Specialist in Indian Banking and Economic Research

Hemindra Hazari

The Reserve Bank of India (RBI)’s decision to grant a 1-year <a href="https://ir.rblbank.com/pdfs/regulatory/ReappointmentofMDCEOMrVishwavirAhujaFinal2021.pdf" target="_blank" rel="noopener">extension</a> to  Vishwavir Ahuja, Chief Executive Officer (CEO), <a href="https://www.smartkarma.com/entities/rbl-bank-ltd" target="_blank" data-smartkarma-citation="entities:22856:1" rel="noopener">RBL Bank Ltd (RBK IN)</a> is similar to the 1-year extensions it provided to <a href="https://www.dcbbank.com/pdfs/BSENSEReAppointmentOfMDANDCEOApril2021.pdf" target="_blank" rel="noopener">Murali Natarajan</a>, CEO, <a href="https://www.smartkarma.com/entities/dcb-bank-ltd" target="_blank" data-smartkarma-citation="entities:1557:1" rel="noopener">Dcb Bank Ltd (DCBB IN)</a> and <a href="https://www.bseindia.com/xml-data/corpfiling/AttachHis/d8768272-3bd1-4d07-808b-43b725fcdc69.pdf" target="_blank" rel="noopener">Shyam Srinivasan</a>, CEO <a href="https://www.smartkarma.com/entities/federal-bank-ltd" target="_blank" data-smartkarma-citation="entities:11784:1" rel="noopener">Federal Bank (FB IN)</a>. In recent times, Udak Kotak, CEO-founder, <a href="https://www.smartkarma.com/entities/kotak-mahindra-bank-ltd" target="_blank" data-smartkarma-citation="entities:126:1" rel="noopener">Kotak Mahindra Bank (KMB IN)</a>(KMB) enjoys the unique distinction of getting a <a href="https://www.bseindia.com/xml-data/corpfiling/AttachLive/d5faa2b3-1886-42a9-af9d-960ff207a4ce.pdf" target="_blank" rel="noopener">3-year</a>  extension by the regulator, despite having been a CEO for over 15 years, contradicting RBI’s <a href="https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12078&amp;Mode=0" target="_blank" rel="noopener">policy</a>  regarding the maximum tenure for bank CEOs.There are three issues raised by RBI’s conduct. Firstly, the decision to favour Uday Kotak and KMB is plainly <a href="https://thewire.in/banking/uday-kotak-ceo-kotak-mahindra-bank-rbi" target="_blank" rel="noopener">partisan</a>, undermining the credibility of the banking regulator. Secondly, by granting three private bank CEOs only a 1-year extension, is the regulator indicating to the banks its displeasure with the existing CEOs and the need to find a replacement in the course of the year? Although the RBI granted Shyam Srinivasan a second 1-year extension last year, the Federal Bank board of directors has <a href="https://economictimes.indiatimes.com/industry/banking/finance/federal-bank-board-seeks-another-3-year-term-for-ceo/articleshow/81639243.cms?from=mdr" target="_blank" rel="noopener">sought</a>  a 3-year extension when his term ends on September 29, 2021, indicating that the bank has chosen not to read the regulator’s tea leaves – or that the RBI did not give any such indication to the bank to look for a successor. If the RBI were to approve a further term to Shyam Srinivasan, it would raise questions about the regulator’s competence; what was the justification for repeated 1-year extensions? Thirdly, RBI’s policy of renewing CEOs with 1-year tenures unnecessarily introduces uncertainty in a bank’s future strategy: the existing CEO and the bank can plan for only one year, as the RBI may insist on a replacement at the end of the year.   Such short-term planning, especially in the current environment of economic stress, can be disruptive to the bank and its stakeholders, and it is unfortunate that it is being caused by the regulator’s decision to approve only 1-year extensions, without any explanation to the public.The capital market plays an important role for private banks, and the regulator must either be more transparent in explaining its decisions or it should reconsider its policy of granting 1-year extensions even when the candidates are conforming to the regulator’s norms of age and tenure for the CEOs. It is tragic that the RBI’s credibility as an impartial regulator has reached a nadir. Latest developments -- the favoured treatment it has meted to Uday Kotak, and its inability to comprehend the significance of its decision to renew CEO tenures for only  one year -- take its credibility even lower.

