fundamental and technical analysis of banking stocks

CHAPTER 1 INTRODUCTION

INTRODUCTION OF THE STUDY

Investment is putting money into something with the expectation of profit. More specifically, investment is the commitment of money or capital to the purchase of financial instruments or other assets so as to gain profitable returns in the form of interest, dividend capital gain sends, or appreciation of the value of the instrument (capital gains). An investment involves the choice by an individual or an organization, such as a pension fund, after some analysis or thought, to place or lend money in a vehicle, instrument or asset, such as property, commodity, stock, bond, financial derivatives (e.g. futures or options), or the foreign asset denominated in foreign currency, that has certain level of risk and provides the possibility capital gainsay of generating returns over a period of time. Investment comes with the risk of the loss of the principal sum. The investment that has not been thoroughly analysed can be highly risky with respect to the investment owner because the possibility of losing money is not within the owner's control. The difference between speculation and investment can be subtle. It depends on the investment owner's mind whether the purpose is for lending the resource to someone else for economic purpose or not. In the view of fundamental analysis, stock valuation based on fundamentals aims to give an estimate of their intrinsic value of the stock, based on predictions of the future cash flows and profitability of the business. Fundamental analysis may be replaced or augmented by market criteria. An approach to invest analysis, technical analysis is radically different from fundamental analysis. Technical analysis don’t evaluate a large number of fundamental factors relating to the company the industry and the economy, instead they analyse market generated data like price and volume to determine the future direction of price movement. Here I conduct fundamental and technical analysis of four scrip from Banking industry listed at NSE with special reference to Hedge equities, Ernakulum and the project was completed in around in 2 month started from May to June, 2013. PROJECT REPORT ON FUNDAMENTAL AND TECHNICAL ANALYSIS OF FOUR BANKING SCRIPS

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STATEMENT OF THE PROBLEM

Here to understand the fundamental and technical analysis of different equity. To study the stock market trends of various stocks, evaluate the economy, industry & companies in the banking industry using fundamental and to know how the entry and exit point work with technical analysis. SIGNIFICANCE OF THE STUDY

The study is entitled to evaluate the performance of four scrip in banking sector wise and to find the optimal scrip in the industry. The study is conducted also to find out the direction and magnitude of banking industry. The analysis of the past performance will help to predict the future behavior of the scrip. This study may help the investors to take decisions regarding investments. The study also helps the trends in economic market. Stock selection criteria is a strategy in which an analyst or investor uses a systematic form of analysis to determine if a particular stock constitutes a good investment which should be added to their portfolio. There are many different ways to value stocks. The key is to take each approach into account while formulating an overall opinion of the stock. The objective of stock selection criteria is maximizing total return on investment for the target holding period, subject to limiting risk to acceptable level, and maintaining a targeted degree of portfolio diversification. OBJECTIVES OF THE STUDY

Primary objective  To examine the performance of four selected banks listed in NSE using fundamental and technical analysis.  Find out THE BEST among these four banks and rank them in order of buy.

PROJECT REPORT ON FUNDAMENTAL AND TECHNICAL ANALYSIS OF FOUR BANKING SCRIPS

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Secondary objective  To understand the current economic scenario.  To have a general awareness about banking industry.  To match the financial theory with practice.  To explore the financial position of the four scrip banks.  To understand the share practice movement with the help of technical analysis.  To understand the fundamental analysis.

SCOPE OF THE STUDY

The main purpose of this study is to conduct Fundamental and Technical Analysis. In my project the scope is limited to the four securities from the Banking sector. But this will provide an overall picture of the economy and the banking industry. The scrip I have selected are:  AXIS BANK  HDFC BANK  YES BANK  ICICI BANK The global economy, Indian economy, Banking Industry and the financial analysis of the above scrip are analyzed. METHODOLOGY OF THE STUDY

A research methodology is a way to systematically solve the research problem. It may be understood as a science of study how research is done. This portion includes study of various steps that are generally adopted by me as a research in studying this “research problem” along with my logic.


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a)Research Design A research design is a plan that specifies the source and types of information relevant to the research problem. The research design used here is the descriptive and analytical research design. Descriptive studies aims at portraying accurately the characteristics of a particular group pr situation, and the analytical approach helped me to conduct fundamental and technical analysis. b)Data Collection Method Secondary source includes as follows: Vital information relevant to study has been collected from different articles and journals, books, magazines, fact sheets.

c)Sample Design i) The population frame: The population frame consists of the whole banks in the industry. ii) Sampling method: Convenience sampling was used to select four banks. iii) Sample method: 4 banks from private sector were selected.

PERIOD OF STUDY

The period of study on FUNDAMENTAL AND TECHNICAL ANALYSIS ON BANKING SCRIPS in HEDGE EQUTIES about 45 days, during May & June

CHAPTER SCHEME

Chapter 1: Introduction, Introduction of the study, Statement of the Problem, Significance of the study, Objectives of the study, Scope of the study, Hypothesis, Methodology of the study, Period of study, Chapter Scheme, Assumptions of the study, Limitations of the study


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Chapter 2: Review of the related Literature Industry Profile, Company Profile, Theoretical Background of the study, Recent Studies on the Topic, Review on Research Methodology. Chapter3: Research Methodology Research Design, Study Approach, Techniques of Data Collection, Sampling Techniques, and Statistical Tools for Data Analysis (Minimum 2-3 statistical tools in addition to Percentage Analysis Chapter 4: Data Analysis and Interpretation Objective- wise Data Analysis, Hypothesis Testing (Appropriate tables, charts, calculations etc. should be added) Chapter 5: Summary and Conclusion Summary of the study, Observations/ Finding, Suggestions/ Recommendations, Scope for Further Study, Conclusion ASSUMPTION OF THE STUDY

 The secondary sources of data are true.  For the last 5 years, economic details, industry details of banking industry and various financial ratios of the bank such ICICI BANK, AXIS BANK, YES BANK, HDFC BANK are collected in a proper way. LIMITATIONS OF THE STUDY

 Only secondary data is used for analysis.  The prediction made using fundamental and technical analysis may not always be correct.  Past performance may or may not be sustained on future.  The share price of the company change with time. The tool used in this study is not effective for predicting those changes with respect to time.  Fundamental and technical analysis is a vast topic and only some of its aspects have been included in this study. These aspects have to be continually evaluated to improve the accuracy of the prediction. PROJECT REPORT ON FUNDAMENTAL AND TECHNICAL ANALYSIS OF FOUR BANKING SCRIPS

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CHAPTER 2 REVIEW OF THE RELATED LITERATURE


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INDUSTRTY PROFILE The Indian Economy -- A Brief History The second most populated country in the world (1.11 billion), India currently has the fourth largest economy in PPP terms, and is closing in at the heels of the third largest economy, Japan. At independence from the British in 1947, India inherited one of the world’s poorest economies (the manufacturing sector accounted for only onetenth of the national product), but also one with arguably the best formal financial markets in the developing world, with four functioning stock exchanges (the oldest one predating the Tokyo Stock Exchange) and clearly defined rules governing listing, trading and settlements; a well-developed equity culture if only among the urban rich; a banking system with clear lending norms and recovery procedures; and better corporate laws than most other erstwhile colonies. The 1956 Indian Companies Act, as well as other corporate laws and laws protecting the investors’ rights, were built on this foundation. After independence, a decades-long turn towards socialism put in place a regime and culture of licensing, protection and widespread red-tape breeding corruption. In 1990-91 India faced a severe balance of payments crisis ushering in an era of reforms comprising deregulation, liberalization of the external sector and partial privatization of some of the state sector enterprises. For about three decades after independence, India grew at an average rate of 3.5% (infamously labeled “the Hindu rate of growth”) and then accelerated to an average of about 5.6% since the 1980’s. The growth surge actually started in the mid-1970s except for a disastrous single year, 1979-80. As we have seen in Table 1.1, the annual GDP growth rate (based on inflation adjusted, constant prices) of 5.9% during 1990-2005 is the second highest among the world’s largest economies, behind only China’s 10.1%. In 2004, 52% of India’s GDP was generated in the services sector, while manufacturing (agriculture) produced 26% (22%) of GDP. In terms of employment, however, agriculture still accounts for about two-thirds of the half a billion labor force, indicating both poor productivity and widespread underemployment. Over 90% of the labor force works in the “unorganized sector.”


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ROLE OF SEBI SEBI is regulator to control Indian capital market. Since its establishment in 1992, it is doing hard work for protecting the interests of Indian investors. SEBI gets education from past cheating with naive investors of India. Now, SEBI is more strict with those who commit frauds in capital market. The role of security exchange board of India (SEBI) in regulating Indian capital market is very important because government of India can only open or take decision to open new stock exchange in India after getting advice from SEBI.

ROLE OF RESERVE BANK OF INDIA The Reserve Bank of India (RBI) plays a key role of regulator and controller of money market. The intervention of RBI is varied – curbing crisis situations by reducing key policy rates or curbing inflationary situations by rising key policy rates such as Repo, Reverse Repo, CRR etc.

FINANCIAL MARKET

financial market capital market

primary market

secondary market

money market

primary market

secondary market


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CAPITAL MARKET Capital markets are financial markets for the buying and selling of long-term debt- or equitybacked securities. These markets channel the wealth of savers to those who can put it to longterm productive use, such as companies or governments making long-term investments. Financial regulators, such as the UK's Bank of England (BoE) or the U.S. Securities and Exchange Commission (SEC), oversee the capital markets in their jurisdictions to protect investors against fraud, among other duties.

1)Primary market Primarily there are two types of stock markets – the primary market and the secondary market. This is true for the Indian stock markets as well. Basically the primary market is the place where the shares are issued for the first time. So when a company is getting listed for the first time at the stock exchange and issuing shares – this process is undertaken at the primary market. That means the process of the Initial Public Offering or IPO and the debentures are controlled at the primary stock market.

2) Secondary market On the other hand the secondary market is the stock market where existing stocks are bought and sold by the retail investors through the brokers. It is the secondary market that controls the price of the stocks. Generally when we speak about investing or trading at the stock market we mean trading at the secondary stock market. It is the secondary market where we can invest and trade in the stocks to get the profit from our stock market investment. MONEY MARKET As money became a commodity, the money market became a component of the financial markets for assets involved in short-term borrowing, lending, buying and selling with original maturities of one year or less. Trading in the money markets is done over the counter, is wholesale. Various instruments exist, such as Treasury bills, commercial paper, bankers' acceptances, deposits, certificates of deposit, bills of exchange, repurchase agreements, federal funds, and short-lived mortgage-, and asset-backed securities. It provides liquidity funding for the global financial system. Money markets and capital markets are parts of financial markets. PROJECT REPORT ON FUNDAMENTAL AND TECHNICAL ANALYSIS OF FOUR BANKING SCRIPS

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The instruments bear differing maturities, currencies, credit risks, and structure. Therefore they may be used to distribute the exposure.

Money Market Instruments: Money Market Instruments provide the tools by which one can operate in the money market. Money market instrument meets short term requirements of the borrowers and provides liquidity to the lenders. The most common money market instruments are Treasury Bills, Certificate of Deposits, Commercial Papers, Repurchase Agreements and Banker's Acceptance.

STOCK EXCHANGES IN INDIA

National Stock Exchange (NSE) The National Stock Exchange (NSE) is stock exchange located at Mumbai, India. It is the 11th largest stock exchange in the world by market capitalization and largest in India by daily turnover and number of trades, for both equities and derivative trading. NSE has a market capitalization of around US$1 trillion and over 1,652 listings as of July 2012. Though a number of other exchanges exist, NSE and the Bombay Stock Exchange are the two most significant stock exchanges in India, and between them are responsible for the vast majority of share transactions. The NSE's key index is the S&P CNX Nifty, known as the NSE NIFTY (National Stock Exchange Fifty), an index of fifty major stocks weighted by market capitalization. Indices NSE also set up as index services firm known as India Index Services & Products Limited (IISL) and has launched several stock indices including: 

S&P CNX Nifty, CNX Nifty Junior, S&P CNX 500, CNX Midcap.

Bombay Stock Exchange (BSE) The Bombay Stock Exchange Limited popularly called BSE is the oldest stock exchange in Asia. It is located at Dalal Street, Mumbai. Bombay stock exchange was established in 1875. There are around 5000 Indian companies listed in the stock exchange. As of July 2005, the market capitalization of the BSE was about Rs.20 trillion i.e. US $ 466 billion. The BSE SENSEX is the PROJECT REPORT ON FUNDAMENTAL AND TECHNICAL ANALYSIS OF FOUR BANKING SCRIPS

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short form of Sensitive index also called the BSE 30. It is widely used market index in India and Asia. As of 2005, it is among the 5th biggest stock exchanges in the world in terms of transactions volume. Along with the NSE the companies listed on the BSE have a combined market capitalization of US $ 125.5 billion. In 1990 the BSE crossed the 1000 mark for the first time. It crossed 2000, 3000 and 4000 figures in 1992. The up-beat mood of the market was suddenly lost with Harshad Mehta Scam. BSE Sensex The BSE SENSEX also known as the BSE 30 is a value-weighted index composed of 30 scrips, with the base April 1979 = 100. The set of companies which make up the index has been changed only a few minutes in the last 20 years. These companies account for around one-fifth of the market capitalization of the BSE. Apart from BSE SENSEX, BSE uses other stock indices as well; 

BSE 500, BSEPSU, BSEMIDCAP, BSE SMAMLCAP, BSEBANK.

