CHAPTER-1

INTRODUCTION

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ABOUT THE TOPIC:

1.1 What is Equity?

Equity is the ownership interest of investors in a business firm. Investors can own
equity shares in a firm in the form of common stock or preferred stock. Equity
ownership in the firm means that the original business owner no longer owns 100% of
the firm but shares ownership with others. On a company's balance sheet, equity is
represented by the following accounts: common stock, preferred stock, paid-in capital,
and retained earnings. Equity can be calculated by subtracting total liabilities from total
assets.

EQUITY ANALYSIS:-

Stock analysis is a term that refers to the evaluation of a particular trading instrument,
an investment sector or the market as a whole. Stock analysts attempt to determine the
future activity of an instrument, sector or market. There are two basic types of stock
analysis: fundamental analysis and technical analysis. Fundamental analysis
concentrates on data from sources including financial records, economic reports,
company assets and market share. Technical analysis focuses on the study of past
market action to predict future price movement.

Equity Analysis on Banking Sector

The main aim of this project is to analyze current growth trend of scripts of
banking in equity market. Based on the study of Indian economy. Research studies
have proved that investments in some shares with a longer tenure of investment
have yielded far superior returns than any other investment. However, this does not
mean all equity investments would guarantee similar high returns. Equities are high-risk
investments. One needs to study them carefully before investing.

Since 1990 till date, Indian stock market has returned about 17% to investors
on an average in terms of increase in share prices or capital appreciation annually.
Besides that on average stocks have paid 1.5 % dividend annually. Dividend is a
percentage of the face value of a share that a company returns to its shareholders from
its annual profits. Compared to most other forms of investments, investing in
equity shares offers the highest rate of return, if invested over a longer duration.

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Each investment alternative has its own strengths and weaknesses. Some options seek
to achieve superior returns (like equity), but with corresponding higher risk. Other
provide safety (like PPF) but at the expense of liquidity and growth. Other options such
as FDs offer safety and liquidity, but at the cost of return. Mutual funds seek to combine
the advantages of investing in arch of these alternatives while dispensing with the
shortcomings. Indian stock market is semi-efficient by nature and, is considered as one
of the most respected stock markets, where information is quickly and widely
disseminated, thereby allowing each security’s price to adjust rapidly in an unbiased
manner to new information so that, it reflects the nearest investment value. And mainly
after the introduction of electronic trading system, the information flow has become
much faster. But sometimes, in developing countries like India, sentiments play major
role in price movements, or say, fluctuations, where investors find it difficult to predict
the future with certainty.

Banks are the major part of any economic system. They provide a strong base to Indian
economy as well. Even in the share markets, the performance of banks shares is of great
importance.

Thus, the performance of the share market, the rise and the fall of market is greatly
affected by the performance of the banking sector shares and this report revolves around
all factors, their understanding and a theoretical and technical analysis

1.2 OBJECTIVES:

The major objectives of the study:-

• To study and compare the performance of the banks in the banking sector.

• To help the investors for choosing to make their investments in banking sector.

• To calculate the risk-return stock of banking sector.

• To understand the concept of investing in equity shares.

• Comparative analysis of 4 selected banks.

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1.3 SCOPE

The scopes of the project are limited to understanding the basics of fundamental
analysis and technical analysis and apply it to take a decision of investing in banking
sector

1.4 RESEARCH METHODOLOGY

The process used to collect information and data for the purpose for making business
decisions. The methodology may include publication research ,interviews ,surveys and
other research techniques, and could include present and historical information.

The methodology of study consists of

• Source of data collection

• Statistical tools and techniques

Source of data collection:

The data has been collected through primary and secondary sources

 primary data :-

 Discussion with branch manager

 Live trading in the market

 secondary data:-

 Books related to financial management

 Web sites can be used as vital information source

Statistical tool and techniques:

The collected data needed for the analysis are:

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 • Comparative analysis of balance sheets

• Financial ratio’s

• The data has been analysed through different graphs for the selected banks.

1.5 LIMITATIONS

 The study is based on the data is given by the investors and the employee which
may not be 100% correct.

 Moreover, very few investors and agents have a detail knowledge of the study.

 The study is confined to only one sector.

 The project has been limited to investment analysis of banking sector only.

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 CHAPTER-2

REVIEW OF LITERATURE

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2.1 Literature review

A lot of investors trading in the financial markets with securities and stocks are trying to
foresee the market movements with the help of accessible information of the press. This
may concern the question will securities with higher prospective benefits get greater
revenues to securities with lower prospective benefits? These ideas can be investigated
using time research and deeper analysis. If a security is determined precisely, the future
return of the security will come to the beta at the securities market line. Nevertheless, if
it goes down that line then that states the security is understated and it is overrated if it
goes above the line. In any situation, regulations have to be implemented.

Security market line is a line that shows the risks against revenue in the trading market
at a specified time and can expose all the securities that are in a good demand. It is also
called characteristic line or SML. Security market line really shows the outcomes of the
financial capital asset pricing model. It is also called CAPM formula. Risk on the
market is represented through the X-axis also called beta. Prospective revenue is
represented through the Y-axis. Securities risk premium is identified with the help of
security market line

Security market line turns out to be an effective instrument in identifying if a security

involved in your Security market gives sensible prospective revenue for specified risks.
Your securities are represented on the chart with security market line. So, if the
securities risks against the prospective profits are situated above the line it is
undervalued security. It is so, as the trader supposes to get higher revenue for specified
risk. The asset that is situated below the line is overvalued. This can happen when the
trader can take less profit for the considered risk. Take this effective knowledge for your
consideration and use for earning profits.

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 CHAPTER-3
COMPANY PROFILE

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 INDUSTRY PROFILE

3.1 INTRODUCTION

The banking section will navigate through all the aspects of the Banking System in
India. It will discuss upon the matters with the birth of the banking concept in the
country to new players adding their names in the industry in coming few years.

The banker of all banks, Reserve Bank of India (RBI), the Indian Banks Association
(IBA) and top 20 banks like IDBI, HSBC, ICICI, ABN AMRO, etc. has been well
defined under three separate heads with one page dedicated to each bank.

However, in the introduction part of the entire banking cosmos, the past has been well
explained under three different heads namely:

 History of Banking in India

 Nationalization of Banks in India

 Scheduled Commercial Banks in India

The first deals with the history part since the dawn of banking system in India.
Government took major step in the 1969 to put the banking sector into systems and it
nationalized 14 private banks in the mentioned year. This has been elaborated in
Nationalization of Banks in India. The last but not the least explains about the
scheduled and unscheduled banks in India. Section 42 (6) (a) of RBI Act 1934 lays
down the condition of scheduled commercial banks.

