Money & Banking
Selection of chief executives at 5 state-run banks from Monday

A finance ministry source told IANS that this would be the first time when executives from private sector banks would be part of the selection process for top jobs in state-run banks including Punjab National Bank, Canara Bank and the Bank of India

 

As many as 26 shortlisted candidates, including executives from private sector banks, are to appear for interviews here for two days from Monday, for the posts of chief executive and managing director at five major banks.
 
A finance ministry source told IANS that this would be the first time when executives from private sector banks would be part of the selection process for top jobs in state-run banks including Punjab National Bank, Canara Bank and the Bank of India.
 
Each candidate will have to go through three sub-committees or screening committees of two members each, whose members are secretary, department of financial services, the additional secretary and a deputy governor of the Reserve Bank.
 
The sub-committees include three outside experts -- former State Bank of India managing director S. Viswanathan, Indian Institute of Management-Indore director Rishikesha T. Krishnan, and former Allahabad Bank chairperson S. Panse.
 
The final selection of candidates would be made by the appointment board chaired by the RBI governor.
 
The finance ministry had sought applications for the top posts in Punjab National Bank, Bank of Baroda, Bank of India, Canara Bank and IDBI Bank for a fixed term of three years.
 
However, it did not find an adequate number of candidates as per the criteria advertised, and, thus, relaxed the norms in April.
 

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Mutual funds or Stocks? Here’s what you need to consider
A Moneylife Foundation event focussed on whether the mutual fund route or the stock route is right for investing 
 
Investors are always confused with the question whether they should invest directly through stocks or through an equity mutual fund. Debashis Basu, editor of Moneylife, at a Moneylife Foundation event on the topic, explained major differences between stocks and mutual funds, and also which one is suited to whom. Many people tend to avoid stocks as they are considered to be riskier than stocks and more attention needs to be paid to details. 
 
“Though equity funds offer a diversified portfolio, in principle they as similar to holding individual stocks,” explained Mr Basu at the packed Moneylife Knowledge Centre. Both are volatile and can fall sharply leading to a loss of capital, he said. If one has a huge corpus to invest, over a long period of time, mutual funds turn out to be more costly as compared to stocks. The reason being, in mutual fund you pay a fee, which is a percentage of the market value of the corpus. In the case of stocks, you need to pay fixed annual maintenance charges and one-time transaction charges, which work out to be a tiny percentage amount.
 
Those who have no time and interest to analyse individual stocks or those who have a low investment corpus should go for equity funds. Equity funds would be ideal for those who are just beginning to invest and are looking to invest small amounts. However, when they gain confidence and have larger corpus, they need to look at stocks because of higher costs in staying invested in funds.
 
Illustrating this with charts, Mr Basu explained how stocks score over equity funds in terms of costs. “Costs eat in to an equity fund returns. Equity fund charge an expense ratio, which is their fees in terms of a percentage of the corpus they manage. This is deducted from the corpus on a daily basis. The fees charged can range between 1.25% and 3% per year. In percentage terms, it may seem very low, but as your corpus grows, you are paying higher fees in percentage terms and the costs for holding stocks remains fixed and transactions costs are low as compared to equity funds,” he said.
 
In terms of stock selection too, equity funds are not very efficient, Mr Basu said, adding, they (funds) stick to the same basket of stocks and are heavily weighted to their benchmark stocks. Most equity funds also have similar stocks in their portfolio. Mr Basu gave an example how nearly 86 of the 200-odd actively managed schemes hold Reliance in their portfolio. The main reason for holding this stock is because it is a heavy weight on the index. To win at stock picking, Mr Basu said that one should pick stocks with high return on capital and hold them for the long term.

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COMMENTS

Anand Vaidya

1 year ago

Moreover, the MF and its staff get paid whether the fund makes a profit or loss. They don't have "their skin in the game".

The biggest problem for small investors is to pick the right stocks and timing the entry/exit...

Chandragupta Acharya

1 year ago

Mutual Fund expenses are a percentage of the AUM. Therefore in the long run, as your investment in MF appreciates, the expenses grow dramatically AS A PERCENTAGE OF YOUR ORIGINAL INVESTMENT. This is an excellent point that I have not seen made before anywhere. Clearly, for those who can invest sensibly, direct investing is more beneficial than taking the Mutual Fund route.