MCX Stock Exchange Limited (MCX SX) MCX Stock Exchange Limited (MCX-SX), India’s new stock exchange, commenced operations in the Currency Derivatives (CD) segment on October 7, 2008 under the regulatory framework of Securities & Exchange Board of India (SEBI) and Reserve Bank of India (RBI). The Exchange is recognized by SEBI under Section 4 of Securities Contracts (Regulation) Act, 1956. In line with global best practices and regulatory requirements, clearing and settlement is conducted through a separate clearing corporation, MCX-SX Clearing Corporation Ltd. (MCXSX CCL). Indices SX40 is the flagship Index of MCX-SX. A free float based index of 40 large cap - liquid stocks representing diversified sectors of the economy. It is designed to be a performance benchmark and to provide for efficient investment and risk management instrument. It would also help in structuring passive investment vehicles.


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INDIAN BROKERAGE INDUSRTY Stock brokers A Brokerage firm, or simply Brokerages, is a financial institution that facilitates the buying and selling of financial securities between a buyer and a seller. Brokerage firms serve a clientele of investors who trade public stocks and other securities, usually through the firm's agent stockbrokers, they strive to meet the investing needs of the clinet and exchanges facilitate security trading. A traditional, or "full service", brokerage firm usually undertakes more than simply carrying out a stock or bond trade. The staff of this type of brokerage firm is entrusted with the responsibility of researching the markets to provide appropriate recommendations and in so doing they direct the actions of pension fund managers and portfolio managers alike. These firms also offer margin loans for certain approved clients to purchase investments on credit, subject to agreed terms and conditions. Traditional brokerage firms have also become a source of up-to-date stock prices and quotes. Stock broker A stockbroker is a regulated professional individual, usually associated with a brokerage firm or broker-dealer, who buys and sells shares and other securities for both retail and institutional clients, through a stock exchange or over the counter, in return for a fee or commission. Stockbrokers are known by numerous professional designations, depending on the license they hold, the type of securities they sell, or the services they provide. In the United States, a stockbroker must pass both the Series 7 and Series 63 exams in order to be licensed. Trading Pattern of the Indian Stock Market Trading in Indian stock exchanges is limited to listed securities of public limited companies. They are broadly divided into two categories, namely, specified securities (forward list) and nonspecified securities (cash list). Equity shares of dividend paying. Growth-oriented companies with a paid-up capital of at least Rs-50 million and a market capitalization of at least Rs.100 million and having more than 20.000 shareholders are. Normally, put in the specified group and the balance in non-specified group.


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Two types of transactions can be carried out on the Indian stock exchanges: (a) spot delivery transactions "for delivery and payment within the time or on the dale stipulated when entering into the contract which shall not be more than 14 days following the date of the contract": and (b) forward transactions "delivery and payment can be extended by further period of 14 days each so that the overall period does not exceed 90 days from the date of the contract". The latter is permitted only in the case of specified shares. A member broker in an Indian stock exchange can act as an agent, buy and sell securities for his clients on a commission basis and also can act as a trader or dealer as a principal, buy and sell securities on his own account and risk, in contrast with the practice prevailing on New York and London Stock Exchanges, where a member can act as a jobber or a broker only. The nature of trading on Indian Stock Exchanges are that of age old conventional style of face-to-face trading with bids and offers being made by open outcry. However, there is a great amount of effort to modernize the Indian stock exchanges in the very recent times. COMPANY PROFILE

HEDGE EQUITIES Hedge Equities is one of the leading Financial Services Company in India, specialized in offering a wide range of financial products, tailor made to suit individual needs. Hedge offers its customers a wide range of equity related services including trade execution on BSE , NSE , Derivatives , Depository services , online trading , investment advice etc. The firm has an online trading and investment site –www.hedgeequities.com. The site gives access to superior content and transaction facility to retail customers across the country. Team hedge is a balanced mix of more than 15 years experience cutting across various industries with a strong background in the financial markets. The board comprises of six power houses in their respective fields- fedex securities, baby marine exports. Thakkar developers, smart financial, sm hedge (cfo,Videocon industries) and Padmashree Mohanlal


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MISSION “To create an ethical and sustainable financial services platform for our customers and partner them to build business, to provide employees with meaningful work, self-development and progression, and to achieve a consistent and competitive growth in profit and earnings for our shareholders and staff”.

VISION “At Hedge Equities, they endeavor to become a well reputed financial services super-mart catering to the evolving needs and unique requirements of our clientele, and partnering with them to Build, Manage, and Grow their Wealth.”

MANAGEMENT Alex K Babu -

Managing Director

Bhuvanendran -

CEO

Bobby J Arakunnel-

COO

Mr. Mohanlal -

Director

Mr. Joy Arrackal -

Director

Dr.Samuel George -

Director

Mr.Raj Krishnan -

Director

Mr. Krishnadas -

Director

Mr. Pradeep Kumar C - Director


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HEDGE GROUP

Hedge Equities Hedge Equities is the flagship company of the Hedge Group. The venture revolutionized and popularized share trading culture in Kerala. Today, Hedge Equities enjoys the patronage of 35,000 satisfied customers who are reaping the benefits of professionally managed portfolios. Hedge Commodities Hedge Commodities offers a viable platform to engage in futures trading in agricultural and non-agricultural commodities. The in-depth knowledge of the Indian and world markets help our advisors to provide appropriate and timely assistance to our customers.


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Hedge School of Applied Economics The dire dearth of qualified share trading professionals in Kerala is what prompted the Hedge Group to commence the Hedge School of Applied Economics. Present and potential stock brokers are molded to international standards under the guidance of veteran financial experts. Live trading sessions and world class academic amenities are the highlights of the Hedge School.

Hedge Wealth Management Service (WMS) The premium Wealth Management Services (WMS) was introduced by Hedge Equities. The comprehensive financial package is intended at building, managing and growing the wealth of the client. Service offerings of WMS include Portfolio Management Services (PMS), Portfolio Advisory Services (PAS), Mutual Fund Advisory (MFA), Commodities, Foreign Exchange and Derivatives. A specialized team of SEBI registered portfolio managers and dealers furnish each investor with customized and research oriented solutions to garner maximum possible returns.

Hedge Finance With the inception of Hedge Finance, the Hedge Group entered the prestigious NBFC market of India. The company adheres strictly to the RBI regulations and primarily focuses on the Loan against Security sector. Hedge Finance has huge growth potential and intends to diversify its services in the near future.


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PRODUCT & SERVICES OF HEDGE EQUITIES

Online trading Hedge Equities has a large network of branches with online terminals of NSE and BSE in the Capital market and Derivative segments. The clients are assured of prompt order execution through dedicated phones and expert dealers at our offices. Internet Trading Hedge Equities offers Internet trading through this site. You can trade through the Internet from the comforts of your office or home, anywhere in the world. The dedicated IT systems ensure service up time and speed, making Internet broking through Hedge Equities hassle-free. Using the 'easiest' facility provided by NDSL, our clients can transfer the shares sold by them online without delivery instruction slips. Additionally, digitally signed contract notes can be sent to clients through E-mail. Depository services Hedge Equities is a member of the National Securities Depository Limited (NSDL), offer depository services with minimum Annual Maintenance Charges and transaction charges. Account holders can view their holding position through the Internet. We also offer the “easiest” facility provided by NDSL (electronic access to securities information and execution of secured transaction) through which clients can give delivery instructions via the Internet. Derivative trading. Hedge offer trading in the futures and options segment of the National Stock Exchange (NSE). Through the present derivative trading an investor can take a short-term view on the market for up to a three months’ perspective by paying a small margin on the futures segment and a small premium in the options segment. In the case of options, if the trade goes in the opposite direction the maximum loss will be limited to the premium paid.


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Knowledge Centre Knowledge Centre activities are intended to provide systematic and structured services mainly to new investors and also to young aspirant aiming for a career in financial markets. The centre has three functional areas: the publication Division, the Training centre, and wealth management advisory service which provides complete investment solutions to investors through knowledge based personalized service. Equity Research Hedge Equities constantly strive to deliver insightful research to enable pro-active investment decisions. The Research Department is broadly divided into two divisions – Fundamental Analysis Group (FAG) and Technical Analysis Group (TAG). Our fundamental analysts are continuously scanning the entire economy for discovering what they call the “hidden gems” in stock market terminology and present it to our clients for profitable investments. A good Fundamental Analysis team has the capability to identify emerging businesses before such businesses become the talk of the street and we are proud to say we have one such Fundamental Analysis team. Timing the market has always been the most difficult task for all analysts and our Technical Analysis Group has emerged to predict the market movements well in advance using complex Analytical methods including Elliot Wave Theory. We are equipped with cutting-edge technologies for technical charting which assist our technical analysts to predict both upside and downside movements efficiently for the benefit of our clients. Portfolio Management Services Hedge Equities is a SEBI-approved portfolio manager offering discretionary and nondiscretionary schemes to its clients. Hedge Equities’ portfolio management team keeps track of the markets on a daily basis and is exposed to a lot of information and analytic tools which an investor would not normally have access to. Other technicalities pertaining to shares like dividends, rights, bonus, buy-back, Mergers and Acquisitions are also taken care of by us. Maximize your returns by opting for our PMS scheme.


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Commodity Trading You can trade in commodity futures like gold, silver, crude oil, rubber etc. and take advantage of the extended trading hours (10 am to 11 pm) in commodities trading. Mutual Funds, Bonds etc. We also offer Mutual Funds and Bonds. You can select from a wide range of Mutual Funds and Bonds available in the markets today. Currency Trading Currency derivatives can be described as contracts between the sellers and buyers, whose values are to be derived from the underlying assets, the currency amounts. These are basically risk management tools in force and money markets used for hedging risks and act as insurance against unforeseen and unpredictable currency and interest rate movements. Any individual or corporate expecting to receive or pay certain amounts in foreign currencies at future date can use these products to opt for a fixed rate - at which the currencies can be exchanged now itself. Currency derivative serve the purpose of financial risk management encompassing various market risks. An upfront premium is payable for buying a derivative. Currency Futures will bring in more transparency and efficiency in price discovery, eliminate counterparty credit risk, provide access to all types of market participants, offer standardized products and provide transparent trading platform. CORPORATE SOCIAL RESPONSIBILITY Being a Responsible Corporate Citizen, Hedge Equities has initiated a Non Profit movement ‘Hedge Yuva’ which focuses on educating the masses about Stock Market, and the Hedge Equities initiates Hedge School of Applied Economics with the sole objective of moulding highly qualified investment professionals in the state. In other words, Hedge school is a knowledge initiative of Hedge Equities. It is the leading financial institution in the arena of Wealth management and allied financial services. Through the various activities of school, they


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facilitate students, youth and investors to explore career as well as investment opportunities in this sector. COMPETITORS INFORMATION Major competitors of Hedge equities are as follows: •

Geojit BNP Parbas

•

JRG Secuirities

•

Religare

•

Muthoot Securities

•

Share wealth

•

Motilal Oswal

•

Anandrathi

•

Angel Brocking

•

Accuman Capital

•

Nirmal Bang

REGIONAL ORGANIZATION STRUCTURE


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ORGANIZATION STRUCTURE

FUNCTIONAL DEPARTMENTS •

Client Relation Department: The client relation department assists the client or customer top open an account in HEDGE EQUITIES (p) Ltd securities. This department is also known as the front office. A client has to open two types of accounts to trade and own securities in the NSE & BSE.

•

Finance Department: Thus a department, to organize financial activities may be created under the direct control of the board of directors. Finance manager will decide the major financial policy methods. Lower levels can delegate the other routine activities.


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•

Marketing Department: The major functions of marketing department are: (i) Business associate development (ii) Brand promotion

(iii) Investment promotion(iv) Delivery

promotion •

Systems Department: The systems department is playing a vital role in the day operations of the company. It is through the systems department that the clients can avail the facilities of Internet trading

•

Human Resources Department: Human resource is often considered as the back bone of an organization even in this age of advanced automation and mechanization. Since virtual organizations are not very much popular in our part of the world, it is very important to any organization to have a HR department.

•

Trading Department: The department deals with the trading related activities of the company. The trading refers to the buying and selling of shares. This department is the most important part of the organization. There are two types of trading. They are 1) Online Trading. 2) Internet Trading.

•

Delivery and Depository Department: Delivery refers to the share that bought on particular day are not sold on that day itself and holding of the share for an appreciation in the value of the security and to trade it on a future date. Deliver Instruction Slip: it is a slip the client should fill and gave to the dealer regarding the purchase of the share.

•

Equity Research Department: The function of the department is to study the details regarding the share or securities and to make prediction regarding the future performance of the company.