3.2 History of Banking in India

Without a sound and effective banking system in India it cannot have a healthy
economy. The banking system of India should not only be hassle free but it should be
able to meet new challenges posed by the technology and any other external,internal

9
factors.
For the past three decades India's banking system has several outstanding achievements
to its credit. The most striking is its extensive reach. It is no longer confined to only
metropolitans or cosmopolitans in India. In fact, Indian banking system has reached
even to the remote corners of the country. This is one of the main reasons of India's
growth process.

The government's regular policy for Indian bank since 1969 has paid rich dividends
with the nationalization of 14 major private banks of India.

Not long ago, an account holder had to wait for hours at the bank counters for getting a
draft or for withdrawing his own money. Today, he has a choice. Gone are days when
the most efficient bank transferred money from one branch to other in two days. Now it
is simple as instant messaging or dial a pizza. Money have become the order of the day.

The first bank in India, though conservative, was established in 1786. From 1786 till
today, the journey of Indian Banking System can be segregated into three distinct
phases. They are as mentioned below:

 Early phase from 1786 to 1969 of Indian Banks

 Nationalization of Indian Banks and up to 1991 prior to Indian banking sector

Reforms.

 New phase of Indian Banking System with the advent of Indian Financial &
Banking Sector Reforms after 1991.

The first bank in India, though conservative, was established in 1786. From 1786 till
today, the journey of Indian Banking System can be segregated into three distinct
phases. They are as mentioned below:

 Early phase from 1786 to 1969 of Indian Banks

 Nationalization of Indian Banks and up to 1991 prior to Indian banking sector

Reforms.

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 New phase of Indian Banking System with the advent of Indian Financial &
Banking Sector Reforms after 1991.

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Phase I

The General Bank of India was set up in the year 1786. Next came Bank of Hindustan
and Bengal Bank. The East India Company established Bank of Bengal (1809), Bank of
Bombay (1840) and Bank of Madras (1843) as independent units and called it
Presidency Banks. These three banks were amalgamated in 1920 and Imperial Bank of
India was established which started as private shareholders banks, mostly European
shareholders.

In 1865 Allahabad Bank was established and first time exclusively by Indians, Punjab
National Bank Ltd. was set up in 1894 with headquarters at Lahore. Between 1906 and
1913, Bank of India, Central Bank of India, Bank of Baroda, Canara Bank, Indian
Bank, and Bank of Mysore were set up. Reserve Bank of India came in 1935.
During the first phase the growth was very slow and banks also experienced periodic
failures between 1913 and 1948. There were approximately 1100 banks, mostly small.
To streamline the functioning and activities of commercial banks, the Government of
India came up with The Banking Companies Act, 1949 which was later changed to
Banking Regulation Act 1949 as per amending Act of 1965 (Act No. 23 of 1965).
Reserve Bank of India was vested with extensive powers for the supervision of banking
in India as the Central Banking Authority.

During those days public had lesser confidence in the banks. As an aftermath deposit
mobilization was slow. Abreast of it the savings bank facility provided by the Postal
department was comparatively safer. Moreover, funds were largely given to traders.

Phase II

Government took major steps in this Indian Banking Sector Reform after independence.
In 1955, it nationalized Imperial Bank of India with extensive banking facilities on a
large scale especially in rural and semi-urban areas. It formed State Bank of India to act
as the principal agent of RBI and to handle banking transactions of the Union and State
Governments all over the country.

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Seven banks forming subsidiary of State Bank of India was nationalized in 1960 on
19th July, 1969, major process of nationalization was carried out. It was the effort of the
then Prime Minister of India, Mrs. Indira Gandhi. 14 major commercial banks in the
country were nationalized.

Second phase of nationalization Indian Banking Sector Reform was carried out in 1980
with seven more banks. This step brought 80% of the banking segment in India under
Government ownership.

The following are the steps taken by the Government of India to Regulate Banking
Institutions in the Country:

1949 : Enactment of Banking Regulation Act.

1955 : Nationalization of State Bank of India.

1959 : Nationalization of SBI subsidiaries.

1961 : Insurance cover extended to deposits.

1969 : Nationalization of 14 major banks.

1971 : Creation of credit guarantee corporation.

1975 : Creation of regional rural banks.

1980 : Nationalization of seven banks with deposits over 200 crore.

After the nationalization of banks, the branches of the public sector bank India rose to
approximately 800% in deposits and advances took a huge jump by 11,000%.

Banking in the sunshine of Government ownership gave the public implicit faith and
immense confidence about the sustainability of these institutions.

Phase III

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This phase has introduced many more products and facilities in the banking sector in its
reforms measure. In 1991, under the chairmanship of M Narasimhan,a committee was
set up by his name which worked for the liberalization of banking practices.

The country is flooded with foreign banks and their ATM stations. Efforts are being put
to give a satisfactory service to customers. Phone banking and net banking is
introduced. The entire system became more convenient and swift. Time is given more
importance than money.

The financial system of India has shown a great deal of resilience. It is sheltered from
any crisis triggered by any external macroeconomics shock as other East Asian
Countries suffered. This is all due to a flexible exchange rate regime, the foreign
reserves are high, the capital account is not yet fully convertible, and banks and their
customers have limited foreign exchange exposure.

3.3 Scheduled Commercial Banks In India

The commercial banking structure in India consists of:

 Scheduled Commercial Banks in India

 Unscheduled Banks in India

Scheduled Banks in India constitute those banks which have been included in the
Second Schedule of Reserve Bank of India(RBI) Act, 1934. RBI in turn includes only
those banks in this schedule which satisfy the criteria laid down vide section 42 (6) (a)
of the Act.

As on 30th June, 1999, there were 300 scheduled banks in India having a total network
of 64,918 branches. The scheduled commercial banks in India comprise of State bank of
India and its associates (8), nationalized banks (19), foreign banks (45), private sector
banks (32), co-operative banks and regional rural banks.

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"Scheduled banks in India" means the State Bank of India constituted under the State
Bank of India Act, 1955 (23 of 1955), a subsidiary bank as defined in the State Bank of
India (Subsidiary Banks) Act, 1959 (38 of 1959), a corresponding new bank constituted
under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings)
Act, 1970 (5 of 1970), or under section 3 of the Banking Companies (Acquisition and
Transfer of Undertakings) Act, 1980 (40 of 1980), or any other bank being a bank
included in the Second Schedule to the Reserve Bank of India Act, 1934 (2 of 1934),
but does not include a co-operative bank".

"Non-scheduled bank in India" means a banking company as defined in clause (c) of

section 5 of the Banking Regulation Act, 1949 (10 of 1949), which is not a scheduled
bank".

