Mr. Debraj Banerjee, Associate Vice President,Corporate Strategy, Janalakshmi Financial Services
Mr. Debraj Banerjee on the importance of classifying information first before deciding whether there is information symmetry or asymmetry. Information could be data or ratios or it could be information provided by the management. Further, he stated that people like Warren Buffet did their own research rather than relying on company information. On Efficient Market Hypothesis (EMH), he said that it is something that one really cannot achieve. If one looks at market capitalization of companies listed in the BSE, it forms only 20 percent of the total industry capitalization. Further, he stated on the need to have an authority which regulates information issued by companies as they will look to go beyond their means to promote their companies and make them look attractive. He also stressed on the need to have clear and uniform financial reporting standards to bring about more transparency to the system. To end with, he spoke about how Janalakshmi Bank wants to make a difference to the banking sector and will look to cater to the class of people who rely more on the cash flow basis rather than the profit and loss basis.
Mr. Ganti Murthy, Head – Fixed Income, IDBI Asset Management
Mr. Ganti Murthy started the discussion by giving his view on market research. He said that information was available worldwide but it was the responsibility of the investor to filter the noise. The investor has to take the call as to where he should invest and how much to invest.Talking about Mutual Fund portfolio, Mr. Murthy said unrated investments should not be more than 20%. He threw light on the importance of credit rating agencies. Ratings are an investment factor and are critical third party opinions. On the contrary, he suggested that credit ratings should be taken into consideration along with other factors such as past financials, rating history and macro perspective. Talking about 2008 financial crisis he said the credit rating agencies, fund houses and RBI were all taken aback. He emphasized on the investment in safer mutual funds even though they give lesser returns. He asked whether research houses be part of a bank or brokerage house. He said nowadays more ratings, reports and brokers are available for retail investors to take informed decisions. Speaking of the growth of investors in India he said the strength of Mutual Fund industry has grown leaps and bounds and is now worth 13 lakh crores.
Mr. Rohit Rao, Director and Advisory Leader, Grant Thornton LLP
Mr. Rohit Rao spoke about the potential conflict of interests in the research house sector. He said that the research reports are not free of information asymmetry, and stressed on the importance of research firms being independent from the brokerage houses. He talked about the importance of being a savvy investor by looking at market trends rather than solely depending on research reports for making investment decisions. He also talked about the incentive structure of analysts. The lack of stringent guidelines are leading to more instances of collusion between research firms and brokerage houses, he said. He then went on to talk about reputational risks for the various players in the financial sector. Comparing the regulatory structure of US with India, he said that the regulatory mechanisms in India are weak and hence there are low reputational risks for firms operating from India.
Mr. Shreenivas Kunte, Content Director, CFA Institute
Mr. Shreenivas Kunte started off by discussing the concept of market efficiency. He said that the concept of efficiency rests on inefficiency and that the markets would always represent the overall inefficiency of the system. He then spoke about market predictions and the follies associated with it.
He went on to add that making correct long terms predictions of more than one year is next to impossible. Speaking on return on investments, he said that in the long run ROI would not exceed the performance of the underlying economy. Talking about analyst incentive structure, he agreed with the views of Mr. Rohit Rao and added that in most firms budgetary allocation of research departments are based on the performance of trading divisions. Hence potential conflict of interests are always high. He said that the discussions on new incentive structures are going on in European countries which could lead to lesser conflict of interests in the future. Speaking on reputational risks, he said that it could affect the entire country. A loss of faith in the system could even lead to outflow of FII investments from India, he said.
Values and ethics, that’s what Mr. Krishna Rama Chandran, Chief Finance Officer, CFO, ACIS – Allianz focussed on at the interactive session with the students. He started the session speaking about his own journey in his life. He spoke about his interest in the commerce field from his schooling and his aim to become a CFO of a company. He shared his few experiences, being working as a CFO, at the age of 29, in a start-up, which failed to cope with the market, after six months. He stated, “Failing in a start-up is a good business model”.
Then, he spoke about how one`s choice could actually affects one`s life. He told it by giving an example, “You can exercise your choice. You can have BMW, I10 or a bicycle, to go to the work. The destination would be the same. The road would be the same. The traffic would be the same. But it’s ultimately your decision how would you want to lead your own life”. He said journey is more important than the destination. He also added humour to the session, by comparing our success stories with a Bollywood movie, stating that whatever might be happened in a movie, but finally, it would have been a happy ending. He mentioned the desire is growing unlimited in the world, and explained how material wealth becomes more important than spiritual wealth. He stressed how greed and selfishness affect a human mind to gain that material wealth, and would deviate him to make frauds, by quoting the examples of ‘Satyam’. In saying so, he compared the journey of an individual with the journey of a company, and explained why one should feel responsible and be ethical to the company`s values. He also spoke why an individual (CFO) mind-set should tally with the company`s values and vision, for the overall benefit of the company.