THEORETICAL BACKGROUND OF THE STUDY

The word "investment" can be defined in many ways according to different theories and principles. It is a term that can be used in a number of contexts. However, the different meanings of "investment" are more alike than dissimilar. Generally, investment is the application of money PROJECT REPORT ON FUNDAMENTAL AND TECHNICAL ANALYSIS OF FOUR BANKING SCRIPS

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for earning more money. Investment also means savings or savings made through delayed consumption. According to economics, investment is the An amount deposited into a bank or machinery that is purchased in anticipation of earning income in the long run are both examples of investments. Although there is a general broad definition to the term investment, it carries slightly different meanings to different industrial sectors. On the other hand, finance professionals define an investment as money utilized for buying financial assets, for example stocks, bonds, bullion, real properties, and precious items. Utilization of resources in order to increase income or production output in the future. According to finance, the practice of investment refers to the buying of a financial product or any valued item with anticipation that positive returns will be received in the future. The most important feature of financial investments is that they carry high market liquidity. The method used for evaluating the value of a financial investment is known as valuation.

FUNDAMENTAL ANALYSIS Fundamental analysis is a stock valuation methodology that uses financial and economic analysis to envisage the movement of stock prices. The fundamental data that is analysed could include a company’s financial reports and non-financial information such as estimates of its growth, demand for products sold by the company, industry comparisons, economy-wide changes, changes in government policies etc. The outcome of fundamental analysis is a value (or a range of values) of the stock of the company called its ‘intrinsic value’ (often called ‘price target’ in fundamental analysts’ parlance). To a fundamental investor, the market price of a stock tends to revert towards its intrinsic value. If the intrinsic value of a stock is above the current market price, the investor would purchase the stock because he believes that the stock price would rise and move towards its intrinsic value. If the intrinsic value of a stock is below the market price, the investor would sell the stock because he believes that the stock price is going to fall and come closer to its intrinsic value. To find the intrinsic value of a company, the fundamental analyst initially takes a top-down view of the economic environment; the current and future overall health of the economy as a whole. PROJECT REPORT ON FUNDAMENTAL AND TECHNICAL ANALYSIS OF FOUR BANKING SCRIPS

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After the analysis of the macro-economy, the next step is to analyse the industry environment which the firm is operating in. One should analyse all the factors that give the firm a competitive advantage in its sector, such as, management experience, history of performance, growth potential, low cost of production, brand name etc. This step of the analysis entails finding out as much as possible about the industry and the inter-relationships of the companies operating in the industry. Steps in Fundamental Analysis Fundamental analysis is the cornerstone of investing. In fact all types of investing comprise studying some fundamentals. The subject of fundamental analysis is also very vast. However, the most important part of fundamental analysis involves delving into the financial statements. This involves looking at revenue, expenses, assets, liabilities and all the other financial aspects of a company. Fundamental analysts look at these information to gain an insight into a company’s future performance. Fundamental analysis consists of a systematic series of steps to examine the investment environment of a company and then identify opportunities. Some of these are: •

Macroeconomic analysis - which involves analyzing capital flows, interest rate cycles, currencies, commodities, indices etc.

•

Industry analysis - which involves the analysis of industry and the companies that are a part of the sector

•

Financial analysis of the company

•

Valuation Ratios for financial analysis I) Management efficiency ratio A) Return on Equity (ROE) Return on equity or return on capital is the ratio of net income of a business during a year to its stockholders' equity during that year. It is a measure of PROJECT REPORT ON FUNDAMENTAL AND TECHNICAL ANALYSIS OF FOUR BANKING SCRIPS

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profitability of stockholders' investments. It shows net income as percentage of shareholder equity. ROE = PAT/ Net worth

Where,

Net Worth = Share Capital + Reserve and Surplus b) Return on asset (ROA) Return on assets is the ratio of annual net income to average total assets of a business during a financial year. It measures efficiency of the business in using its assets to generate net income. It is a profitability ratio. ROA=Net income/Total Asset

II) Growth ratio a)Earnings Per Share (EPS) Ratio Earnings per share (EPS) ratio indicate the net income earned by each share of outstanding stock. It is most often used by investors as a primary comparison of performance and profitability across different companies. EPS = Profit after Tax / Number of Equity Dividend b) Price to Earnings Ratio (PE) It is the ratio of a company's stock price to its earnings per share. (Earnings per share or EPS is a company's net profit divided by the number of shares it has issued.) Another way of looking at the P/E ratio is as a ratio of the value that the market thinks a company deserves (its market capitalisaton) to its net profit. PE ratio = Market Price per Share/ EPS


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III) Per share ratio A) Book value The Price to Book Ratio formula, sometimes referred to as the market to book ratio, is used to compare a company's net assets available to common shareholders relative to the sale price of its stock. The formula for price to book value is the stock price per share divided by the book value per share Book value = Net worth – Preference dividend / Total number of equity shares B) Dividend per share ratio The sum of declared dividends for every ordinary share issued. Dividend per share (DPS) is the total dividends paid out over an entire year (including interim dividends but not including special dividends) divided by the number of outstanding ordinary shares issued. DPS can be calculated by using the following formula: DIVIDEND PER SHARE=DPS/EPS

IV) Leverage ratio A) Debt/equity ratio Debt-to-Equity ratio is the ratio of total liabilities of a business to its shareholders' equity. It is a leverage ratio and it measures the degree to which the assets of the business are financed by the debts and the shareholders' equity of a business. Debt Equity Ratio=Total liabilities/Shareholders Equity


27

B) Current Ratio Current ratio is the ratio of current assets of a business to its current liabilities. It is the most widely used test of liquidity of a business and measures the ability of a business to repay its debts over the period of next 12 months. CURRENT RATIO =CURRENT ASSET/CURRENT LIABILITY

V) Profitability ratio A) Net Profit Margin Profit margin is very useful when comparing companies in similar industries. A higher profit margin indicates a more profitable company that has better control over its costs compared to its competitors. Profit margin is displayed as a percentage. Net profit margin = Net income/Sales revenue

B) Dividend Payout Ratio Dividend payout ratio is the ratio of dividend per share divided by earnings per share. It is a measure of how much earnings a company is paying out to its shareholders as compared to how much it is retaining for reinvestment. Dividend payout ratio = Dividend per share / EPS * 100

C) Earnings Retention Ratio The earnings retention ratio (ability to keep profits and pay to shareholders) is a way to calculate what the percentageof earnings are returned to shareholders. Earnings Retention Ratio = (net income-dividends)/net income


28

TECHNICAL ANALYSIS Technical Analysis can be defined as an art and science of forecasting future prices based on an examination of the past price movements. Technical analysis is not astrology for predicting prices. Technical analysis is based on analyzing current demand-supply of commodities, stocks, indices, futures or any tradable instrument. Technical analysis involve putting stock information like prices, volumes and open interest on a chart and applying various patterns and indicators to it in order to assess the future price movements. The time frame in which technical analysis is applied may range from intraday (1-minute, 5-minutes, 10-minutes, 15-minutes, 30-minutes or hourly), daily, weekly or monthly price data to many years. There are essentially two methods of analyzing investment opportunities in the security market viz fundamental analysis and technical analysis. You can use fundamental information like financial and non-financial aspects of the company or technical information which ignores fundamentals and focuses on actual price movements. The basis of Technical Analysis What makes Technical Analysis an effective tool to analyze price behavior is explained by Following theories given by Charles Dow: •

Price discounts everything

•

Price movements are not totally random

1)Price discounts everything Each price represents a momentary consensus of value of all market participants - large commercial interests and small speculators, fundamental researchers, technicians and gamblers- at the moment of transaction" - Dr Alexander Elder Technical analysts believe that the current price fully reﬂects all the possible material information which could affect the price. The market price reﬂects the sum knowledge of all participants, including traders, investors, portfolio managers, buy-side analysts, sell-side analysts, market strategist, technical analysts, fundamental analysts and many others. It would be folly to disagree with the price set by such an impressive array of people with PROJECT REPORT ON FUNDAMENTAL AND TECHNICAL ANALYSIS OF FOUR BANKING SCRIPS

29

impeccable credentials. Technical analysis looks at the price and what it has done in the past and assumes it will perform similarly in future under similar circumstances. Technical analysis looks at the price and assumes that it will perform in the same way as done in the past under similar circumstances in future. 2) Price movements are not totally random Technical analysis is a trend following system. Most technicians acknowledge that hundreds of years of price charts have shown us one basic truth - prices move in trends. If prices were always random, it would be extremely difficult to make money using technical analysis. A technician believes that it is possible to identify a trend, invest or trade based on the trend and make money as the trend unfolds. Because technical analysis can be applied to many different time frames, it is possible to spot both short-term and long-term trends. Chart Charts are the working tools of technical analysts. They use charts to plot the price movements of a stock over specific time frames. It's a graphical method of showing where stock prices have been in the past. Types of price charts: 1. Line charts 2. Bar chart 3. Candlesticks Support &Resistance Support and resistance represent key junctures where the forces of supply and demand meet. These lines appear as thresholds to price patterns. They are the respective lines which stops the prices from decreasing or increasing.


30

TOOL USED Fibonacci Retracements Fibonacci Retracements are ratios used to identify potential reversal levels. These ratios are found in the Fibonacci sequence. The most popular Fibonacci Retracements are 61.8% and 38.2%. Note that 38.2% is often rounded to 38% and 61.8 is rounded to 62%. After an advance, chartists apply Fibonacci ratios to define retracement levels and forecast the extent of a correction or pullback. Fibonacci Retracements can also be applied after a decline to forecast the length of a counter trend bounce. These retracements can be combined with other indicators and price patterns to create an overall strategy. Indicator A Technical indicator is a mathematical formula applied to the security's price, volume or open interest. The result is a value that is used to anticipate future changes in prices. A technical indicator is a series of data points derived by applying a formula to the price data of a security. Price data includes any combination of the open, high, low or close over a period of time. Some indicators may use only the closing prices, while others incorporate volume and open interest into their formulas. The price data is entered into the formula and a data point is produced.


31

Indicator used 1) Relative Strength Index - RSI A technical momentum indicator that compares the magnitude of recent gains to recent losses in an attempt to determine overbought and oversold conditions of an asset. It is calculated using the following formula: RSI = 100 - 100/(1 + RS*) *Where RS = Average of x days' up closes / Average of x days' down closes.

As you can see from the chart, the RSI ranges from 0 to 100. An asset is deemed to be overbought once the RSI approaches the 70 level, meaning that it may be getting overvalued and is a good candidate for a pullback. Likewise, if the RSI approaches 30, it is an indication that the asset may be getting oversold and therefore likely to become undervalued. A trader using RSI should be aware that large surges and drops in the price of an asset will affect the RSI by creating false buy or sell signals. The RSI is best used as a valuable complement to other stock-picking tools. Simple Moving Average - SMA A simple, or arithmetic, moving average that is calculated by adding the closing price of the security for a number of time periods and then dividing this total by the number of time periods. Short-term averages respond quickly to changes in the price of the underlying, while long-term averages are slow to react. PROJECT REPORT ON FUNDAMENTAL AND TECHNICAL ANALYSIS OF FOUR BANKING SCRIPS

32

In other words, this is the average stock price over a certain period of time. Keep in mind that equal weighting is given to each daily price. As shown in the chart above, many traders watch for short-term averages to cross above longer-term averages to signal the beginning of an uptrend. As shown by the blue arrows, short-term averages (e.g. 15-period SMA) act as levels of support when the price experiences a pullback. Support levels become stronger and more significant as the number of time periods used in the calculations increases. Generally, when you hear the term "moving average", it is in reference to a simple moving average. This can be important, especially when comparing to an exponential moving average (EMA). PRIVATE BANKING SECTOR All those banks where greater parts of stake or equity are held by the private shareholders and not by government are called "private-sector banks". These are the major players in the banking sector as well as in expansion of the business activities India. The present private-sector banks equipped with all kinds of contemporary innovations, monetary tools and techniques to handle the complexities are a result of the evolutionary process over two centuries. They have a highly developed organizational structure and are professionally managed. Thus they have grown faster and stronger since past few years.


33

CHAPTER 3 RESEARCH METHODOLOGY


34

RESEARCH DESIGN A research design is the arrangement of conditions for collection and analysis of data in manner that aims to combine relevance to the research purpose with economy in procedure. Type of research: Descriptive Research Under this project study used the Descriptive Research. Descriptive study is a factfinding investigation with adequate interpretation. It is the simplest type of research. It includes survey and fact finding enquiries of different kinds. The major purpose of Descriptive Research is descriptive of the state of affairs as it exists at present. so researcher has no control over the variables STUDY APPROACH There are two basic approaches to research namely;  

Quantitative approach Qualitative approach

Quantitative approach This study is based on measurable quantities so quantitative approach is used in this project work. Therefore, data, in this approach, are available in the quantitative form. TECHNIQUES OF DATA COLLECTION Secondary Data Secondary data are those which are already being collected by someone else and which have already being passed through the statistical process. It is any data originally generated for some purpose other than the present research objectives. The secondary Sources of data are: 

Organization document.