The following are the Scheduled Banks in India (Public Sector):

 State Bank of India  Central Bank of India

 State Bank of Bikaner and Jaipur  Corporation Bank

 State Bank of Hyderabad  Dena Bank

 State Bank of Indore  Indian Overseas Bank

 State Bank of Mysore  Indian Bank

 State Bank of Saurashtra  Oriental Bank of Commerce

 State Bank of Travancore  Punjab National Bank

 Andhra Bank  Punjab and Sind Bank

 Allahabad Bank  Syndicate Bank

 Bank of Baroda  Union Bank of India

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  Bank of India  United Bank of India

 Bank of Maharashtra  UCO Bank

 Canara Bank  Vijaya Bank

The following are the Scheduled Banks in India (Private Sector):

 ING Vysya Bank Ltd  HDFC Bank Ltd

 Axis Bank Ltd  Centurion Bank Ltd

 Indusind Bank Ltd  Bank of Punjab Ltd

 ICICI Bank Ltd  IDBI Bank Ltd

 South Indian Bank  Jammu & Kashmir Bank Ltd.

The following are the Scheduled Foreign Banks in India:

 American Express Bank  Citi Bank N.C.

Ltd.
 Deutsche Bank A.G.

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  ANZ Gridlays Bank Plc.  Hongkong and Shanghai Banking
Corporation
 Bank of America NT & SA
 Standard Chartered Bank.
 Bank of Tokyo Ltd.
 The Chase Manhattan Bank Ltd.
 BanqucNationale de Paris
 Dresdner Bank AG.
 Barclays Bank Plc

Major Banks in India

 ABN-AMRO Bank  Indian Overseas Bank

 Abu Dhabi Commercial Bank  IndusInd Bank

 American Express Bank  ING Vysya Bank

 Andhra Bank  Jammu & Kashmir Bank

 Allahabad Bank  JPMorgan Chase Bank

 Axis Bank (Earlier UTI Bank)  Karnataka Bank

 Bank of Baroda  KarurVysya Bank

 Bank of India  Laxmi Vilas Bank

 Bank of Maharashtra  Oriental Bank of Commerce

 Bank of Punjab  Punjab National Bank

 Bank of Rajasthan  Punjab & Sind Bank

 Bank of Ceylon  Scotia Bank

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 BNP Paribas Bank  South Indian Bank

 Canara Bank  Standard Chartered Bank

 Catholic Syrian Bank  State Bank of India (SBI)

 Central Bank of India  State Bank of Bikaner & Jaipur

 Centurion Bank  State Bank of Hyderabad

 China Trust Commercial Bank  State Bank of Indore

 Citi Bank  State Bank of Mysore

 City Union Bank  State Bank of Saurastra

 Corporation Bank  State Bank of Travancore

 Dena Bank  Syndicate Bank

 Deutsche Bank  Taib Bank

 Development Credit Bank  UCO Bank

 Dhanalakshmi Bank  Union Bank of India

 Federal Bank  United Bank of India

 HDFC Bank  United Western Bank

 HSBC  Vijaya Bank

 ICICI Bank  Kotak Mahindra Bank

 IDBI Bank  Yes Bank

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3.4 Organizational Structure of Banks in India:

In India banks are classified in various categories according to differ rent criteria. The
following charts indicate the banking structure

Reserve Bank of India

Commercial Banks Co-operative Banks Development Banks

Nationalized Private Short-term Long-term

credit credit

Agricultural Urban EXIM Industrial Agricultural

Credit Credit 19
3.5 Broad Classification of Banks in India:

1) The RBI: The RBI is the supreme monetary and banking authority in the
country and has the responsibility to control the banking system in the country.
It keeps the reserves of all scheduled banks and hence is known as the “Reserve
Bank”.
2) Public Sector Banks:
 State Bank of India and its Associates (8)
 Nationalized Banks (19)
 Regional Rural Banks Sponsored by Public Sector Banks (196)
3) Private Sector Banks:
 Old Generation Private Banks (22)
 Foreign New Generation Private Banks (8)
 Banks in India (40)
4) Co-operative Sector Banks:
 State Co-operative Banks
 Central Co-operative Banks
 Primary Agricultural Credit Societies
 Land Development Banks
 State Land Development Banks
5) Development Banks: Development Banks mostly provide long term finance for
setting up industries. They also provide short-term finance (for export and
import activities)
 Industrial Finance Co-operation of India (IFCI)
 Industrial Development of India (IDBI)

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  Industrial Investment Bank of India (IIBI)
 Small Industries Development Bank of India (SIDBI)
 National Bank for Agriculture and Rural Development (NABARD)
 Export-Import Bank of India.

3.6 Role of Banks:

Banks play a positive role in economic development of a country as repositories of
community’s savings and as purveyors of credit. Indian Banking has aided the
economic development during the last fifty years in an effective way. The banking
sector has shown a remarkable responsiveness to the needs of planned economy. It has
brought about a considerable progress in its efforts at deposit mobilization and has
taken a number of measures in the recent past for accelerating the rate of growth of
deposits. As recourse to this, the commercial banks opened branches in urban, semi-
urban and rural areas and have introduced a number of attractive schemes to foster
economic development.

The activities of commercial banking have growth in multi-directional ways as well as

multi-dimensional manner. Banks have been playing a catalytic role in area
development, backward area development, extended assistance to rural development all
along helping agriculture, industry, international trade in a significant manner. In a way,
commercial banks have emerged as key financial agencies for rapid economic
development.

By pooling the savings together, banks can make available funds to specialized
institutions which finance different sectors of the economy, needing capital for various
purposes, risks and durations. By contributing to government securities, bonds and
debentures of term-lending institutions in the fields of agriculture, industries and now
housing, banks are also providing these institutions with an access to the common pool
of savings mobilized by them, to that extent relieving them of the responsibility of
directly approaching the saver. This intermediation role of banks is particularly
important in the early stages of economic development and financial specification. A

21
country like India, with different regions at different stages of development, presents an
interesting spectrum of the evolving role of banks, in the matter of inter-mediation and
beyond.

Mobilization of resources forms an integral part of the development process in India. In

this process of mobilization, banks are at a great advantage, chiefly because of their
network of branches in the country. And banks have to place considerable reliance on
the mobilization of deposits from the public to finance development programmes.
Further, deposit mobilization by banks in India acquired greater significance in their
new role in economic development. Commercial banks provide short-term and
medium-term financial assistance. The short-term credit facilities are granted for
working capital requirements. The medium-term loans are for the acquisition of land,
construction of factory premises and purchase of machinery and equipment. These
loans are generally granted for periods ranging from five to seven years. They also
establish letters of credit on behalf of their clients favoring suppliers of raw
materials/machinery (both Indian and foreign) which extend the banker’s assurance for
payment and thus help their delivery. Certain transaction, particularly those in contracts
of sale of Government Departments, may require guarantees being issued in lieu of
security earnest money deposits for release of advance money, supply of raw materials
for processing, full payment of bills on the assurance of the performance etc.
Commercial banks issue such guarantees also.

