market & Money Market.
(d) Focus on asset – liability management for banks.
(e) Increased Usage of Technology in Banking. Leveraging of technical developments on various banking activities
(f) Focus on Financial Inclusion/Deepening
(g) Introduce measures for the removal of structural bottlenecks on credit delivery and free pricing of financial assets
(h) Bring about transparency and improvement in clearing and settlement practices
(i) Reforms aimed at creating liquidity and depth for efficient price discovery of all banking products
If these expected reforms come into being, bankers expect them to have wide ranging impact. Some of the expected results are:
(a) Norms on NPAs would improve quality of assets & recovery, liquidity and the overall balance sheets of banks.
(b) Consolidation of banks and new players would result in competition and consequently in innovation and efficiency/productivity of banks. It would also bring about economies of scale and economics of scope for banks.
(c) Conversion of some urban cooperative banks into full-fledged commercial banks will help Banks to participate in main stream line of business on lower risk.
(d) Increased usage of technology could lead to technological upgradation and more e-products would be designed. Technology will help sustain and scale business.
(e) Financial deepening would make banking more inclusive, improve geographical coverage, reduce regional imbalances and credit to the unorganized sector would see an increase.
The underlying WPI inflation trend is around 5.5%, with a mix of factors creating volatility around this trend
WPI (wholesale price index) inflation moderated to 4.7% year-on-year in February 2014 from 5.0% in January 2014. The moderation was due to lower input cost (primary + fuel) inflation, while output price inflation (core) rose slightly. On a seasonally adjusted basis, Nomura estimates that WPI inflation rose 0.3% month-on-month in February 2014, which is lower than the six-month average of 0.4%.
Both food and fuel price inflation moderated in February 2014, lowering cost pressures (Figure 1). Food price inflation (primary + manufactured) eased to 5.6% year-on-year from 6.2%, due to lower vegetables, protein-rich food (chicken, egg), tea, edible oil and sugar prices, while a decline in coking coal, electricity (agriculture), turbine fuel and LPG (liquified petroleum gas) prices moderated fuel price inflation. However, output price inflation – as measured by core WPI (manufactured ex-food) – rose marginally to 3.1% from 3%, partly on base effects and higher wood, paper and leather product prices.
Nomura expects both headline and core WPI inflation to accelerate over the next six months – headline WPI inflation above 6% and core WPI around 4%. First, base effects are adverse (Figure 3). Second, Nomura sees risks of higher momentum in food inflation from the unseasonable winter rains, hailstorms across the country and higher probability of El Nino (associated with lower rains) in 2014. Additionally, the rise in soft commodity prices globally over the last two months (led by coffee, sugar, corn) will likely increase input cost pressures in coming months.
In Nomura’s view, the underlying WPI inflation trend is around 5.5%, with a mix of factors (supply shocks, base effects, commodity price changes) creating volatility around this trend.