 Departmental manuals.  Website


35

SAMPLING TECHNIQUES

The study was conducted for the period 2008-2012 and was based on data from four private sector banks. The data collected for analysis involves both fundamental and technical aspects and the value of NSE NIFTY benchmark index). o The selected bank for the analysis are:

SL.NO

BANKS

1

HDFC BANK

2

ICICI BANK

3

AXIS BANK

4

YES BANK

STATISTICAL TOOLS FOR DATA ANALYSIS

Statistical techniques is defined as a collection of methods used to process large amounts of report overall trends and data. It refers to an assortment of methodologies used in measurement of data. It is normally used in ascertaining relative performance that involves assumptions about functional relationships. Three statistical tools are used in this project; 1. Percentage analysis 2. Graphical representation of data.


36

1. Percentage analysis Percentage analysis is being widely used to interpret the results since it is simple and easy to understand for everyone. This is the best method for interpreting certain results. Here, in this study the percentage is being calculated in hundred thus the results are interpreted. Tables and charts are used in the study to make clearer and understandable. Percentage is often used in the data presentation as they simply numbers, reducing all of them to 0 to 100 ranges. Through the use of percentage data are reduced to standard from with base equal to 100. Hence, the answer interpreted using the method will help the researcher to arrive at a good conclusion for the study. Percentage Analysis = Number of respondents Sample size

100

2. Graphical representation of data A graphical representation is a visual display of data and statistical results. It is often more effective than presenting data in tabular form. There are many different types of graphical representation and which is used depends on the nature of the data and the type of statistical results for example, graphs, diagrams, maps and charts. In this project simple bar diagram is used as the tool for graphical representation.  Simple bar diagram A simple bar diagram is constructed for an immediate comparison. It is advisable to arrange the given data set in an ascending or descending order and plot the data PROJECT REPORT ON FUNDAMENTAL AND TECHNICAL ANALYSIS OF FOUR BANKING SCRIPS

37

variables accordingly. Simple bar diagram is used in this project in order to visualize the percentage of different variables.


38

CHATER 4 DATA ANALYSIS AND INTERPRETATION


39

FUNDAMENTAL ANALYSIS I) ECONOMY ANALYSIS FISCAL DEFICIT, CURRENT ACCOUNT DEFICIT AND INFLATION

The purpose of Budget to create economic space and find resources to achieve the objective of inclusive development.

Dr Vijay Kelkar Committee made its

recommendations to Government in September 2012. A new fiscal consolidation path with fiscal deficit at 5.3 per cent of GDP this year and 4.8 per cent of GDP in 2013-14 announced by the Government. Foreign investment in an imperative in view of the high current account deficit (CAD). FII, FDI and ECB three main source of CAD Financing. Foreign investment that is consistent with our economic objectives to be encouraged. Development must be economically and ecologically sustainable and democratically legitimate. Battle against inflation must be fought on all fronts. Efforts in the past few months have brought down headline WPI inflation to about 7 per cent and core inflation to about 4.2 percent. Food inflation is worrying but all possible steps to be taken to augment the supply side to meet the growing demand for food items. Government expenditure has both good and bad consequences and trick is to find the correct level of Government expenditure. Faced with huge fiscal deficit, Government expenditure rationalized in 2012-13. Some economic space retrieved. Space to be used to further Government's socio- economic objectives SAVINGS Need to incentivize greater savings by household sector in financial instruments. Following measures proposed: Rajiv Gandhi Equity Savings Scheme to be liberalized. Additional deduction of interest upto ` 1 lakh for a person taking first home loan up to ` 25 lakh during period 1.4.2013 to 31.3.2014 In consultation with RBI, instruments protecting savings from inflation to be introduced.


40

BANKING Compliance of public sector banks with Basel III regulations to be ensured. 14,000 crore provided in BE 2013-14 for infusing capital. All branches of public sector banks to have ATM by 31.3.2014. Proposal to set up India's first Women's Bank as a public sector bank. Provision of ` 1,000 crore as initial capital. 6,000 crore to Rural Housing Fund in 2013-14. National Housing Bank to set up Urban Housing Fund. ` 2,000 crore to be provided to the fund in 2013-14 GDP

YEAR

GDP

YEAR

GDP

2003

7.94

2008

3.89

2004

7.85

2009

8.48

2005

9.28

2010

10.55

2006

9.26

2011

6.33

2007

9.8

2012

4.5

INTERPRETATION The Gross Domestic Product (GDP) in India expanded 1.30 percent in the fourth quarter of 2012 over the previous quarter. GDP Growth Rate in India is reported by the OECD. Historically, from 1996 until 2012, PROJECT REPORT ON FUNDAMENTAL AND TECHNICAL ANALYSIS OF FOUR BANKING SCRIPS

41

India GDP Growth Rate averaged 1.63 Percent reaching an all time high of 5.80 Percent in December of 2003 and a record low of -1.70 Percent in March of 2009. In India, the growth rate in GDP measures the change in the seasonally adjusted value of the goods and services produced by the Indian economy during the quarter. India is the world’s tenth largest economy and the second most populous.

INFLATION RATE

INTERPRETATION The inflation rate in India was recorded at 4.89 percent in April of 2013. Inflation Rate in India is reported by the Ministry of Commerce and Industry. Historically, from 1969 until 2013, India Inflation Rate averaged 7.74 Percent reaching an all time high of 34.68 Percent in September of 1974 and a record low of -11.31 Percent in May of 1976. In India, the wholesale price index (WPI) is the main measure of inflation. The WPI measures the price of a representative basket of wholesale goods. In India, wholesale price index is divided into three groups: INDIA CURRENT ACCOUNT TO GDP


42

INTERPRETATION India recorded a Current Account deficit of 5.10 percent of the country's Gross Domestic Product in 2012. Current Account to GDP in India is reported by the Ministry of Finance, Government of India. Historically, from 1980 until 2012, India Current Account to GDP averaged -1.46 Percent reaching an all time high of 1.50 Percent in December of 2003 and a record low of -5.10 Percent in December of 2012. The Current account balance as a percent of GDP provides an indication on the level of international competitiveness of a country. Usually, countries recording a strong current account surplus have an economy heavily dependent on exports revenues, with high savings ratings but weak domestic demand. On the other hand, countries recording a current account deficit have strong imports, a low saving rates and high personal consumption rates as a percentage of disposable incomes. This page includes a chart with historical data for India Current Account to GDP.

INDIA INTEREST RATE

INTERPRETATION The benchmark interest rate in India was last recorded at 7.25 percent. Interest Rate in India is reported by the Reserve Bank of India. Historically, from 2000 until 2013, India Interest Rate averaged 6.57 Percent reaching an all time high of 14.50 Percent in August of 2000 and a record low of 4.25 Percent in April of 2009. In India, interest rate decisions are taken by the Reserve Bank of India's Central Board of Directors. The official interest rate is the benchmark repurchase rate. This page includes a chart with historical data for India Interest Rate.


43

INDIA GOVERNMENT BUDGET

INTERPRETATION India is expected to record a Government Budget deficit equal to 5.2 percent of the country's Gross Domestic Product in 2012/13 fiscal year. Government Budget in India is reported by the Ministry of Finance, Government of India. Historically, from 1990 until 2011, India Government Budget averaged 3.7 Percent of GDP reaching an all time high of -2.0 Percent of GDP in December of 1996 and a record low of -7.8 Percent of GDP in December of 2008. Government Budget is an itemized accounting of the payments received by government (taxes and other fees) and the payments made by government (purchases and transfer payments). A budget deficit occurs when an government spends more money than it takes in. The opposite of a budget deficit is a budget surplus. This page includes a chart with historical data for India Government Budget.


44

II) INDUSTRY ANALYSIS I)

Porter's five forces model

BARRIEIERS TO ENTRY

>Product differentiations very difficult >Licensing requirement

BARGAINING POWER OF SUPPLIERS IS VERY LOW

THREAT OF COMPETITORS

>Large No Of Banks >High Market Growth

>Nature Of Suppliers

>Rate

>Few Alternatives

>Low Switching Costs

>RBI Rules And Regulations

>Undifferentiated

>Suppliers Are Not Concentrated

>High Fixed Cost

>Forward Integration

>Services >High Exit Barriers

BARGAINING POWER OF CONSUMER VERY HIGH

>Large No of Alternatives >Low Switching Costs >Undifferentiated Services >Full Information about Product

THREAT OF SUBSTITUTE >Non Banking Financial Sector Increasing

Rapidly >Deposits In Posts >Stock Market >NBFC >Mutual Fund PROJECT REPORT ON FUNDAMENTAL AND TECHNICAL ANALYSIS OF FOUR BANKING SCRIPS

45

POTENTIAL ENTRY OF NEW COMPETITORS Reserve Bank of India has laid out a stagnant rules and regulation for new entrant in Banking Industry. We expect merger and acquisition in the banking industry in near future. Hence, the industry is less proof new competitor. Barriers to an entry in banking industry no longer exist. So lots of private and foreign banks are entering in the market. Competitors can come from an industry to „disinter mediate‟ bank product differentiation is very difficult for banks and exit is difficult. So every bank strives to survive in highly competitive market so we see intense competitive can mergers and acquisitions. Government policies are supportive to start new bank. There is less statutory requirement needed to start a new venture. Every bank to tries to achieve economies of scale through use of technology and selecting and training manpower. There are public sector banks, private sector and foreign banks along with nonbanking finance companies competing in similar business segments RIVALRY AMONG COMPETING FIRMS Rivalry among competitors is very fierce in Indian Banking Industry. The services banks offer is more of homogeneous which makes the Company to offer the same service at a lower rate and eat their competitor market’s share. Market Players use all sorts of aggressive selling strategies and activities from intensive advertisement campaigns to promotional stuff. Even consumer switch from one bank to another, if there is a wide spread in the interest. Hence the intensity of rivalry is very high. The no of factors has contributed to increase rivalry those are. 1. A large no of banks 2. High market growth rate 3. Homogeneous product and services 4. Low switching cost 5. Undifferentiated services 6. High exit barriers 7. Low government regulations PROJECT REPORT ON FUNDAMENTAL AND TECHNICAL ANALYSIS OF FOUR BANKING SCRIPS

46

BARGAINING POWER OF SUPPLIERS Banking industry is governed by Reserve Bank of India. Reserve Bank of India is the authority to take monetary action which leads to direct impact on circulation of money in the Economy. The rules and regulation lay down by RBI. Suppliers of banks are depositors .these are those people who have excess money and prefer regular income and safety. In banking industry suppliers have low bargaining power. 1. Nature of suppliers Suppliers of banks are those people who prefer low risk and those who need regular income and safety as well. Banks best place for them to deposits theirs surplus money. 2. RBI rules and regulations Banks are subject to RBI rules and regulations .bank have to behave in a way that RBI . So RBI takes all decisions related to interest rates. This reduces bargaining power of suppliers. 3. Suppliers not concentrated Banking industry suppliers sure not concentrated. There are numerous with negligible portion of offer .so this reduce their bargaining power. BARGAINING POWER OF CONSUMERS In today world, Customer is the King. Banks offers different services According to clients need and requirement. They offer loans at Prime Lending Rate (PLR) to their trust worthy clients and higher rate to others clients. Customers of banks are those who take loans and uses services of banks. Customers have high bargaining power. These are 1. Large no of alternatives Customers have large no of alternatives, there are so many banks, which fight for same pie. There are many non financial institutions like icici, hdfc, and ifci, etc. which has also jump into these business. there are foreign banks , private banks, co-operative banks and


47

development banks together with specialized financial companies that provides finance to customers .these all increase preference for customers. 2. Low switching cost Cost of switching from one bank to another is low. Banks are also providing zero balance account another types of facilities. They are free to select any banks service. Switching cost are becoming lower with internet banking gaining momentum and a result customers loyalties are harder to retain. 3. Undiffenciated service Bank provide merely similar service there are no much diffracted in service provides by different banks so, bargaining power of customers increase. They cannot be charged for differentiation. 4. Full information about the market Customers have full information about the market due to globalization and digitalization Consumers have become advance and sophisticated .they are aware with each market condition so banks have to be more competitive and customer friendly to serve them. POTENTIAL DEVELOPMENT OF SUBSTITUTE PRODUCTS Every day there is one or the other new product in financial sector. Banks are not limited to tradition banking which just offers deposit and lending. In addition, today banks offers loans for all products, derivatives, For Ex, Insurance, Mutual Fund, Demit account to name a few. The wide range of choices and needs give a sufficient room for new product development and product enhancement. Substitute products or services are those, which are different but satisfy the same set of customers. In private banking industry following are the substitutes: NBFC: Non-banking financial Institutions play an important role in giving financial assistance. Mobilization of financial resources outside the traditional banking system has witnessed tremendous growth in recent years in the India. NBFC is a close substitute of banking in respect of raising funds. Borrower can easily raise funds from NBFC because it requires less formal procedure for getting funds compare to private banks. PROJECT REPORT ON FUNDAMENTAL AND TECHNICAL ANALYSIS OF FOUR BANKING SCRIPS

48

Post Office Products: Post office is also providing some service like fixed deposit facility, saving account, recurring account etc. The interest rate of saving account is higher than private banks. It is fully secured by the government so people who do not want to take risk for them post office saving is good substitute. Government Bond: Govt. Bond also attracts savings from the general public. It is less risky and more secured as compare to savings in private banks. Mutual Funds: Mutual funds are also now proving as good substitutes for banks. They assure for providing high return with less time in comparison of banks. The administrative expenses are also very low as compared to banks. Investment in Mutual funds is more flexible than investment in banks. Stock Market: People who are ready to bear risk and wants a high return on their investment, stock market is a good substitute for them. Day by day investors are moving towards stock market as interest rate in banks are decreasing. So now stock market has proved as a big competitor for baking sector. Debentures: Debentures is also proved as a good substitute of bank’s fixed deposit as return on debenture is fixed and high. There are different types of debentures, which attract various classes of investors. Other Investment Alternatives: Now common people’s attraction is shifting from banks to other various alternatives such as gold, precious metals, land, small savings etc. As we can see the growing trend in these alternatives in comparison of decreasing interest rates in banks.