PRODUCTS AND SERVICES OFFERED BY BANKS

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 Investment Banking
Consumer Banking
Commercial Banking
Retail Banking
Products Private Banking
Asset Management
Pensions
Mortgages
Credit Cards

Broad Classification of Products in a bank:

The different products in a bank can be broadly classified into:
 Retail Banking.
 Trade Finance.
 Treasury Operations.

Retail Banking and Trade finance operations are conducted at the branch level while the
wholesale banking operations, which cover treasury operations, are at the hand office or
a designated branch.

Retail Banking:
 Deposits
 Loans, Cash Credit and Overdraft
 Negotiating for Loans and advances
 Remittances
 Book-Keeping (maintaining all accounting records)
 Receiving all kinds of bonds valuable for safe keeping

Trade Finance:
 Issuing and confirming of letter of credit.

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  Drawing, accepting, discounting, buying, selling, collecting of bills of exchange,
promissory notes, drafts, bill of lading and other securities.

Treasury Operations:
 Buying and selling of bullion. Foreign exchange
 Acquiring, holding, underwriting and dealing in shares, debentures, etc.
 Purchasing and selling of bonds and securities on behalf of constituents.

The banks can also act as an agent of the Government or local authority. They insure,
guarantee, underwrite, participate in managing and carrying out issue of shares,
debentures, etc.

Apart from the above-mentioned functions of the bank, the bank provides a whole lot of
other services like investment counseling for individuals, short-term funds management
and portfolio management for individuals and companies. It undertakes the inward and
outward remittances with reference to foreign exchange and collection of varied types
for the Government.

Following Services Can Be Availed On The Internet:

 Bill Payment
 Funds Transfer
 Special Promotions & Offers
 Ticket Booking
 Online loans and credit cards
 Online Shopping
 Online Tax payment
 Prepaid mobile recharge

Banks will expand In overseas market

In order to sustain the business growth amid highly competitive market and slowing
Indian economy, banks are likely to expand in the overseas market. They will try to tap
emerging opportunities by expanding into newer markets such as Africa, former Soviet

24
region and other South East Asian countries, in which India has maintained good trade
relations. They can set up captive operations or expand through inorganic means by
undergoing M&A (mergers and acquisitions) with banks in foreign countries.

Passage of 'Banking Laws (Amendment) Bill' aimed at attracting more foreign

investments

With an aim to reform and strengthen India's banking sector, the LokSabha passed the
'Banking Amendment Bill' in Dec 2018. Once, the bill is passed by RajyaSabha as well,
it will pave way for RBI to issue new banking licenses to private sector and attract more
foreign investments in the sector.

The Bill also proposes to enhance the voting rights of investors in case of both public
sector and private sector banks from existing 1% to 10% of public sector banks and
from 10% to 26% of private sector banks. This move will attract more foreign
investment in the sector

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3.7 FACTORS AFFECTING BANKING SECTOR

Starting off with the project, in the initial phase of SIP, I learnt the basics of the stock
market. As I had to work here in this market for 3.5 months this was the basic necessity.
In that phase I had a nice exposure of how to deal with clients, how to handle the
queries of the investors, it was a practical exposure to learn the working of the market,
how the market moves and all about the corporate culture. Also I had learnt what factors
basically affect the equity market. Then I decided to limit my project to just Banking
Sector, because it is one of the most dynamic sector and also availability of time was
not permitting me to go beyond this. There are N numbers of factors which affect the
share prices. They can be broadly classified into two:
 INTERNAL FACTORS

 EXTERNAL FACTORS

INTERNAL FACTORS:
As the name suggests, Internal Factors are those which affect the share prices internally,
i.e. they are internal to the company or more specifically bank. Some of the major
internal factors that affect the share prices of a bank are as follows:

Earnings of the company:

How much Profit a company earns acts as a significant factor in price movements. If the
quarterly results are good for a bank, then the price goes up, and if the results are not
good, the investors show no interest in such bank’s share and thus price falls. Investors
invest money in the companies who earn well and in turn give good return on
investment. Thus, a wealthy and a profitable company have good investors and thus
have positive price movements. Price/Earnings Ratio also gives us idea about the same.

26
Market capitalization:
Generally we commit one mistake that we guess the company’s worth from the price of
its stock. It is the market capitalization of the company, rather than the stock price, that
is more
Important when it comes to determining the worth of the company. We need to multiply
the stock price with the total number of outstanding stocks in the market to get the
market capitalization of a company and that is the worth of the company. Thus, a
company or bank with high Market Capitalization turns out to be more popular among
investors. For example, HDFC BANK, ICICI BANK and SBI are more popular among
investors than other banks because they have huge market share and market
capitalization. As market capitalization increases, the share price tends to increase and
as market capitalization decreases, the share price tends to decrease.

Price/earnings ratio:
Price/Earnings ratio or the P/E ratio gives us a fair idea of how a company's share price
compares to its earnings. If the price of the share is too much lower than the earning of
the company, the stock is undervalued and it has the potential to rise in the near future.
On the other hand, if the price is way too much higher than the actual earning of the
company and then the stock is said to overvalued and the price can fall at any point. The
earnings also have a direct relation with price which is already explained above.

Internal affairs of the company:

Any happening inside the company or any internal news does affect its share price. For
example any key person moving out of the company, acquisition or takeover or merger
news, share split, employee strike and any other thing internal to the affairs of the bank
affects the share price. A positive note from the internal affairs takes the price to new
highs and a negative does vice versa.

Interest rates:
Interest rates play a major role in determining stock market trends. Bull markets (those
in an upward market) are usually associated with low interest rates and high Capital
Gains, and bear markets (those in a downward trend) with high interest rates and low
Capital gains. Interest rates are determined by the demand for capital – pushes them up
and normally indicates that the economy is thriving and that shares probably expensive.

27
Low interest indicate low demand for capital, thus liquidity builds up on the economy,
driving share price down. Other interest rates like that of on Deposits and Borrowings
also have impact on share prices.

Other factors:
Other factors like Growth of the company, figures of deposits, advances, balance sheet,
Profit and Loss Account, etc. Also affect the share prices drastically. A discussion for
the same is done in later part of the report.

EXTERNAL FACTORS:
After studying the internal factors, let’s take a look at some External Factors which
affect the Share Prices.