He also spoke about corporate governance, and said that it was all about the stakeholder`s management. He said independence is a state of a mind, and a CFO needs to have this, to prevent himself from any bias among his vendors. He said, as a CEO/CFO, one should have guts to tell that your company was down before the electronic media. He mentioned a few situations, how sometimes, stock markets run the company, but not the CEO. He also mentioned about risk management and why mitigation of risk is important. He said, “More the risks, more the profits for a company”. He said India has a few advantages, such as low cost capital, and democracy, when compared to China for the investors, in spite of the fact that ease of doing business is not so good. He explained why sustainability is important for a company, in this competitive world. And finally, he winded up the session, saying that the company culture is very important to sustain in this competitive world for a long run, how a company would build its own culture, values and principles and that responsibility should be taken care off by CEO/CFO.
Finomenal 2015, Day 2: Guest Lecture – Viswanathan Iyer, Director, Head of institutional Banking, India at National Australia Bank – “What could be the next driver for an economic boom?”
Viswanathan Iyer, has worked predominantly with large global banks. From a lender’s lens he spoke about the current economic landscape and touched on the tepid economic global growth, exhaustion of monetary tools, little fiscal headroom for major economies, the two major economic blocs battling a structural decline, slowing down of the of the engine of global growth in the 21st century, commodities looking weak, disruption by technology and geopolitical tensions.
Economic boom requires a propeller. The major drivers for economic boom till now have been the first two industrial revolutions, post war conditions like increased globalization, internet and communication. What could be the next driver for an economic boom? Potential drivers could be rise of substitution for the lack from China; the possibilities being India, US and Africa. Technological drivers like robotics, renewables, smart grid, energy storage, big data, IOT and additive manufacturing (3D printing).
He spoke about the challenges in the new world being the liquidity factor, complexity due to integrated markets, increased disruption due to technology, the quantum and frequency of data being high, shorter business cycles and geopolitics.
He touched on the newer themes being transportation vs. communication, aggregators vs. owners, intangibles (ideas) vs. tangibles ( hard assets), valuation appearing to be more of an art than science.
The inaugural ceremony of Finomenal 2015 was kick-started in the spirit with which the event was conceived. The MOC for the event Anisha introduced the guests followed by welcoming the students and faculty. The almighty was invoked by a song by Madhura and Priyanka.
The director spoke to the audience gathered about the need to strive to be the best. He had the audience in splits when he narrated a couple of anecdotes.
The Chief Guest for the function C. Vasudevan, (General Manager, BSE) spoke about the evolution of the securities market. Many years ago, transactions took 15 days to settle. Now BSE follows a T+2 settlement cycle. The chief guest encouraged the students to equip themselves with the changes in technology along with their understanding of the financial markets
Prof Madhu Veeraragahavan gave the students a glimpse of what to expect from Finomenal 2015. The Bloomberg Olympiad is hosting its first Olympiad championship in TAPMI. The theme of this year’s Finomenal is Inform, Influence and Invest. Prof. Madhu spoke about the need of inculcating ethics in students and practitioners. HE also spoke about the contribution of veterans like Jean Pharma, Markowitz, Fischer Black who made modern finance what it is today
The MOC welcomed the Bloomberg Champions from various B-schools. This was followed by the unwrapping of Pitch-Book of Bloomberg by the Chief Guest and the Director
The Fin Forum Convenor Mr. Solomon introduced to the audience the editorial board of TJEF(Tapmi Journal of Economics and Finance). The Chief dignitaries unwrapped the first TJEF to a thundering applause from the audience. The director was all praise to the students and the finance forum for coming up with such incredible initiatives.
The key note speaker of the day was Mr. Nitin Jaiswal of Bloomberg (Head Sales for ASEAN & South Asia). Mr Nitin spoke to students about the the 3 C’s in life
- Creativity- He said that humans are creatures of habit. We always want to play safe. He encouraged students to think differently. He asked us not to follow the norm, but to challenge it. Only way that we can surge ahead is when we break the mould and think differently from others
- Common Sense– Is this the best way to do it? Or is there some other way of doing things?
- Communication– Effective communication is one of the hallmarks of successful leaders. We need to develop our ability not just to speak well, but also to listen effectively
After the keynote address, the TJEF inaugural cake cutting took place by the dignitaries on the stage.
The event was a grand success and it set the tone for many more happening things in store for Finomenal 2015
Mr. Vidhu Shekhar, the country head of CFA Institute was present amongst us today for the inaugural ceremony of Finomenal 2015. TAPMI has been institutionally recognized by the CFA, which is a landmark achievement for the institute. The course materials and curriculum of Financial Majors will now be mapped 70% to that of CFA.