Sudhakar Ojha

1 year ago

Wondering wether how to select Stocks will be a bigger problem than how to select Mutual Funds

Nifty, Sensex, Bank Nifty may rally a bit - Weekly closing report

If this week’s lows hold and Nifty closes above 8,030, it may recover some of this month’s losses

 

The S&P BSE Sensex closed the week that ended on 12th June at 26,425 (down 343 points or 1.28%), while the NSE’s CNX Nifty closed at 7,983 (down 132 points or 1.62%). Previous week we had mentioned that 50-stock Nifty continues to remain weak and a close above 8,200 is needed for the down move to end temporarily.
 
The 50-stock index opened Monday marginally higher at 8,124 and immediately hit the day’s high, but later was pulled lower. The benchmark moved down gradually and closed in the red for the sixth consecutive session. That day, oil cartel Organization of the Petroleum Exporting Countries (OPEC) had decided to keep its collective output level unchanged at 30 million barrels a day. This was the second time in six months that it decided to take no action amid a global glut of crude and weak oil prices. 
 
The Reserve Bank of India (RBI) on Monday issued a notification allowing banks to seize control of a company if a debt restructuring fails and sell their stake in the defaulting firm to recover dues. 
 
On Tuesday, the Nifty moved in a narrow range for the entire session. Railway Minister Suresh Prabhu said that the Indian government will invest Rs8.5 lakh crore over the next five years to develop India’s railway services. This is expected to kickstart related manufacturing. 
 
This downtrend in the Nifty was broken on Wednesday as the 50-stock index gained 102.05 points (or 1.27%) to close at 8,124.45. Sugar stocks had something to cheer about that day. The Union Cabinet approved Rs6,000 crore interest-free loan to sugar mills for making payments to cane farmers. Cane arrears amounting to Rs22,000 crore of farmers are still pending. Sugar prices both in domestic and global market have fallen to the lowest levels in the last six years. India's sugar production is estimated to touch all time high of 28.3 million tonnes (MT) in 2014-15. 
 
The RBI laid down draft rules for companies to sell rupee bonds offshore, setting a limit on the price of the bonds at 500 basis points above government bonds of similar maturities. The price cap is not particularly restrictive, but the appeal of the bonds to offshore investors is likely to be limited for now, analysts said. The value of the rupee is uncertain as an increase in US interest rates begins to look more likely.
 
On Thursday, the 50-stock benchmark opened in the green and immediately hit the day’s high. This was followed by Nifty making a gradual down move. The benchmark lost 159 points and closed Thursday near the day’s low. 
 
India is on the path to emerge as the fastest growing economy on the World Bank’s growth chart of major economies for the first time. In its latest report, the World Bank expects India to grow at 7.5% in 2015, outpacing China, which is poised to grow at 7.1%. The collapse in commodity prices has been a boon for the country. Concerns over the current account deficit, fiscal deficit and inflation have all dissipated with the fall in oil prices. This, coupled with reforms has raised confidence in the economy adds the report.
 
On Friday, the US government has reportedly opened an investigation against two of the biggest Indian outsourcing companies for possible violations of H1-B visa rules. The Department of Labour has opened the investigation against Tata Consultancy Services (TCS) and Infosys Ltd for possible violations of rules for visas for foreign technology workers under contracts they held with an electric utility Southern California Edison. The move by the Labour Department comes days after reports that hundreds of employees at entertainment giant Walt Disney were laid off and replaced with Indians holding H1-B visas.
 
India's financial market regulatory framework on Friday got the top-most ratings from the global bodies of banking and capital market regulators, with RBI and SEBI being rated better than their peers in China and the US. In the latest global 'assessment study' of the regulatory framework for financial market infrastructures across the world, only six countries, including India, have got the highest score of 4 for all eight parameters on a scale of one to four. The other five countries are Australia, Brazil, Hong Kong, Japan and Singapore. The 'Rating Level 4' means that RBI and Sebi have all regulatory measures "fully in force".
 
The CNX Nifty closed Friday at 7,982.90. 
 
For the week, Nifty has closed down 1.62%. Over the week, the S&P BSE Sensex has closed down 1.28% at 26,425. 
 
Out of the 27 main sectors tracked by Moneylife, top five and the bottom five sectors for this week were:
 
 

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