The Reserve Bank of India (RBI)’s decision to grant a 1-year extension to  Vishwavir Ahuja, Chief Executive Officer (CEO), RBL Bank Ltd (RBK IN) is similar to the 1-year extensions it provided to Murali Natarajan, CEO, Dcb Bank Ltd (DCBB IN) and Shyam Srinivasan, CEO Federal Bank (FB IN). In recent times, Udak Kotak, CEO-founder, Kotak Mahindra Bank (KMB IN)(KMB) enjoys the unique distinction of getting a 3-year  extension by the regulator, despite having been a CEO for over 15 years, contradicting RBI’s policy  regarding the maximum tenure for bank CEOs.There are three issues raised by RBI’s conduct. Firstly, the decision to favour Uday Kotak and KMB is plainly partisan, undermining the credibility of the banking regulator. Secondly, by granting three private bank CEOs only a 1-year extension, is the regulator indicating to the banks its displeasure with the existing CEOs and the need to find a replacement in the course of the year? Although the RBI granted Shyam Srinivasan a second 1-year extension last year, the Federal Bank board of directors has sought  a 3-year extension when his term ends on September 29, 2021, indicating that the bank has chosen not to read the regulator’s tea leaves – or that the RBI did not give any such indication to the bank to look for a successor. If the RBI were to approve a further term to Shyam Srinivasan, it would raise questions about the regulator’s competence; what was the justification for repeated 1-year extensions? Thirdly, RBI’s policy of renewing CEOs with 1-year tenures unnecessarily introduces uncertainty in a bank’s future strategy: the existing CEO and the bank can plan for only one year, as the RBI may insist on a replacement at the end of the year.   Such short-term planning, especially in the current environment of economic stress, can be disruptive to the bank and its stakeholders, and it is unfortunate that it is being caused by the regulator’s decision to approve only 1-year extensions, without any explanation to the public.The capital market plays an important role for private banks, and the regulator must either be more transparent in explaining its decisions or it should reconsider its policy of granting 1-year extensions even when the candidates are conforming to the regulator’s norms of age and tenure for the CEOs. It is tragic that the RBI’s credibility as an impartial regulator has reached a nadir. Latest developments -- the favoured treatment it has meted to Uday Kotak, and its inability to comprehend the significance of its decision to renew CEO tenures for only  one year -- take its credibility even lower.

RBI’s 1-Year Extensions to Bank CEOs: Creating Uncertainty and Short-Termism

Asia Pac ECM and Index Rebal, Shenton Research

Ke Yan, CFA, FRM

Asia Pac ECM and Index Rebal

Asia Pac IPO & Placement Research, China Biotech

DZT Research

DZT Research is an independent Asia Pacific equity specialist. Our quantitative research covers index rebalancing flows, alongside exchange data analytics accross Asia Pacific. On the equity capital markets side, we focus on Asia Pacific ECM, especially biotech and TMT. Our lead analyst is frequently cited by international media.

Quantitative Analysis

<ul>
<li>We analysed the earning revision of component stocks of MS-India in the past month.</li>
<li>We tabulated stocks with the top impact on index's EPS, stocks' EPS revision, and revenue revision.</li>
<li>We highlighted EPS revision on Hindustan Petroleum, National Aluminium, Oil &amp; Natural Gas, Vedanta, Tata Motors Passenger Vehicles, ICICI Bank.</li>
</ul>


We analysed the earning revision of component stocks of MS-India in the past month.
We tabulated stocks with the top impact on index's EPS, stocks' EPS revision, and revenue revision.
We highlighted EPS revision on Hindustan Petroleum, National Aluminium, Oil &amp; Natural Gas, Vedanta, Tata Motors Passenger Vehicles, ICICI Bank.