Mr. Shekhar told us about the mission of CFA and emphasized how ethics are ultimately benefiting the society through professional excellence on a global level. He said that in today’s business scenario, having knowledge and skill is not enough. One should also focus on ethics as it is important to know how to act in relation to customer needs and business needs. There always exists a conflict between the two and CFA pays a lot of attention to it so as to understand how this conflict works and therefore can be avoided.
Citing example from a MBA student’s life itself, he said that it is important to make informed choices because these choices has a long term impact. The CFA’s ethic programs teaches the candidates about the same ethics and its relevance. CFA aims at serving the society
Mr. Shekhar went on to show a picture to the audience. The photo was taken in 1964, where CEOs of investment funds, analysts, head of research works and other experienced people were taking the very first CFA exam. He further explained how and why the idea of CFA was conceived. He said that a community of security analysts came together and decided that some credentials were needed when it came to finance and related activities.
Next, he spoke some more about CFA Institute. It is a global membership body of investment professionals and is also a non-profit organization. It has portfolio of various products and services. It has 145 member societies across 70 countries.
Lastly, he enunciated the relevance of CFA programs. According to a survey, Financial Services are the least trusted industry globally. This is mainly due to the fact that money in involved in it. The CFA program focuses on benefiting the society, and for this purpose has identified some key areas to develop. Some of them are Financial Knowledge, Retirement Security, Safeguarding the system, and putting investors first.
Finomenal 2015, Day 2: Guest Lecture-Tamal Bandyopadhyay,Adviser, Strategy at Bandhan Bank Ltd, & Consulting Editor, Mint
Tamal Bandyopadhyay is one of the most respected business journalists in India. His weekly column, Banker’s Trust, in India’s second largest read financial daily Mint, is widely read for its deep insights into the world of finance and its unerring ability to anticipate major policy moves. TAPMI students were privileged to have him among themselves during the ongoing Annual Finance Conclave- Finomenal 2015, where he delivered a session on the topic- Evaluation of Indian Banking Sector and the changing landscape.
He discussed about the intricacies of the various phases that the banking Industry saw in India. Banking is the most regulated industry in India as it deals in public money. A bank failure can lead to a big systemic failure for the country. He took the students through the story of how things started and took shape to make banking in India a lucrative sector.
Post liberalisation (in the early 1990s) when government of India allowed private entities to hold on to banks, a lot of changes took shape in the industry. He shed light on the transition of banking sector from being a Seller’s market to a customer’s market. The sector has seen dramatic changes in the skillsets required by the sector from being defined and clerical to more technology equipped, customer oriented and innovative ones. This transition was seen due to the evolution of the banks from being driven to impress the government to becoming customer oriented in the present scenario.
At present, with a lot of RBI and other regulatory authorities coming up with many guidelines in favour of promoting growth of banking sector, many public sector banks have become product oriented. They are chasing customers by coming up with lucrative products to make things easier for their customers like- home loans, car loans, educational loans etc. Quality of assets changed and is improving day by day with upgrading technology. They are lending a helping hand to other sectors to grow. However, there are various challenges that the sector is currently facing in terms of RBI regulations, government interventions and the dynamic customer requirements. The present day banks in India are emerging out as better service providers to mitigate those challenges.
In the end he took up questions from the enthusiastic students and built upon the fact that how the banking sector is becoming an empowering factor for India to be a world leader. It was a very interactive session overall.
Finomenal 2015, Day 2: Guest Lecture – Mr. Shreenivas Kunte, Content Director, CFA Institute – “For writers to stand out, they must report something which has never been discovered.”
The students of TAPMI were privileged to be a part of a discussion on Writing Investment Reports by Mr. Shreenivas Kunte, Content Director, CFA Institute. To begin with, he stressed on the importance of writing in the finance industry. Top traders read at least two books a week and that is one of the keys to writing investment reports, he stated.
Moving ahead, he spoke about the various forms of communication used by investment writers these days. These include WhatsApp, emails, Bloomberg reports, LinkedIn and journals. He also spoke about the two behavioral biases – anchoring and herding, which set the benchmark and gives the writer the buying argument respectively. Further, he explained how a trader looks to make gains through his writings by giving a hypothetical example.
Further, he said that too much information is a problem these days and writers need to have the knowledge and skills to be choosy about what to write and which audience to target. The reports should also be detailed and punchy. Time and again, he kept on encouraging the students to indulge in writing investment reports in the form of blogs, stating that it will give them an edge over others whether it comes to interviews or at some point or the other in the future.
He touched on the roles and duties performed by research analysts, fund managers, investment bankers and pointed out the types of reports prepared by them. Written communication has a multiplicative effect and can go viral, he said. To end with, he stated that level of disclosure is a problem faced by Indian companies these days and to add to that the lack of punchy and comprehensive reports was a major quality lacking in Indian investment reports.