49

III) COMPANY ANALYSIS

I)

AXIS BANK

Axis Bank Limited provides retail and corporate banking services in India. Its deposit products include savings, current, resident foreign currency, and salary accounts, as well as fixed deposits, tax saver fixed deposits, prepaid cards, and recurring deposits. The company’s loan products comprise home loans, car loans, education loans, personal loans, loans against shares and security, and loans against property and gold for individuals; working capital finance for corporate; loans against property for small and medium enterprises; microfinance for microfinance institutions; and agriculture business loans. It also offers safe deposit locker, Internet banking, money transfer, payment and collection, cash management, finance management, and forex services; investment products; life, health, accident, home, motor, and business guard insurance products; merchant solutions; capital market and treasury solutions; trading services; and debit, credit, and prepaid cards. As of March 31, 2013, it operated 1,947 branches and extension counters, as well as 11,245 ATMs in India. Axis Bank Limited also has branches in Singapore, Hong Kong, Dubai, Colombo, Abu Dhabi, and Shanghai. The company was formerly known as UTI Bank Limited and changed its name to Axis Bank Limited in July 2007. Axis Bank Limited was incorporated in 1993 and is based in Mumbai, India.

I)PROFITABILITY RATIO

A) NET PROFIT MARGIN (%) Net profit margin = Net income/Sales revenue

YEAR

Net profit margin (%)

2012 2011 2010 2009 2008

15.51 17.2 16.1 13.31 12.22


50

Net profit margin (%) 20 15 10


5 0 2012

2011

2010

2009

2008

INTERPRETATION The above table shows that, AXIS Bank is having high Net Profit Margin of 17.2% during the year 2011.

B) DIVIDEND PAYOUT RATIO (NET PROFIT) Dividend payout ratio = Dividend per share / EPS * 100 YEAR

Dividend payout ratio (net profit)

2012 2011 2010 2009 2008

18.15 19.78 22.56 23.16 23.49

Dividend payout ratio (net profit) 25 20 15 Dividend payout ratio (net profit)

10 5 0 2012

2011

2010

2009

2008


51

INTERPRETATION The above table shows that, AXIS Bank is having high dividend payout ratio of 23.49% during the year 2008.

C) EARNING RETENTION RATIO Retention ratio= (net income-dividends)/net income YEAR

Earning retention ratio

2012

81.77

2011

80.26

2010

77.47

2009

76.94

2008

76.84

Earning retention ratio 83 82 81 80 79 78 77 76 75 74


2012

2011

2010

2009

2008

INTERPRETATION The above table shows that, AXIS Bank is having high Retention ratio of 81.77 % during the year 2012


52

II) MANAGAGEMENT EFFICIENCY RATIO A) ROE ROE=PAT/ Net worth Net Worth = Share Capital + Reserve and Surplus YEAR

ROE

2012 2011 2010 2009 2008

18.51 17.87 15.69 17.75 12.38

Return on equity 20 15 10

return on equity

5 0 2012

2011

2010

2009

2008

INTERPRETATION The graph shows that, AXIS Bank is having high Return on equity of 18.51 % during the year 2012. B) RETURN ON ASSET RETURN ON ASSET = Net income/total asset YEAR

ROA

2011-2012

18.51

2010-2011

17.87

2009-2010

15.69

2008-2009

17.85

2007-2008

12.38


53

INTERPRETATION

From the above table it is clearly understood that there is a fluctuating growth in the ROA for last five years and it reaches in the highest of 18.51 in 2012 III) GROWTH RATIO A) EPS EPS= PAT/ Number of equity shares YEAR

EPS

2011-2012

102.67

2010-2011

82.54

2009-2010

62.06

2008-2009

50.57

2007-2008

29.94

EPS 120 100 80 60

EPS

40 20 0 2012

2011

2010

2009

2008


54

INTERPRETATION

From the above table it is clearly understood that there is a continues growth in the EPS for last four years and it reaches in the highest of 102.67 in 2012. B) PRICE EARNING RATIO PE RATIO= Market Price Per Share/ EPS YEAR

PE RATIO

2011-2012

11.04

2010-2011

16.16

2009-2010

15.02

2008-2009

11.68

2007-2008

26.23

PE Ratio 30 25 20 15

PE Ratio

10 5 0 2012

2011

2010

2009

2008

INTERPRETATION

From the above table it is clearly understood that there is a fluctuating growth in the PE Ratio for last five years and it reaches in the highest of 26.23 in 2008.


55

IV) LEVARAGE RATIO A) CURRENT RATIO Current ratio =current asset/current liability

YEAR

CURRENT RATIO

2011-2012

0.75

2010-2011

0.56

2009-2010

0.63

2008-2009

0.37

2007-2008

0.36

INTERPRETATION

From the above table it is clearly understood that there is a uptrend in growth in the Current Ratio for last five years and it reaches in the highest of .75 in 2012.


56

B) DEBT/EQUTY RATIO Debt/equty ratio = total liability/shareholders equity YEAR

Debt equity ratio

2011-2012

9.96

2010-2011

8.81

2009-2010

11.49

2008-2009

9.99

2007-2008

9.96

INTERPRETATION

From the above table it is clearly understood that there is a fluctuating growth in the debt equity Ratio for last five years and it reaches in the highest of 11.49 in 2010.


57

V) PER SHARE RATIO A) BOOK VALUE BOOK VALUE = Net worth – Preference dividend / Total number of equity shares

YEAR

Book value

2011-2012

551.99

2010-2011

462.77

2009-2010

395.99

2008-2009

284.5

2007-2008

245.13

Book value 600 500 400 300

Book value

200 100 0 2012

2011

2010

2009

2008

INTERPRETATION

From the above table it is clearly understood that there is a uptrend growth in the Book value for last five years and it reaches in the highest of 551.99 in 2012.


58

B)DIVIDEND PER SHARE Dividend per share = dividend / number of shares

Year

Dividend per share

2011-2012

18

2010-2011

16

2009-2010

14

2008-2009

10

2007-2008

6

DIVIDEND PER SHARE 20 18 16 14 12 10

DIVIDEND PER SHARE

8 6 4 2 0 2012

2011

2010

2009

2008

INTERPRETATION

From the above table it is clearly understood that there is a continues growth in the DPS for last five years and it reaches in the highest of 18 in 2012.


59

FAIR VALUE CALCULATION AXIS BANK 1.) REVENUE GROWTH year

revenue 13,732.37 15,583.80 19,786.94 27,414.87 33,733.68

Mar '09 Mar '10 Mar '11 Mar '12 Mar '13

Average

Last 3-yr average growth 13.48 26.97 38.55 23.05

29.52

2.) PAT margin year Mar '09 Mar '10 Mar '11 Mar '12 Mar '13

Net Profit/(Loss) For the Period 1815.36 2514.53 3388.49 4242.21 5179.43

revenue 13,732.37 15,583.80 19,786.94 27,414.87 33,733.68

net profit margin 13.22 16.14 17.12 15.47 15.35

Last 3-yr average growth in PAT

15.98

3.) Projected Revenue = ((Last year revenue * Last 3-yr average growth)/100) + Last year revenue = (33,733.68*29.52)/100 =9958.1823 =9958.1823+33733.68 =43693.03 FY14E 4.) Projected PAT = (Projected revane * Last 3-yr average growth in PAT) = (43693.03*15.98)/100 =6984.02 FY14E 5) Projected Dividend Payout = Projected PAT * current year Dividend Payout =6984.02 *19% =1326.96 FY14E PROJECT REPORT ON FUNDAMENTAL AND TECHNICAL ANALYSIS OF FOUR BANKING SCRIPS

60

6.) No of Share No of share in AXISBANK: 467954468

7.) Projected Book Value = Addition this year = Projected PAT- Projected Dividend Payout =6984.02-1326.96 =5657.06 = per share = (Addition this year*1, 00, 00,000)/no of share = (5657.06*1, 00, 00,000)/ 467954468 =120.89 =Current Book value =707.50 FY 13 = Projected Book Value = per share + Current Book value =120.89 + 707.50 =828.39 FY14E 8.) 3 Year Average P/BV =2.00 9.) FY14E projected Value of share = Projected Book Value * 3 Year Average P/BV = 828.39*2.00 =1656.78


61

10.) COST OF EQUITY CALCULATION

CAPM Calculation RF Beta RM Market premium Cost of equity capital

PERCENTAGES 8.50% 1.39 16.5% 8.00% 19.62%

11.) WACC CALCULATION

WACC CALCULATION D/D+E E/D+E Er(d) Tax rate Er(e) Cost of capital

PERCENTAGES 90.0% 10.0% 10.25% 32.0% 19.62% 8.24%

12.) Discounting factor =1/1+.0824 =0.92 13.) AXIS BANK Fair value = FY14E projected Value of share* Discounting factor =1524.2374 FY14E


62

II)

HDFC BANK HDFC Bank Limited, together with its subsidiaries, provides a range of financial products and services to individuals and businesses in India, as well as in Bahrain and Hong Kong. The company operates in four segments: Retail Banking, Wholesale Banking, Treasury, and Other Banking Operations. It offers various deposit products, including savings accounts, salary accounts, current accounts, fixed and recurring deposits, demat accounts, safe deposit lockers, and rural accounts, as well as foreign currency deposits, accounts for returning Indians, and offshore accounts and deposits; loan products comprising personal, business, home, car, two wheeler, educational, term, and rural loans, as well as working capital and health care finance, and loans against assets and government sponsored programs; credit, debit, and prepaid cards; and private banking services. The company also provides export, import, remittance, travel, bank guarantee and letter of credit, and other foreign exchange services; life, motor, travel, and home insurance products; and investment banking services in the areas of equities and derivatives, project appraisal, mutual funds, IPO, gold and silver investments, bonds, structured finance, loan syndication and debt capital markets, equity placement, mergers and acquisitions, corporate advisory services, and capital market advisory services. In addition, it offers online and mobile banking, wealth, merchant and cash management, foreign currency demand drafts, foreign currency cheque collection, and lock box services. As of March 31, 2013, the company operated a network of 3,062 branches and 10,743 ATMs in 1,845 cities/towns. HDFC Bank Limited was founded in 1994 and is based in Mumbai, India.


A)Net profit margin (%) Net profit margin = Net income/Sales revenue year


2012 2011 2010 2009 2008

15.93 16.09 14.76 11.35 12.82


63



5 0 2012

2011

2010

2009

2008

INTERPRETATION

The above table shows that, HDFC Bank is having high Net Profit Margin of 16.09% during the year 2011.

B) Dividend payout ratio (net profit) Dividend payout ratio = Dividend per share / EPS * 100 year


2012 2011 2010 2009 2008

22.69 22.72 21.72 22.16 22.16

Dividend payout ratio (net profit) 23 22.5 22


21.5 21 2012

2011

2010

2009

2008


64

INTERPRETATION

The above table shows that, HDFC Bank is having high dividend payout ratio of 22.72% during the year 2011.

C)Earning retention ratio Retention ratio= (net income-dividends)/net income year


2012 2011 2010 2009 2008

77.3 77.29 78.25 77.79 77.83

Earning retention ratio 78.5 78 77.5


77 76.5 2012

2011

2010

2009

2008

INTERPRETATION

The above table shows that, HDFC Bank is having high Retention ratio of 78.25 % during the year 2010. II MANAGEMENT EFFICIENCY RATIO

A) RETURN ON EQUITY ROE=PAT/ Net worth Net Worth = Share Capital + Reserve and Surplus


65

year

ROE

2012 2011 2010 2009 2008

17.26 15.47 13.68 15.29 13.82

ROE 20 15 10

ROE

5 0 2012

2011

2010

2009

2008

INTERPRETATION

The graph shows that, HDF C Bank is having high Return on equity of 17.26 % during the year 2012. B) RETURN ON ASSET RETURN ON ASSET= Net income/total asset YEAR

ROA

2011-2012

17.26

2010-2011

15.47

2009-2010

13.68

2008-2009

15.29

2007-2008

13.82


66

INTERPRETATION

From the above table it is clearly understood that there is a fluctuating growth in the ROA for last five years and it reaches in the highest of 17.26 in 2012

III) GROWTH RATIO

A)EARNINGS PER SHARE RATIO EPS=PAT/ Number of equity shares

YEAR

EPS

2011-2012

22.02

2010-2011

84.4

2009-2010

64.42

2008-2009

52.77

2007-2008

44.87


67

EPS 100 80 60 EPS

40 20 0 2012

2011

2010

2009

2008

INTERPRETATION

From the above table it is clearly understood that there is a fluctuating growth in the EPS for last four years and it reaches in the highest of 84.4 in 2011. B) PRICE EARNING RATIO

PE RATIO = Market Price Per Share/ EPS YEAR

PE Ratio

2011-2012

21.78

2010-2011

51.1

2009-2010

49.92

2008-2009

41.8

2007-2008

53.8

PE Ratio 60 50 40 30

PE Ratio

20 10 0 2012

2011

2010

2009

2008


68

INTERPRETATION From the above table it is clearly understood that there is a fluctuating growth in the PE Ratio for last five years and it reaches in the highest of 53.8 in 2008. IV) LEVARAGE RATIO A) CURRENT RATIO Current ratio =current asset/current liability YEAR

CURRENT RATIO

2011-2012

0.58

2010-2011

0.5

2009-2010

0.28

2008-2009

0.27

2007-2008

0.26

INTERPRETATION

From the above table it is clearly understood that there is a fluctuating growth in the Current Ratio for last five years and it reaches in the highest of .58 in 2012.