MS-India Index Earning Revision (Jun): Hindustan Petroleum, National Aluminium, Oil & Natural Gas

Thematic (Sector/Industry)

In the <a href="https://www.smartkarma.com/entities/state-bank-of-india" target="_blank" data-smartkarma-citation="entities:160:1" rel="noopener">State Bank Of India (SBIN IN)</a>-led bail-out of <a href="https://www.smartkarma.com/entities/yes-bank-ltd" target="_blank" data-smartkarma-citation="entities:767:1" rel="noopener">Yes Bank (YES IN)</a> assisted by private sector entities, <a href="https://www.smartkarma.com/entities/hdfc-bank-ltd-4b6b7a92-9087-468d-9dbe-ab169e77f014" target="_blank" data-smartkarma-citation="entities:558:1" rel="noopener">HDFC Bank (HDFCB IN)</a>, the largest private sector bank, is notably absent, as is <a href="https://www.smartkarma.com/entities/indusind-bank-ltd" target="_blank" data-smartkarma-citation="entities:1558:1" rel="noopener">Indusind Bank (IIB IN)</a> . Stranger still, much smaller banks like <a href="https://www.smartkarma.com/entities/bandhan-bank-ltd" target="_blank" data-smartkarma-citation="entities:26705:1" rel="noopener">Bandhan Bank (BANDHAN IN)</a>, <a href="https://www.smartkarma.com/entities/federal-bank-ltd" target="_blank" data-smartkarma-citation="entities:11784:1" rel="noopener">Federal Bank (FB IN)</a> and <a href="https://www.smartkarma.com/entities/idfc-first-bank-limited" target="_blank" data-smartkarma-citation="entities:26934:1" rel="noopener">IDFC First Bank Limited (IDFCBK IN)</a> have decided to come to the rescue of Yes Bank even though their own share prices have been under considerable pressure. When the largest private sector bank, known for its superior asset quality and conservative risk management, decides to stay away from the blood transfusion, that is perhaps an indication of the likely outcome of the rescue mission of Yes Bank. 
While HDFC Bank shareholders may be pleased by the bank’s decision to be a bystander, the same cannot be said about the shareholders of smaller banks like Federal, Bandhan and IDFC First whose share price already indicate shareholders’ displeasure with their existing performance. While it is understandable for larger private sector players to participate in the rescue of a private sector bank in the interest of financial stability, one is at a loss to understand why smaller players have rushed to lock-in their investment for 3 years when even the largest private sector bank is unwilling to take the risk.

In the State Bank Of India (SBIN IN)-led bail-out of Yes Bank (YES IN) assisted by private sector entities, HDFC Bank (HDFCB IN), the largest private sector bank, is notably absent, as is Indusind Bank (IIB IN) . Stranger still, much smaller banks like Bandhan Bank (BANDHAN IN), Federal Bank (FB IN) and IDFC First Bank Limited (IDFCBK IN) have decided to come to the rescue of Yes Bank even though their own share prices have been under considerable pressure. When the largest private sector bank, known for its superior asset quality and conservative risk management, decides to stay away from the blood transfusion, that is perhaps an indication of the likely outcome of the rescue mission of Yes Bank. 
While HDFC Bank shareholders may be pleased by the bank’s decision to be a bystander, the same cannot be said about the shareholders of smaller banks like Federal, Bandhan and IDFC First whose share price already indicate shareholders’ displeasure with their existing performance. While it is understandable for larger private sector players to participate in the rescue of a private sector bank in the interest of financial stability, one is at a loss to understand why smaller players have rushed to lock-in their investment for 3 years when even the largest private sector bank is unwilling to take the risk.

HDFC Bank Declines to Donate Blood for Yes Bank; Why Did Weaker Donors Oblige?

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Periscope Analytics

Periscope Analytics focuses on event-driven trades across Asia Pacific and provides comprehensive, timely and systematic coverage of index changes to major Asia Pacific indices in a structured manner.