Sentiments:
Investor sentiment is almost impossible to predict and can be infuriating if, for example,
you have bought shares in a company that you think is a good „buy‟ but the price
remains flat. Investor sentiment is influenced by a wide variety of factors. Share prices
can, for example, be flat during the summer simply because so many major investors
are on holiday or attending major sporting events such as Royal Ascot and Wimbledon,
hence the adage „sell in May and go away‟. Investor sentiment can lead to irrational
buying or selling of shares and result in bull and bear markets. A bull market is when
share prices rise while a bear market is when they fall. In the technology boom of the
late 1990s, for example, investors paid extremely high prices for shares and ignored
traditional valuation measures, such as P/E ratios. This carried on until 2000 when
investors belatedly realized these shares has risen too far and resulted in a three year
bear market in shares. Thus, Sentiments of investors affect the share prices a lot and this
is something unpredictable and immeasurable factor, but still the most important one.

28
Company news and other news:

The way investors interpret news coming out of companies is also a major influence on
share prices. If, for example, a company puts out a warning that business conditions are
tough, shares will often drop in value. If, however, a director buys shares in the firm, it
may be a signal that the company’s prospects are improving. Companies put out a great
deal of news and most of the major announcements are covered by the financial press.
But some announcements not regarded as so important and sometimes, particularly
among smaller firms that are monitored less by investors and financial journalists,
indicators of the company’s health can be missed. Takeovers or even rumours of
takeovers also have a big influence on prices. This is because investors expect the
bidder to pay a premium to shareholders. Also any other news or speculation about
factors like change in Repo Rate, Cash Reserve Ratio, Reverse Repo Rate, any change
or likely change in the policies of government or RBI or SEBI, any new guidelines
issued by the concerned authority, etc. affect the price of the share. A positive news in
any of these respects leads to a rise in price and a negative takes it to the other side.

Thus, news in any respect is undoubtedly a huge factor when it comes to stock price.
Positive news about a company can increase buying interest in the market while a
negative press release can ruin the prospect of a stock. Having said that, we must
always remember that often times, despite amazingly good news, a stock can show least
movement. It is the overall performance of the company that matters more than news. It
is always wise to take a wait and watch policy in a volatile market or when there is
mixed reaction about a particular stock.

Demand and supply:

This fundamental rule of economics holds good for the equity market as well. The price
is directly affected by the trend of stock market trading. When more people are buying a
certain stock, the price of that stock increases and when more people are selling the
stock, the price of that particular stock falls. Now it is difficult to predict the trend.
Thus, we should be very careful while dealing in stocks as buying or selling pressure
may lead to steep rise or fall in price of the shares.

29
Analysts’ reports:
Reports produced by independent analysts also influence share prices. If an analyst
changes their recommendation from „sell‟ to „buy‟, for example, the shares will often
rise in value. Analysts‟ reports are produced primarily by investment banks for
professional investors, although some stockbrokers will make their research available to
private investors. We may find summaries of some reports published on financial news
websites or in newspapers and magazines. Some investment banks also publish their
reports on their websites for free. We should remember that the recommendation an
analyst puts on a company will affect its share price very quickly and can become
irrelevant within hours. This is because the analyst will usually say a stock is a „buy‟
within a particular price range. If the price moves above their targets the improvements
the analyst expects may be „priced in‟ and so the shares are not worth buying. But
analysts‟ reports are always worth reading, even if the recommendation is out of date.
The reports usually contain a great deal of useful information on the company and how
its business is developing. They also often look at how the company rates against its
competitors.

The economy:
The health of the global economy has a fundamental influence on share prices because
it is ultimately responsible for driving company profits. Broadly speaking, if the
economy is growing, company profits improve and shares will become more highly
valued. If the economy is weakening, company profits will fall and share prices will go
down. Investors look at a vast amount of data to try and work out what is going to
happen to the economy and shift their portfolios before the events occur. This is why we
will often see markets move well ahead of an actual event occurring. For example, we
could get little reaction from the stock market when interest rates rise. This is because
investors have already anticipated the shift months in advance and adjusted their
portfolios beforehand. We can usually assume that the stock market will anticipate
moves in the economy by around six to nine months. So if we want to stay ahead of the
game we need to follow economic data as closely as the professionals. The kind of
information we need to play close attention to is: employment data, the reports put out
by the Monetary Policy Committee (to get an idea where interest rates are headed),
trade with other countries, retail sales and manufacturing. Sentiment surveys produced

30
by trade bodies such as the Confederation of British Industry are also important
indicators of where the economy is heading.
It is not only news about the US and UK economy that will impact on share prices. The
signals coming out of other major economies, particularly the US and UK‟s major
trading partners, such as the Europe and Asia will also affect US and UK shares as what
happens in these economies will have an impact on our own. When looking at economic
data, we need to think not only how the wider economy will be affected but whether
certain areas will be more affected than others. A rise in interest rates is, for example,
often bad news for house builders as people feel less confident about taking on debt.
Retailers are often badly affected too as people spend less. Pharmaceutical companies
are, however, usually unaffected as people’s demand for drugs is not influenced by the
state of the economy. Companies whose profits are closely tied to the health of the
economy are known as “cyclical” stocks. Those businesses that aren’t too affected by
the economy are called “defensive” stocks. If economic conditions deteriorate you will
often see investors shift from cyclical stocks to defensives. Thus, the economic health
of an Economy affects the Share Prices.

Press and broking house recommendations:

The financial pages of most national newspapers and investment magazines usually
contain share tips. Like analysts‟ reports these tips can have a major influence on share
prices. If a journalist recommends a share, the price will usually rise and if they write a
negative story the price will fall. These moves usually happen very quickly so if we
follow the recommendation it often makes sense to do so as soon as possible. The
Broking House also recommends BUY or SELL for particular shares based on their
own research analysis. They display these recommendations in leading media such as
Television and News Papers. Thus, these recommendations affect the price of shares
and lead the market in the direction these recommendations take.

Technical influences:
Share prices can rise and fall for a variety of technical reasons that may have nothing to
do with the actual outlook for an individual company or the outlook for the market. It is,
for example, a common occurrence for share prices to drop back after a strong rally.
This happens because investors take profits on some of the shares that have risen in
value, protecting their gains just in case the shares start to slip back. Investors often

31
refer to this as market consolidation. Another technical reason for share prices to rise or
fall is the quarterly adjustment in the FTSE 100™ index. Shares that are expected to
enter the FTSE 100™ may experience a sharper rise than one would expect in the
weeks beforehand while shares that leave the index can fall more sharply. This happens
because funds that simply track the index have to match the composition of the index.
Some professional fund managers who hold the affected stocks also adjust their
portfolios as they do not want their holding to be too far above or below the company’s
weighting in the index. Share prices can also be affected by investors who use technical
analysis to drive their investment techniques. Technical analysis, also known as
Chartism, is simply the study of past share price movements and stock market index
trends, which are then used to forecast how shares and stock markets will behave in
future. Market makers can also influence prices. If they, for example, do not own
enough shares to balance their books they will have to buy more. Market makers also
influence prices if the market is looking flat, reducing prices to attract buyers. Thus,
technical reasons can also be a cause for the rise or fall in the prices of shares.