B)DEBT/EQUTY RATIO Debt/equty ratio = total liability/shareholders’ equity PROJECT REPORT ON FUNDAMENTAL AND TECHNICAL ANALYSIS OF FOUR BANKING SCRIPS

69

YEAR

Debt equity ratio

2011-2012

8.24

2010-2011

8.22

2009-2010

7.78

2008-2009

9.75

2007-2008

8.76

INTERPRETATION

From the above table it is clearly understood that there is a fluctuating growth in the debt equity Ratio for last five years and it reaches in the highest of 9.75 in 2009. V) PER SHARE RATIO

A)BOOK VALUE BOOK VALUE = Net worth – Preference dividend / Total number of equity shares YEAR

Book value

2011-2012

127.52

2010-2011

545.53

2009-2010

470.19

2008-2009

344.44

2007-2008

324.38


70

Book value 600 400 Book value

200 0 2012

2011

2010

2009

2008

INTERPRETATION

From the above table it is clearly understood that there is a fluctuating growth in the Book value for last five years and it reaches in the highest of 545.53 in 2011.

B)DIVIDEND PER SHARE Dividend per share=dps/eps

YEAR

DIVIDEND PER SHARE

2011-2012

4.3

2010-2011

16.5

2009-2010

12

2008-2009

10

2007-2008

8.5

DPS 20 15 10

DPS

5 0 2012

2011

2010

2009

2008


71

INTERPRETATION

From the above table it is clearly understood that there is a fluctuating growth in the DPS for last five years and it reaches in the highest of 16.05 in 2011.

FAIR VALUE CALCULATION HDFC BANK 1.) REVENUE GROWTH year

revenue 19,802.89 19,983.52 24,361.72 32,619.76 41,917.49


Average 0.903894809 17.97163747 25.31606609 22.18102754

Last 3-yr average growth

21.82291037


Net Profit/(Loss) For the Period 2,244.95 2,948.69 3,926.39 5,167.07 6,726.28

revenue 19,802.89 19,983.52 24,361.72 32,619.76 41,917.49



16.00127675

3.) Projected Revenue = ((Last year revenue * Last 3-yr average growth)/100) + Last year revenue = (41,917.49*21.82)/100 =9146.396318 =9146.396318+41,917.49 =51063.88632 FY14E 4.) Projected PAT = (Projected Revenue * Last 3-yr average growth in PAT) =(51063.88*16.00)/100 =8170.221 FY14E PROJECT REPORT ON FUNDAMENTAL AND TECHNICAL ANALYSIS OF FOUR BANKING SCRIPS

72

5) Projected Dividend Payout = Projected PAT * current year Dividend Payout =8170.221 *22.76% = 1859.735 FY14E

6.) No of Share No of share in HDFCBANK: 2379419030

7.) Projected Book Value = Addition this year = Projected PAT- Projected Dividend Payout =8170.221 – 1859.735 = 6311.333677 = per share = (Addition this year*1, 00, 00,000)/no of share = (6311.333*1, 00, 00,000)/ 2379419030 =26.52468353 =Current Book value =152.2 FY 13 = Projected Book Value = per share + Current Book value =26.524 + 152.2 =178.724 FY14E 8.) 3 Year Average P/BV = 3.895239719


73

9.) FY14E projected Value of share = Projected Book Value * 3 Year Average P/BV = 178.724 *3.895239719 =696.1754861



PERCENTAGES 8.50% 0.94 16.5% 8.00% 16.02%



PERCENTAGES 90.00% 10.00% 10.25% 32.00% 16.02% 7.875%

12.) Discounting factor =1/1+.07875 =0.926998841

13.) HDFC BANK Fair value = FY14E projected Value of share* Discounting factor =645.35 FY14E


74

III)

ICICI BANK

ICICI Bank Limited, together with its subsidiaries, provides banking and financial services to corporate and retail customers in 19 countries, including India. It primarily offers commercial banking, retail banking, project and corporate finance, working capital finance, insurance, venture capital and private equity, investment banking, broking, and treasury products and services.

The company provides current and savings accounts, term deposits, fixed and recurring deposits, outward remittances, and salary accounts; credit, debit, prepaid, and corporate cards; and home, commercial vehicle, personal, and car loans, as well as loans against securities. It also offers life, travel, health, car, two wheeler, home, and student medical insurance products; demat accounts; and investment products, such as mutual funds, gold, bonds, foreign exchange, and initial public offerings, as well as senior citizens savings schemes. In addition, the company provides wealth management products and services, including funds and investments, such as mutual funds, portfolio management services, and alternative investments; lockers; and risk protection, investment advisory and management, and shipment tracking services. Further, it offers real estate services related to residential and commercial real estate, joint venture structuring, and funding; direct equity; real estate funds; cash management and trade services; mergers and acquisitions advisory and loan syndication services; financial institutions, capital market, and custodial services; and project and technology finance. Additionally, the company provides business loans and vendor/dealer finance; transaction banking, trade, and private equity placement services; and NRI, rural and agricultural, Internet, mobile, and phone banking services. As of March 31, 2013, it had a network of 3,100 branches and 10,481 ATMs in India. ICICI Bank Limited was founded in 1955 and is based in Mumbai, India.


75

A) Net profit margin (%) Net profit margin = Net income/Sales revenue YEAR


2012 2011 2010 2009 2008

16.14 15.91 12.17 9.74 10.51



5 0 2012

2011

2010

2009

2008

INTERPRETATION

The above table shows that, ICICI Bank is having high Net Profit Margin of 16.14% during the year 2012.

B) Dividend payout ratio (net profit) Dividend payout ratio = Dividend per share / EPS * 100 Year


2012 2011 2010 2009 2008

32.82 35.23 37.31 36.6 33.12


76

Dividend payout ratio (net profit) 38 36 34


32 30 2012

2011

2010

2009

2008

INTERPRETATION

The above table shows that, ICICI Bank is having high dividend payout ratio of 37.31% during the year 2010.

C) Earning retention ratio Retention ratio= (net income-dividends)/net income Year


2012 2011 2010 2009 2008

67.19 64.49 61.4 63.23 66.35

Earning retention ratio 68 66 64 Earning retention ratio

62 60 58 2012

2011

2010

2009

2008

INTERPRETATION

The above table shows that, ICICI Bank is having high Retention ratio of 67.19 % during the year 2012


77

II) MANAGEMENT EFFICIENCY RATIO A) RETURN ON EQUITY

Roe=pat/ net worth Net Worth = Share Capital + Reserve and Surplus Year 2012 2011 2010 2009 2008

ROE 10.7 9.35 7.79 7.58 8.94

ROE 15 10 ROE

5 0 2012

2011

2010

2009

2008

Interpretation From the above table it is clearly understood that there is a fluctuating growth in the ROE for last five years and it reaches in the highest of 10.07 in 2012.

B) RETURN ON ASSET Return on asset= Net income/total asset

YEAR

ROA

2011-2012

10.7

2010-2011

9.35

2009-2010

7.79

2008-2009

7.58

2007-2008

8.94


78

Interpretation From the above table it is clearly understood that there is a fluctuating growth in the ROA for last five years and it reaches in the highest of 10.07 in 2012

III) GROWTH RATIO A) EARNINGS PER SHARE

EPS = PAT/ Number of equity shares YEAR

EPS

2011-2012

56.09

2010-2011

44.73

2009-2010

36.1

2008-2009

33.76

2007-2008

37.37


79

EPS 60 50 40 30

EPS

20 10 0 2012

2011

2010

2009

2008

Interpretation From the above table it is clearly understood that there is a continues growth in the EPS for the last four years and it reaches in the highest of 56.09 in 2012

B) ) PRICE EARNING RATIO

PE RATIO=Market Price Per Share/ EPS

YEAR

PE RATIO

2011-2012

16.5

2010-2011

22.79

2009-2010

22.04

2008-2009

15.84

2007-2008

27.41


80

PE RATIO 30 25 20 15

PE

10 5 0 2012

2011

2010

2009

2008

Interpretation From the above table it is clearly understood that there is a fluctuating growth in the PE Ratio for last five years and it reaches in the highest of 27.41 in 2008.

IV) LEVARGE RATIO A) CURRENT RATIO CURRENT RATIO =CURRENT ASSET/CURRENT LIABILITY

YEAR

CURRENT RATIO

2011-2012

1.97

2010-2011

1.73

2009-2010

1.94

2008-2009

0.78

2007-2008

0.72


81

INTERPRETATION

From the above table it is clearly understood that there is a fluctuating growth in the Current Ratio for last five years and it reaches in the highest of 1.97 in 2012. B)DEBT/EQUTY RATIO DEBT/EQUTY RATIO = TOTAL LIABILITY/SHAREHOLDERS EQUITY

YEAR

Debt equity ratio

2011-2012

4.23

2010-2011

4.1

2009-2010

3.91

2008-2009

4.42

2007-2008

5.27


82

INTERPRETATION


V) PER SHARE RATIO A) BOOK VALUE

BOOK VALUE= Net worth – Preference dividend / Total number of equity shares

YEAR

Book value

2011-2012

524.01

2010-2011

578.31

2009-2010

463.01

2008-2009

444.94

2007-2008

417.64

Book value 700 600 500 400 Book value

300 200 100 0 2012

2011

2010

2009

2008

Interpretation From the above table it is clearly understood that there is a fluctuating growth in the Book value for last five years and it reaches in the highest of 578.31 in 2011.


83

B) DIVIDEND PER SHARE DIVIDEND PER SHARE=DPS/EPS YEAR

DPS

2011-2012

16.5

2010-2011

14

2009-2010

12

2008-2009

11

2007-2008

11

DPS 20 15 10

DPS

5 0 2012

2011

2010

2009

2008

Interpretation From the above table it is clearly understood that there is a continues growth in the DPS for last five years and it reaches in the highest of 16.65 in 2012

FAIR VALUE CALCULATION ICICI BANK 1.) REVENUE GROWTH year Mar '09 Mar '10 Mar '11 Mar '12 Mar '13

Revenue 39,210.31 32,999.36 33,082.96 41,450.75 48,421.30

Average -18.82142563 0.252698066 20.18730662 14.39562754


11.61187741


84


Net Profit/(Loss) For the Period 3,758.13 4,024.98 5,151.38 6,465.26 8,325.47

revenue 39,210.31 32,999.36 33,082.96 41,450.75 48,421.30



16.1207884

3.) Projected Revenue = ((Last year revenue * Last 3-yr average growth)/100) + Last year revenue = (48,421.30*11.6187)/100 =5625.92 =48.421.30+5625.92 = 54043.922 FY14E

4.) Projected PAT = (Projected Revenue * Last 3-yr average growth in PAT) = (54043.92*16.1207)/100 = 8712.30631 FY14E

5) Projected Dividend Payout = Projected PAT * current year Dividend Payout =8712.30631 *31.22% = 2719.98203 FY14E

6.) No of Share No of share in ICICIBANK: 1153581715


85

7.) Projected Book Value = Addition this year = Projected PAT- Projected Dividend Payout =8712.30631 – 2719.98203 = 5992.32428 = per share = (Addition this year*1, 00, 00,000)/no of share = (5992.32428*1, 00, 00,000)/ 1153581715 =51.94538195 =Current Book value =578.21 FY 13 = Projected Book Value = per share + Current Book value =51.94538195 +578.21 =630.155382 FY14E 8.) 3 Year Average P/BV = 1.973682995 9.) FY14E projected Value of share = Projected Book Value * 3 Year Average P/BV = 630.155382 * 1.973682995 = 1243.726961 10.) COST OF EQUITY CALCULATION CAPM Calculation RF Beta RM Market premium Cost of equity capital

PERCENTAGES 8.5% 1.69 16.5% 8% 22.02%


86

11.) WACC CALCULATION WACC CALCULATION D/D+E E/D+E Er(d) Tax rate Er(e) Cost of capital

PERCENTAGES 87% 13% 10.25% 32% 22.02% 89.593%

12.) Discounting factor =1/1+.089593 =0.917773844

13.) ICICI BANK Fair value = FY14E projected Value of share* Discounting factor =1243.726961*0.917773844 = 1141.460074 FY14E


87

IV)

YES BANK

Yes Bank Limited provides banking and financial services in India and internationally. The company operates through Treasury, Corporate/Wholesale Banking, Retail Banking, and Other Banking Operations segments. The company offers corporate banking and commercial banking services, including working capital finance, specialized corporate finance, trade, cash management and transactional services, treasury services, investment banking solutions, and liquidity management solutions. It also provides financial services to corporate, multinational corporations, central and state government undertakings and agencies, financial institutions, and capital market participants. In addition, the company offers debt, trade finance, and financial advisory services to international customers. Further, the company provides business banking services to small and medium businesses; and retail banking products, including car loans, commercial vehicle loans, inventory finance, home loans, education loans, personal loans, salary overdraft, loan against property, and loan against shares. Additionally, it offers transaction banking comprising cash management services; liabilities, cards, and direct banking services; trade finance services; and capital markets, escrow account, and securities services, as well as financial market products and services.