The analysis includes forecasted inclusions and exclusions to all major Asian indices that have significant amount of tracking assets, including estimates of passive buy/sell flow on the stocks. The service also provides commentary and impact of market consultations, ground rule changes, and other events (IPOs, spin-offs, M&A) that could lead to index changes and passive flow.

Periscope Analytics works with multi-strategy hedge funds, proprietary trading firms, stat arb trading groups and long-only investors that invest and trade in the Asia Pacific region with the data being used to trade index rebalances, avoid pre-positioning and passive flow, and to time entry into and exit from stocks.

Event-Driven Trades Across Asia Pacific

Index Rebalance

<ul>
<li>The changes to a global index in May will be announced pre-market open Wednesday and will be implemented at the close of trading on 29 May.</li>
<li>The big market moves since the last rebalance result in many changes with the final number dependent on the day picked to compute market cap and free float market cap.</li>
<li>There have been big price moves in stocks over the last few months with the forecast adds continuing to perform well and the forecast deletes beginning to catch a bid.</li>
</ul>


The changes to a global index in May will be announced pre-market open Wednesday and will be implemented at the close of trading on 29 May.
The big market moves since the last rebalance result in many changes with the final number dependent on the day picked to compute market cap and free float market cap.
There have been big price moves in stocks over the last few months with the forecast adds continuing to perform well and the forecast deletes beginning to catch a bid.


Global Index: Potential Changes in May for Asia Pac

Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

Our cautious outlook and expectation for continued downward consolidation for global equities remains intact. Broad global indexes (MSCI ACWI, ACWI ex-U.S., EAFE, and EM) are all trading within patterns of lower highs and lower lows, leading us to believe the most likely scenario is that this near-term bounce is likely nothing more than a countertrend rally before longer-term downtrends reassert themselves. The one bright spot is EM.  In this report we highlight a number of attractive set-ups within the Financial, Communication, Engineering &amp; Construction, and Transportation Sectors.

Our cautious outlook and expectation for continued downward consolidation for global equities remains intact. Broad global indexes (MSCI ACWI, ACWI ex-U.S., EAFE, and EM) are all trading within patterns of lower highs and lower lows, leading us to believe the most likely scenario is that this near-term bounce is likely nothing more than a countertrend rally before longer-term downtrends reassert themselves. The one bright spot is EM.  In this report we highlight a number of attractive set-ups within the Financial, Communication, Engineering &amp; Construction, and Transportation Sectors.

Global Equity Strategy: Bearish with the Exception of EM.

India

Federal Bank is a major Indian private sector commercial bank offering a comprehensive suite of banking and financial services, including retail banking, wholesale banking, and treasury operations. It provides products such as savings and current accounts, loans, credit and debit cards, insurance, and wealth management. The bank is headquartered in Aluva, Kochi, Kerala, India, and was founded on April 23, 1931.

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Federal Bank (FB IN)

RBI’s 1-Year Extensions to Bank CEOs: Creating Uncertainty and Short-Termism

The favoured treatment RBI has meted to Uday Kotak, and its inability to comprehend the significance of its decision to renew CEO tenures for only ...

Hemindra Hazari

MS-India Index Earning Revision (Jun): Hindustan Petroleum, National Aluminium, Oil & Natural Gas

We analyzed MS-India's consensus for Jun 2026 and highlighted changes of EPS in Hindustan Petroleum, National Aluminium, Oil & Natural Gas,...

Ke Yan, CFA, FRM

HDFC Bank Declines to Donate Blood for Yes Bank; Why Did Weaker Donors Oblige?

In the State Bank Of India (SBIN IN)-led bail-out of Yes Bank (YES IN) assisted by private sector entities, HDFC Bank (HDFCB IN), the largest...

Hemindra Hazari

Global Index: Potential Changes in May for Asia Pac

The index rebalances at the close tomorrow and there will be huge volume in the constituent changes at the close. Since announcement, the adds have...

Brian Freitas

Global Equity Strategy: Bearish with the Exception of EM.

Our cautious outlook and expectation for continued downward consolidation for global equities remains intact. Broad global indexes (MSCI ACWI, ACWI...

Vermilion Research

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