OTHER FACTORS:
Some other factors which influence share prices are as follows:

Change in rates by RBI:

Looking at the changing scenario, RBI keeps on changing rates like Repo Rate, Reverse
Repo Rate and Cash Reserve Ratio. These rates have a direct relation with the Bank’s
performance and in turn the share prices are linked with Bank’s Performance. Thus, a
change in these rates or even a speculation of change in these rates affects share prices.

Global changes:
Any change in the global economy or in other words global changes also affects Indian
economy. Thus, the performance of an economy and its banks is affected by these
global changes. For example: The recession was first observed in the USA and later on
it caught its lead in other countries too. When it entered India, the share market crashed
literally. So, a careful and logical investor always keeps this in mind that what global
changes affect the market and thus leads to rise or fall in share prices.

32
Change in Government Policies:
Keeping in mind the progress and well wishes about the country, the government takes
desired steps and keeps on reviewing its policies, rules and regulations and procedures.
A change in FDI and FII inflow restrictions, entry exit barriers for foreign banks in
India, EXIM regulations, change in Basel Norms, etc form part of important
government policies. Thus, a change in these policies affects the market scenario. For
example: if government allows entry of foreign Banks in India, then the competition
would rise and it might happen that those foreign Banks may outperform and leave our
own banks far behind. Then in this case, the investors would be interested in investing
in those foreign Banks and a government would never like that the funds are invested in
some foreign banks rather than our own banks. Thus, some restriction would follow and
this will definitely affect the share prices.

33
 3.8 COMPANY PROFILE

Indiabulls is India’s leading Financial, Real Estate and Power Company with a wide
presence throughout India. They ensure convenience and reliability in all their products
and services. Indiabulls has over 640 branches all over India. The customers of
Indiabulls are more than 4,50,000 which covers from a wide range of financial services
and products from securities, derivatives trading, depositary services, research &
advisory services, consumer secured & unsecured credit, loan against shares and
mortgage & housing finance. The company employs around 4000 Relationship
managers who help the clients to satisfy their customized financial goals. Indiabulls
entered the Real Estate business in the year 2005 with its group of companies. Large
scale projects worth several hundred million dollars are evaluated by them.

Indiabulls Financial Services Ltd is listed on the National Stock Exchange (NSE),
Bombay Stock Exchange (BSE) and Luxembourg Stock Exchange. The market

capitalization of Indiabulls is around USD 2500 million (29thDecember, 2006).

Consolidated net worth of the group is around USD 700 million. Indiabulls and its
group companies have attracted USD 500 million of equity capital in Foreign Direct
Investment (FDI) since March 2000. Some of the large shareholders of Indiabulls are
the largest financial institutions of the world such as Fidelity Funds, Goldman Sachs,
Merrill Lynch, Morgan Stanley and Farallon Capital.

Indiabulls Group is one of India’s top business houses with businesses spread over Real
Estate, Infrastructure, Financial Services, Securities, Retail, Multiplex and Power
sectors. The group companies are listed on important Indian and Overseas markets.
Indiabulls has been conferred the status of a “Business Superbrand” by The Brand
Council, Superbrands India.

VISION

To be the largest and most profitable financial services organization in Indian retail
market and become one stop shop for all non banking financial products and services
for the retail customers. To become the preferred long term financial partner to a wide
base of customers whilst optimizing stake holder’s value

34
MISSION

Rapidly increase the number of client relationships by providing a broad array of

product offering to emerge as a clear market leader. To establish a base of 1 million
satisfied customers by 2016. We will create this by being a responsible and trustworthy
partner.

COMPANY’S HISTORY IN INDIA

In 1999, three IIT-Delhi alumni Sameer Gehlaut, Rajiv Rattan and Saurabh Mittal
acquired Orbis,a Delhi based stock broking company. Young entrepreneur Sameer
Gehlaut established Indiabulls in 2000, after acquiring orbis Securities, a stock
brokerage company in Delhi. The group started its operations from a small office near
HauzKhas bus terminal in Delhi.The office had a tin roof and two computers. The idea
of leveraging technology for trading stocks led to the creation of Indiabulls
Incorporated on 10th January 2000, it was converted into a public limited company on
27th February 2004.

Its original idea of leveraging technology bore fruit when Indiabulls was accorded
permission to conduct online trading on Indian stock exchanges.The company had
achieved the distinction of becoming only the second brokerage firm in India to be
granted this consent. The challenges facing it were immense – not least of all the mind
set of investors who were called to make the big leap from traditional stock trading to a
completely online interface. Having overcome this resistance, the company later
expanded its service portfolio to include equity, F&O, wholesale debt, mutual fund
distribution and equity research.

In 2003/04, Indiabulls ventured into insurance distribution and commodity trading. It

successfully floated its IPO in September 2004 and in the same year entered the
consumer finance segment. Real estate, the new sunrise industry, was the next frontier
for Indiabulls. In 2004/05, it entered this sector. But it wasn’t just real estate that was
booming. Opportunities were opening up in retail and infrastructure as well. To cement
its position in the Indian business and industry firmament, Indiabulls acquired Pyramid
Retail in 2007 and marked its presence in the power sector by launching Indiabulls
Power.

35
Indiabulls Financial Services Limited

Indiabulls Financial Services Limited was incorporated on January 10, 2000 as M/s
OrbisInfoTech Private Limited at New Delhi under the Companies Act, 1956. The
name of company was changed to M/s. Indiabulls Financial Services Private
Limited on March 16, 2001. In the year 2004, Indiabulls came up with it own public
issue & became a public limited company on February 27, 2004. The name of
company was changed to M/s. Indiabulls Financial Services Limited.

The company was promoted by three engineers from IIT Delhi, and has attracted more
than Rs.700 million as investments from venture capital, private equity and institutional
investors and has developed significant relationships with large commercial banks such
as Citibank, HDFC Bank, Union Bank, ICICI Bank, ABN Amro Bank, Standard
Chartered Bank and IL&FS.