The company also provides infrastructure banking and project finance, structured finance, realty banking, project advisory, and syndications to corporate customers; and investment banking services, including mergers and acquisitions, joint venture advisory services, private equity placement, and merchant banking services. As of March 31, 2013, it operated 430 branches covering 275 cities in India. The company also operates 951 ATMs; and 2 national operating centers. Yes Bank Limited was incorporated in 2003 and is headquartered in Mumbai, India.


88


A) Net profit margin (%) Net profit margin = Net income/Sales revenue year


2012 2011 2010 2009 2008

13.66 15.56 16.3 12.35 12.01



5 0 2012

2011

2010

2009

2008

INTERPRETATION

The above table shows that, YES Bank is having high Net Profit Margin of 16.3% during the year 2010.

B) Dividend payout ratio (net profit) Dividend payout ratio = Dividend per share / EPS * 100 year


2012 2011 2010 2009 2008

16.79 13.91 12.47 -


89

Dividend payout ratio (net profit) 20 15 10


5 0 2012

2011

2010

2009

2008

INTERPRETATION

The above table shows that, YES Bank is having high dividend payout ratio of 16.79% during the year 2012.

C) Earning retention ratio Retention ratio=(net income-dividends)/net income year


2012 2011 2010 2009 2008

83.23 86.1 87.54 100 100

Earning retention ratio 120 100 80 60


40 20 0 2012

2011

2010

2009

2008

INTERPRETATION

The above table shows that, YES Bank is having high Retention ratio of 100 % during the year 2008 & 2009 PROJECT REPORT ON FUNDAMENTAL AND TECHNICAL ANALYSIS OF FOUR BANKING SCRIPS

90

II) MANAGEMENT EFFICIENCY RATIO

A) RETURN ON EQUITY RATIO ROE =PAT/ Net worth Net Worth = Share Capital + Reserve and Surplus year

ROE

2012 2011

20.92 19.16

2010 2009 2008

15.46 18.7 15.6

return on equity 25 20 15 return on equity

10 5 0 2012

2011

2010

2009

2008

Interpretation The above table shows that, YES Bank is having high Return on equity of 20.92 % during the year 2012


91

B) RETURN ON ASSET RETURN ON ASSET= Net income/total asset

YEAR

ROA

2011-2012

20.92

2010-2011

19.17

2009-2010

15.48

2008-2009

18.71

2007-2008

15.16

INTERPRETATION The above graph shows that, YES Bank is having high Return on Asset of 20.92 % during the year 2012


92

III) GROWTH RATIO

A) EARNINGS PER SHARE RATIO EPS= PAT/ Number of equity shares

YEAR

EPS

2011-2012

27.68

2010-2011

20.95

2009-2010

14.06

2008-2009

10.23

2007-2008

6.76

EPS 30 25 20 15

EPS

10 5 0 2012

2011

2010

2009

2008

Interpretation From the above table it is clearly understood that there is a continues growth in the EPS for last four years and it reaches in the highest of 27.68 in 2012.


93

B)PRICE EARNING RATIO PE RATIO = Market Price Per Share/ EPS

YEAR

PE RATIO

2011-2012

11.22

2010-2011

14.24

2009-2010

14.12

2008-2009

9.69

2007-2008

27.28

PE Ratio 30 25 20 15

PE Ratio

10 5 0 2012

2011

2010

2009

2008

Interpretation From the above table it is clearly understood that there is a fluctuating growth in the PE Ratio for last five years and it reaches in the highest of 27.28 in 2008.


94

IV) LEVARAGE RATIO A)CURRENT RATIO CURRENT RATIO =CURRENT ASSET/CURRENT LIABILITY

YEAR

CURRENT RATIO

2011-2012

0.73

2010-2011

0.84

2009-2010

0.68

2008-2009

0.45

2007-2008

0.51

INTERPRETATION From the above table it is clearly understood that there is a fluctuating growth in the Current Ratio for last five years and it reaches in the highest of .84 in 2011.


95

B)DEBT/EQUTY RATIO DEBT/EQUTY RATIO = TOTAL LIABILITY/SHAREHOLDERS EQUITY

YEAR

Debt equity ratio

2011-2012

10.51

2010-2011

12.11

2009-2010

8.67

2008-2009

9.96

2007-2008

10.06

INTERPRETATION



96

V) PER SHARE RATIO

1) BOOK VALUE BOOK VALUE = Net worth – Preference dividend / Total number of equity shares YEAR

Book value

2011-2012

132.49

2010-2011

109.29

2009-2010

90.96

2008-2009

54.69

2007-2008

44.59

Book value 140 120 100 80 Book value

60 40 20 0 20112

2011

2010

2009

2008

Interpretation From the above table it is clearly understood that there is a continues growth in the Book value for last four years and it reaches in the highest of 132.49 in 2012.


97

B)DIVIDEND PER SHARE DIVIDEND PER SHARE=DPS/EPS YEAR

DPS

2011-2012

4

2010-2011

2.5

2009-2010

1.5

2008-2009

_

2007-2008

_

DPS 4.5 4 3.5 3 2.5 DPS

2 1.5 1 0.5 0 2012

2011

2010

2009

2008

Interpretation From the above table it is clearly understood that there is a continues growth in the DPS for last three years and it reaches in the highest of 4 in 2012 and there is 0 DPS in the year 2008 and 2009.


98

FAIR VALUE CALCULATION YES BANK 1.) REVENUE GROWTH year

revenue


2,438.34 2,945.24 4,665.02 7,164.48 9,551.43

Average 17.21 36.87 34.89 24.99


32.25


Net Profit/(Loss) For the Period 303.84 477.74 727.13 976.99 1,300.68

revenue 2,438.34 2,945.24 4,665.02 7,164.48 9,551.43



14.28

3.) Projected Revenue = ((Last year revenue * Last 3-yr average growth)/100) + Last year revenue = (9,551.43*32.25)/100 =3080.33 =9551.43+3080.33 =12631.54 FY14E 4.) Projected PAT = (Projected revenue * Last 3-yr average growth in PAT) = (12631.54 *14.28)/100 =1803.83 FY14E 5) Projected Dividend Payout = Projected PAT * current year Dividend Payout =1803.83 *19.22% =346.70 FY14E PROJECT REPORT ON FUNDAMENTAL AND TECHNICAL ANALYSIS OF FOUR BANKING SCRIPS

99

6.) No of Share No of share in YESBANK: 358622289

7.) Projected Book Value = Addition this year = Projected PAT- Projected Dividend Payout =1803.83 – 346.70 =1457.13 = per share = (Addition this year*1, 00, 00,000)/no of share = (1457.13*1, 00, 00,000)/ 358622289 =40.63 =Current Book value =161.94 FY 13 = Projected Book Value = per share + Current Book value =40.63 + 161.94 =202.57 FY14E 8.) 3 Year Average P/BV =2.89 9.) FY14E projected Value of share = Projected Book Value * 3 Year Average P/BV = 202.57*2.89 =584.44


100



PERCENTAGES 8.50% 1.80 16.5% 8.00% 22.90%



PERCENTAGES 93.8% 6.2% 10.25% 32.0% 22.90% 7.96%

12.) Discounting factor =1/1+.0796 =0.93 13.) YES BANK Fair value = FY14E projected Value of share* Discounting factor =541.34 FY14E


101

TECHNICAL ANALYSIS I)

AXIS BANK(AS PER 8/7/2013)

II)

HDFC BANK(AS PER 8/7/2013)


102

III)

ICICIBANK(AS PER 8/7/2013)

IV)

YESBANK(AS PER 8/7/2013)


103

CHAPTER6 SUMMARY AND CONCLUSION


104

SUMMARY OF THE STUDY A project was done at” HEDGE EQUITIES LTD” on the topic

“A study on Fundamental

Analysis of selected companies in banking sector”. Hedge equities is one of the foremost stock broker firm in south India which started functioning its operation in the stock market in the year 2012.ial The main aim of the company is to act as a financial for the investors. The main objective of my study is to understand the performance, growth and financial analysis of the top four companies in the banking sector. Duration of the study was from 15/4/2013 to 30/5/2013. For the purpose of the study, Fundamental analysis method is used. Fundamental analysis includes the analysis of economic, industry and the company as s whole. My study was confined to only four companies namely; AXISBANK, HDFCBANK, ICICIBANK & YESBANK For carrying out the study, both primary and secondary dada were used. The primary data and was collected though personal interview with research head and other officials of hedge equities and also employees of hedge school. The secondary data was collected from the company brochures, reports. Web page of NSE, BSE and also website of different companies. I was given this study by hedge equities because it was felt that the study will be useful since the market showed a bearish trend during the period of the study .with help of this study the investors can decide whether it is wise to invest in the market in selected companies, and also knows about growth of these companies and financial soundness, efficiency of the sector.

FINDINGS As per the objectives set and the analysis done on the fundamental analysis of BANKING sector the following are the major findings: Economy Analysis. India's economic confidence grew by 8 points to 68 per cent in the month of January 2013 as compared to December 2012, making it the second most economically confident country in the world, according to a survey titled 'Ipsos Economic Pulse of the World'. India's services sector PROJECT REPORT ON FUNDAMENTAL AND TECHNICAL ANALYSIS OF FOUR BANKING SCRIPS

105

has emerged as a prominent sector in terms of its contribution to national and state incomes, a comparison of the services performance done across the top 15 countries over the 11 year period from 2001 to 2011. India stood first in terms of increase in share of services in the gross domestic product (GDP) with 8.1 per cent, among top 15 countries during 2001-2011. Moreover, India was among the top 20 real estate investment markets globally with investment volume of Rs 190 billion (US$ 3.46 billion) recorded in 2012, according to Cushman & Wakefield's report ‘International Investment Atlas’. India is also expected to be the second largest manufacturing country globally in the next five years, followed by Brazil as the third ranked country, according to Deloitte. The Economic Scenario India is expected to record 6.1 per cent gross domestic product (GDP) growth in the current fiscal. The growth is expected to increase further to 6.7 per cent in 2014-15, according to the World Bank's latest India Development Update, a bi-annual report on the Indian economy. While, the Prime Minister's Economic Advisory Panel expects the economic growth rate to increase to 6.4 per cent in 2013-14 from 5 per cent during 2012-13, on back of improvement in performance of agriculture and manufacturing sectors. Indian manufacturing and services sectors expanded more than China in February 2013, according to a survey by HSBC. The HSBC composite index for India for manufacturing and services stood at 54.8 in February 2013, whereas it was 51.4 for China.

Industry Analysis  The present Rs 64 trillion (US$ 1.17 trillion) Indian banking industry is governed by the Banking Regulation Act of India, (1949) and is closely monitored by the Reserve Bank of India (RBI). RBI manages the country's money supply and foreign exchange and also serves as a bank for the Government of India and for the country's commercial banks. As


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of now, public sector banks account for 70 per cent of the Indian banking assets.  Liberal policies, Government support and huge development in other economic segments have made the Indian banking industry more progressive and inclusive with regard to global banking standards.  According to an IBA-FICCI-BCG report, India’s gross domestic product (GDP) growth will make the Indian banking industry the third largest in the world by 2025. According to the report, the domestic banking industry is set for an exponential growth in coming years with its assets size poised to touch USD 28,500 billion by the turn of the 2025.  The banking sector is highly correlated with the economy of the country. The GDP growth is estimated at 7.6 per cent for FY13, so the economy is expected to recover and be back on the growth track in FY13. This will also result in the banking space witnessing a spurt in growth in business next fiscal.  Increasing disposable income and increasing exposure to a range of products, have led consumers towards a higher willingness to take credit, particularly, young customers.  Increasing spread of mobile banking, which is expected to become the second largest channel for banking after ATMs, will accelerate growth of the sector  Financial Inclusion Program: Currently, in India, 41% of the adult population doesn’t have bank accounts, which indicates a large untapped market for banking players. Under the Financial Inclusion Program, RBI is trying to tap this untapped market and the growth potential in rural markets by volume growth for banks. PROJECT REPORT ON FUNDAMENTAL AND TECHNICAL ANALYSIS OF FOUR BANKING SCRIPS

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 The Indian economy will require additional banks, and expansion of existing banks to meet its credit needs. Company Analysis AXISBANK Strengths



Axis bank has been given the rating as one of top three positions in terms of fastest growth in private sector banks



Financial express has given number two position and BT-KPMG has rated AXIS bank as the best bank with some 26 parameters



The bank has a network of 1,947 domestic branches and 11,245 ATMs



The bank has its presence in 971 cities and towns



The banks financial positions grows at a rate of 29.52% y-o-y which is a major positive sign for any bank



The company’s net profit is Q3FY13 is 5179.43cr which has a increase of15.35% growth compared to 2012 Weaknesses



Gaps – Majorly they concentrated in corporate, wholesale banking, treasury services, retail banking



Foreign branches constitute only 8% of total assets



Very recently the bank started focusing its attention towards personal banking and rural areas



The share rates of AXIS bank is constantly fluctuating in higher margins which makes investors in an uncomfortable position most of the time



There are lot of financial product gaps in terms of performance as well as reaching out to the customer



There are many fraudulent activities involved in credit cards as the banks process credit card approval even without verification of original documents



Their financial consultants are not wise enough to guide the customers towards right investments



Customer service has to improve a lot in order to be in race with other major players Opportunities



Acquisitions to fill gap



In 2009, Alliance with Motilal Oswal for online trading for 10 million customers



In 2010, acquired Enam Securities Pvt Ltd – broking and investment banking



In Sep 2009, SEBI approved Axis Asset Management Co. for mutual fund business



No. of e-transactions increased from 0.7 million to around 2 million



Geographical expansion to rural market – 80% of them have no access to formal lending



46% use informal lending channels



24% unregulated money lenders



Now number of branches increased to 1947.



largest ATM network among private banks in India



Since it’s a new age banking there are lot of opportunities to have the advance technicalities in banking solutions compared to existing major players PROJECT REPORT ON FUNDAMENTAL AND TECHNICAL ANALYSIS OF FOUR BANKING SCRIPS

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

The assets in their international operations are growing at a very faster pace with a growth rate of 9%.



The concept of ETM (Everywhere teller machine) by AXIS Bank had a good response in terms of attracting new customers in personal banking segment



In 2013, RBI has decreased CRR to 4% from 5%.



Decreased repo rate & reverse repo rate by 50 points. Threats



Increasing popularity of QIPs due to ease in fund raising.



New banking license norms of RBI.



RBI allowed foreign banks to invest up to 74% in Indian banking



Government schemes are most often serviced only by govern banks like SBI ,Indian Banks, Punjab National Bank etc



ICICI and HDFC are imposing strong threats in terms of their expansion in customer base by their aggressive marketing strategies

ICICIBANK Strengths of ICICI Bank



ICICI is the second largest bank in terms of total assets and market share



Total assets of ICICI is Rs. 536,794.69 cr and recorded a maximum profit after tax of Rs. 8,325.47 cr and located in 19 countries



One of the major strength of ICICI bank according to financial analysts is its strong and transparent balance sheet



ICICI bank has first mover advantage in many of the banking and financial services. ICICI bank is the first bank in India to introduce complete mobile banking solutions and jewelry card



The bank has presence in 19 countries and around 3,350 branches and 10,486 ATM’s



ICICI bank is the first bank in India to attach life style benefits to banking services for exclusive purchases and tie-ups with best brands in the industry such as Nakshatra, Asmi, D’damas etc



ICICI bank has the longest working hours and additional services offering at ATM’s which attracts customers



Marketing and advertising strategies of ICICI have good reach compared to other banks in India Weaknesses of ICICI Bank



Customer support of ICICI section is not performing well in terms of resolving complaints



There are lot of consumer complaints filed against ICICI



The ICICI bank has the most stringent policies in terms of recovering the debts and loans, and credit payments. They employ third party agency to handle recovery management



There are also complaints of customer assault and abuse while recovering and the credit payment reminders are sent even before the deadlines which annoys the customers



The bank service charges are comparatively higher



The employees of ICICI are bank in maximum stress because of the aggressive policies of the management to win ahead in the race. This may result in less productivity in future years PROJECT REPORT ON FUNDAMENTAL AND TECHNICAL ANALYSIS OF FOUR BANKING SCRIPS

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Opportunities of ICICI Bank



Banking sector is grow at a rate of 24% yoy.



The concept of saving in banks and investing in financial products is increasing in rural areas as more than 62% percentage of India’s population is still in rural areas.



As per 2010 data in TOI, the total number b-schools in India are more than 1500. This can ensure regular supply of trained human power in financial products and banking services



Small and non performing banks can be acquired by ICICI because of its financial strength



ICICI bank is expected to have 20% credit growth in the coming years.



ICICI bank has the minimum amount of nonperforming assets Threats of ICICI Bank



RBI allowed foreign banks to invest up to 74% in Indian banking



Government sector banks are in urge of modernizing the capacities to ensure the customers switching to new age banks are minimized



HDFC is the major competitor for ICICI, and other upcoming banks like AXIS, HSBC impose a major threat



In rural areas the micro financing groups hold a major share



Though customer acquisition is high on one side, the unsatisfied customers are increasing and make them to switch to other banks

HDFCBANK Strengths



HDFC bank is the largest private bank by market capitalization in India.



HDFC bank is the second largest private banking sector in India having 3,062 branches and 10,743ATM’s



HDFC bank is located in 1,568 cities in India and has more than 800 locations to serve customers through Telephone banking



The bank’s ATM card is compatible with all domestic and international Visa/Master card, Visa Electron/ Maestro, Plus/cirus and American Express. This is one reason for HDFC cards to be the most preferred card for shopping and online transactions



HDFC bank has the high degree of customer satisfaction when compared to other private banks



The attrition rate in HDFC is low and it is one of the best places to work in private banking sector



HDFC has lots of awards and recognition, it has received ‘Best Bank’ award from various financial rating institutions like Dun and Bradstreet, Financial express, Euromoney awards for excellence, Finance Asia country awards etc



HDFC has good financial advisors in terms of guiding customers towards right investments Weakness



HDFC bank doesn’t have strong presence in Rural areas, where as ICICI bank its direct competitor is expanding in rural market



HDFC cannot enjoy first mover advantage in rural areas. Rural people are hard core loyals in terms of banking services.



HDFC lacks in aggressive marketing strategies like ICICI PROJECT REPORT ON FUNDAMENTAL AND TECHNICAL ANALYSIS OF FOUR BANKING SCRIPS

110



The bank focuses mostly on high end clients



Some of the bank’s product categories lack in performance and doesn’t have reach in the market



The share prices of HDFC are often fluctuating causing uncertainty for the investors Opportunities



HDFC bank has better asset quality parameters over government banks, hence the profit growth is likely to increase



The companies in large and SME are growing at very fast pace. HDFC has good reputation in terms of maintaining corporate salary accounts



HDFC bank has improved it’s bad debts portfolio and the recovery of bad debts are high when compared to government banks



HDFC has very good opportunities in abroad



Greater scope for acquisitions and strategic alliances due to strong financial position Threats



The non banking financial companies and new age banks are increasing in India



The HDFC is not able to expand its market share as ICICI imposes major threat



The government banks are trying to modernize to compete with private banks



RBI has opened up to 74% for foreign banks to invest in Indian market

YESBANK STRENGTHS:



The capital adequacy ratio of YBL at 18.30% is well above minimum requirements of 9% which Supports the long term soundness and sustainability of its business.



YBL's annualized RoA has been at or above 1.5% over last 3 years and its annualized RoE has been at or above 20% over last 4 years. This stands in testimony to the bank’s lucrative business model.



Over the years, YBL has brought down the cost to income ratios to 36%-38%,, which is far below the Industry average Cost to income ratio of approx 45% and retains high profitability per employee as compared to peers.

WEAKNESSES: 

Although YBL has made significant strides over the last few years, it is still a very small player in the banking space. It suffers from low market share as its network of branches (~360) is still Relatively smaller than its peers in both the public and private sector.



Being a new Bank in the industry, YBL’s brand awareness among retail customers is lower than its peers who have been in the business for significantly longer time.



YBL also has a relatively lower Current and Saving Account (CASA) base against its peers due to higher exposure to corporate banking.


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OPPORTUNITIES:



Savings rate deregulation by the RBI has offered YBL an opportunity to gain significant savings account market share by offering better rates and services to customers.



YBL’s entry into new product or segments like retail assets offers significant potential for the Bank to build on its expanding custom base. The ability to cross sell product to retail customers would enhance profitability of the Bank over the long run.



The large middle class population of India, with increasing incomes and banking needs along with a huge unbanked population below the age of 25 offers an enormous retail opportunity for banks in India. Smaller towns and rural India still provide a huge untapped potential for expansion THREATS



The tight monetary policy adopted by the RBI with a view to tame inflation could dampen corporate credit off take. Overall business could also be impacted due to reduction in asset quality and rise in NPAs.



Expansion may lead to increase in costs and overall reduction in operating profit accompanied by a decrease in quality of assets with exposure to retail in the future.



Recent regulatory changes including revised priority sector norms, adoption of BASEL III norms could result in lower profitability for the banking system in general, thereby also impacting YBL.


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RANKING PROFITABILTY RATIOS AXISBANK HDFCBANK ICICIBANK YESBANK NET PROFIT MARGIN

2

3

4

1

DIVIDENT PAYOUT RATIO

2

3

4

1

EARNING RETENSION RATIO

3

2

1

4

TOTAL

7

8

5

6

MANAGEMENT EFFICIENCY RATIO RETURN ON EQUITY

3

2

1

4

RETURN ON ASSET

3

2

1

4

TOTAL

6

4

2

8

GROWTH RATIO EPS

4

1

3

2

PE

1

4

3

2

TOTAL

5

5

6

4

LEVAARAGE RATIO CURRENT RATIO

3

1

4

2

DEBT EQUITY RATIO

3

2

1

4

TOTAL

6

3

5

6

PER SHARE RATIO BOOK VALUE

4

1

3

2

DPS

4

2

3

1

TOTAL

8

3

6

3

35

23

27

27

1

3

2

2

TOTAL SCORE RANKING


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SUGGESTIONS AND RECOMMENDATIONS The following are the major suggestions and recommendations:  Fundamentally

First

preference

TO

BUY

AXISBANK

THEN

ICICIBANK,YESBANK,HDFCBANK RESPETIVELY  Hold on or buy decision is given for the AXIS BANK because there may be increase in price of market value of share in future AND WITH A TARGET OF RS 1530. Those who holding this stock they can value average this stock @ 960 levels because of strong SUPPROT at this levels  Hold on or buy decision is given for the HDFC BANK because there may be increase in price of market value of share in future AND WITH A TARGET OF RS 645. Those who holding this stock they can value average this stock @ 555 levels because of strong SUPPORT at this levels  Hold on or buy decision is given for the ICICI BANK because there may be increase in price of market value of share in future AND WITH A TARGET OF RS1141. Those who holding this stock they can value average this stock @ 780 levels because of strong SUPPORT at this levels  Hold on or buy decision is given for the YES BANK because there may be increase in price of market value of share in future AND WITH A TARGET OF RS 541. Those who holding this stock they can value average this stock @ 230 levels because of strong SUPPORT at this levels


114

CONCLUSION The fundamental analysis of banking sectors in India was a very relevant topic on account of the increased investor interest in markets and there for rational investment behavior. There is always a need to study and analyze share before investing in to the share. Fundamental analysis studies the fundamental aspects of the economy, industry and the company as a whole. The analysis revealed the growing prospects of the Indian economy after the major hit. The position of the banking sector in the economy and the main private companies are studied. Investor can arrive at rational decisions and avoid unnecessary losses if they make fundamental analysis. Nowadays majority of the stock brokers use this technique, along with the others to advice clients on investment matters. The exercised proved fruitful as it opened our eyes to the reality of the stock market and the sector under study as well as the prospective to be invested.


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ANNAXURE


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BIBLOGRAPHY

BOOKS  Kothari, C.R, “Research Methodology Methods and Techniques”, New Age International Publishers,Delhi,Second Edition 2004  Pandian,Punithavathy,”Security Analysis and Portfolio Management”,Vikas Publishing House Pvt Ltd,New Delhi  Prasannachandra,”Investment Analysis and Portfolio Management”, Tata McGraw-Hill Publishers,2008.

WEBSITES  http://www.nseindia.com  http://www.moneycontrole.com/stocksmarketsindia/  http://www.in.finance.yahoo.com  http://www.money.rediff.com/  http://www.livemint.com  http://www.hedgeequities.com  http://www.investopedia.com  http://www.wikiepedia.com  Other official websites of AXISBANK,HDFCBANK,ICICIBANK & YESBANK.


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Balance work ANAXTURE  RSI CALULATION  MOVING AVG CALCULATION RESULTS BALANCESHEET P&L CASH FLOWS


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fundamental and technical analysis of banking stocks

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