Brand Values

Indiabulls is amongst the largest non-banking financial services companies in India and
enjoys strong brand recognition and customer acceptance. The company attributes its
dominant position in the brokerage industry to the preferential status it enjoys with
investors Coupled with its forays into various segments; the Group believes that the
bulk of its brand story is yet to be written. Indeed, when a case study on India’s
youngest brands which have had a profound impact on the economy is crafted,
Indiabulls will feature prominently in it

INDIABULLS GROUP

 Total Group Networth – Rs. 19,502 Cr

 Total Group PAT for 9M FY 12-13 – Rs. 1,034 Cr.
 Total Group Capital Expenditure – Rs. 6,200 Cr. (US $ 1.2 bn.) capex in FY 10-
11. Planned capex of Rs. 29,000 (US $ 5.7 bn.) by FY 2014-15.
 Focus on Execution and on ground results translating into profits.
 For its ongoing projects Indiabulls Group consumes 385 MT of Steel,
550MT of Cement & 1,700 CUM of RMC on daily basis.
 Creating Value for Shareholders – Dividend payout of Rs. 543.6 Cr. in 9M
FY12-13

Products offeredEquities and Derivatives

36
  Offers purchase and sale of securities (stock, bonds, debentures etc.)
 Broker assisted trade execution
 Automated online investing
 Access to all IPO's

Our Management Team:

 Mr. Divyesh Shah ( Chief Executive Officer )
 Mr. Sujitraychowdary ( Vice President )
 Mr. R.Venkataraman (Executive Director)

The Board of Directors:

 Mr. Sat Pal Khattar (Non Executive Director)

 Mr. SanjivAhuja (Independent Director)
 Mr. NileshVikamsey (Independent Director)
 Mr. KrantiSinha (Independent Director)

Milestones Achieved

 Developed one of the first internet trading platforms in India

 Amongst the first to develop in-house real-time CTCL (computer to computer

link) with NSE

 Introduction of integrated accounts with automatic gateways to client bank

accounts

 Development of products such as Power Indiabulls for high volume traders

 Indiabulls Signature Account for self-directed investors

 Indiabulls Group Professional Network for information and trading service

37
STRATEGY AND FOCUS

 Consolidation – aim to be among top 3 players in existing businesses within

next 3 years
 No new products – focus on gaining size and scale in existing core areas
 No capital market fund raising – all businesses are well funded to achieve
growth and size

 Goal- FY 2013/14 – target of US $ 1.5 billion in cash generation from the 3

companies (Finance, Real Estate and Power)

.MAJOR COMPETITORS

 KOTAK SECURITIES
 SHAREKHAN

ANALYSING THE COMPETITORS STRENGTH &WEAKNESS :-

Competition, being an important market force needs to be tracked, analyzed

&preempted. Market leader always have a system to help them preempt
anycompetitive moves. For this, it is not just important to know competitor by name,
but also critical to understand its major strength & weaknesses.

A competitor’s strength may be its marketing systems, aggressive sales force, and itsrel
ationship with major external environmental variables like government &financial instit
ute or a financial resources base. For the effective competitiveanalysis only strength &
weaknesses are not sufficient we need to consider other key factors like market share of
the company & 7p s of service marketing i.e.

 Product
 Price
 Place
 Promotion
 Process
 Physical evidence
 People etc.

38
SWOT ANALYSIS

 Services:As products of Indiabulls is an extremely innovative product with very

less cost services like online trading facility, institutional and domestic broking,
customized research reports with almost 80% efficiency etc give Indiabulls an
edge over its competitors.

 Exposure updating tie-ups with leading banks

 Well diverse Investment portfolio

 Indiabulls has presence in the Real Estate, Infrastructure, Financial Services,

Securities, Retail, Multiplex and Power sectors

 Weaknesses

 It should have its own mutual funds as it provides advises on mutual funds

 Position to answer the question of the clients in their fields.

 It does not provide indices on major world markets, ADR Prices of Indian
Scripts.

 Lacks Banking arm.

 Opportunities

 ATM facility should be provided for easy withdrawals.

 Tie-ups with third party companies for selling products.

 High client base will help for cross sales of its products.

 Threats

 Companies like Sharekhan, ICICI Direct, Kotak Securities and Private brokers
are major threats.

 Banks with Demat facilities are jockeying for position.

39
 Local brokers capable of charging lower brokerage

40
 CHAPTER-4

DATA ANALYSIS

41
4.1 Fundamental Analysis:
Fundamental analysisrefers to the study of the core underlying elements that influence
the economy of a particular entity. It is a method of study that attempts to predict price
action and market trends by analyzing economic indicators, government policy and
societal factors within a business cycle framework. The fundamental analysis of a
company involves the following parameters:
1. Macroeconomic Analysis
2. Industry Analysis
3.Company analysis

How does an investor determine if a stock is undervalued, overvalued, or trading at fair

market value? With fundamental analysis, this may be done by applying the concept of
intrinsic value. If all the information regarding a corporation's future anticipated
growth, sales figures, cost of operations, and industry structure, among other things, are
available and examined, then the resulting analysis is said to provide the intrinsic value
of the stock. To a fundamentalist, the market price of a stock tends to move towards its
intrinsic value. If the intrinsic value of a stock is above the current market price, the
investor would purchase the stock. However, if the investor found through analysis that
the intrinsic value if a stock was below the market price for the stock, the investor
would sell the stock from their portfolio or take a short position in the stock.

1. Macroeconomic Analysis:

Change in rates by RBI:

Looking at the changing scenario, RBI keeps on changing rates such as Repo Rate,
Reverse Repo Rate and Cash Reserve Ratio. These rates have a direct relation with
Bank’s performance and in turn share prices are linked with bank’s performance. Thus,
a change in these rates or even a speculation of change in these rates affects share
prices.

Global Analysis:
Any change in global economy or in other words, global changes also affects Indian
Economy. For example: The recession was first observed in USA and later on it caught

42
its lead in other countries too. When it entered India, the share market crashed literally.
It affected many banks as ICICI and others, resulting in loss of people’s confidence
towards banks.

Change in Governments Policy:

The government takes desired steps and keeps on reviewing its policies, rules,
regulations and procedures. A change in FDI and FII inflow restrictions, entry exit
barriers for foreign banks in India, EXIM regulations, change in Basel norms, etc. form
a part of important government policies. For example if government allows entry of
foreign banks in India, then competition would rise, and it may happen that those
foreign banks may outperform and leave our own banks far behind. Thus, some
restriction would follow and this will definitely affect share prices.

Effect of Inflation on banking operations:

Several economists have found that countries with high inflation rates have inefficiently
small banking sectors and equity markets. This effect suggests that inflation reduces
bank lending to the private sector, which is consistent with the view that a sufficiently
high rate of inflation induces banks to ration credit.
Effect of monetary policy on Banking Sector:

Monetary policy affects banking sector in many ways. One way is through
creditMarkets. Because of imperfect information, incomplete contracts and imperfect
bankCompetition, monetary policy may affect banks’ loan supply. In particular,
expansive Monetary policy may increase banks’ loan supply directly (bank lending
channel), or Indirectly by improving borrowers’ net worth and, hence, by reducing the
agency costs of lending.

2. Industry Analysis:
Life Cycle Analysis:
Bank plays an important role in the economic development of the country. The entire
commercial and industrial activities are well knitted with the banks. One cannot
imagine the cessation of the banking activities even for a day. There may be an
economic crisis in the country if the banks stop functioning for some days.
In the early days, the banking business was confined to receiving of deposits and
lending of money. But the modern bankers undertake wide variety of functions to assist

43
their customers. Banks are like any other business in that they produce goods and
services to customers. Like any other businesses, their products have life cycles.
Cheques are in a decline phase of their life cycle and use of cheques is declining rapidly
and being replaced by electronic bill pay and debit cards. Internet Banking and
Electronic Bill pay are in their growth phase as more and more customers are using
these services. Cards or Cheque Cards are in their maturity phase as they are accepted
by nearly everyone. So overall, the banking industry is in a GROWTH PHASE, as new
measures are being adopted overtime so as to make transactions speedy and easy.

Porter’s five forces analysis:

1. Threat of New Entrants. The average person can't come along and start up a bank,
but there are services, such as internet bill payment, on which entrepreneurs can
capitalize. Banks are fearful of being squeezed out of the payments business, because it
is a good source of fee-based revenue. Another trend that poses a threat is companies
offering other financial services. Also, the possibility of a mega bank entering into the
market poses a real threat.

2.Power of Suppliers. The suppliers of capital might not pose a big threat, but the
threat of suppliers luring away human capital does. If a talented individual is working in
a smaller regional bank, there is the chance that person will be enticed away by bigger
banks, investment firms, etc.

3. Power of Buyers. The individual doesn't pose much of a threat to the banking
industry, but one major factor affecting the power of buyers is relatively high switching
costs. If a person has a mortgage, car loan, credit card, checking account and mutual
funds with one particular bank, it can be extremely tough for that person to switch to
another bank. In an attempt to lure in customers, banks try to lower the price of
switching, but many people would still rather stick with their current bank. On the other
hand, large corporate clients have banks wrapped around their little fingers. Financial
institutions - by offering better exchange rates, more services, and exposure to foreign
capital markets - work extremely hard to get high-margin corporate clients.

44
4. Availability of Substitutes. There are plenty of substitutes in the banking industry.
Banks offer a suite of services over and above taking deposits and lending money, but
whether it is insurance, mutual funds or fixed income securities, chances are there is a
non-banking financial services company that can offer similar services. On the lending
side of the business, banks are seeing competition rise from unconventional companies.
Sony, General Motors and Microsoft all offer preferred financing to customers who buy
big ticket items

5. Competitive Rivalry. The banking industry is highly competitive. The financial

services industry has been around for hundreds of years and just about everyone who
needs banking services already has them. Because of this, banks must attempt to lure
clients away from competitor banks. They do this by offering lower financing, preferred
rates and investment services. The banking sector is in a race to see who can offer both
the best and fastest services, but this also causes banks to experience a lower ROA.
They then have an incentive to take on high-risk projects. In the long run, we're likely to
see more consolidation in the banking industry. Larger banks would prefer to take over
or merge with another bank rather than spend the money to market and advertise to
people.

45
4.2 DATA ANALYSIS

To study the financial performance of the following selected Banks:

1. STATE BANK OF INDIA
2. ICICI BANK LIMITED
3. PUNJAB NATIONAL BANK
4. CANARA BANK
5. BANK OF BARODA
6. BANK OF INDIA

State Bank of India

Company Profile

Company Information

Headquarters: Mumbai, India

Year of Incorporation: 1806
Base interest rate: 9.75%
No. of branches: Over 14,000
No. of ATMs: Over 10,000

State Bank of India (SBI) is the India’s oldest and largest bank by revenue, assets
and market capitalization. SBI has launched various cost-effective channels, such as
SBI Tiny Card(biometrically enabled card), Kiosk banking (internet enabled
kiosk/computer
with biometric validation) and cell phone messaging channel. The bank also has more
than 170branches in ~30 foreign countries, including multiple locations in the US,
Canada, and Nigeria.
“The objective of the lending rate cut is to improve demand for assets which in our
view could have a positive cascading effect on related industries”

46
KEY MANAGEMENT

MD & CEO: Mr. Rajnish Kumar

Managing Director: Mr. P.K. Gupta
Managing Director: Mr. Arijit Basu
Managing Director: Mr. Anshula Kant

Banking segments of SBI

Treasury: Includes investment portfolio and trading in foreign exchange contracts and
derivative contracts.

Corporate/Wholesale: Comprises of lending activities of Corporate Accounts Group,

Mid Corporate Accounts Group and Stressed Assets Management Group.

Retail : Comprises of branches in National Banking Group, which includes personal

banking activities, including lending activities to corporate customers.

Other Services: NRI Services, ATM Services, Demat Services, E-Pay/E-Rail Broking
Services.

COMPANY PROFILE:

COMPANY INFORMATION:

Headquarters: Vadodra, India

Year of Incorporation: 1994
Base interest rate: 9.75%
No. of branches: Over 2,880
No. of ATMs: Over 10,0

47
BUSINESS OVERVIEW:

 ICICI Bank (Industrial Credit and Investment Corporation of India) was

originally promoted in 1994 by ICICI Ltd.,
 an Indian financial institution ICICI acquired Bank of Rajasthan through a
share swap in a non-cash deal that valued the bank of Rajasthan at
aboutRs.3,000 crores on 2016. This merger added over 450 branches of ICICI
to the network
 The bank is currently in talks with Vodafone to bring a concept of e- money
into play

“The strategy of focusing on profitability, growth and risk management for fiscal
2018 resulted in better than the
expected results.”

KEY MANAGEMENT:

MD & CEO: Ms. Sandeep Bakhshi

MD & CFO: Mr. N.S. Kannan
Executive Director: Mr. K. Ramkumar
Executive Director: Mr. Rajiv Sabharwal

Punjab National Bank

Company Profile

Company Information

Headquarters: New Delhi, India

Year of Incorporation: 1895

48
Base interest rate: 10.50%
No. of branches: Over 5,900
No. of ATMs: Over 6,000

Business Overview:

 Punjab National Bank (PNB) is the largest nationalized Bank in the country
in terms of its branch network, total business, advances, operating profit and
low cost CASA deposits
 Apart from offering banking products, the bank has also taken up Wealth
Management Services such as credit card / debit card; bullion business;
 life/non-life insurance PNB Prerna and PNB Pragati are two corporate
social responsibility initiatives undertaken by the bank.
“The status of the banking sector in 2013will depend on how the economy
behaves over the next one year”

Key Management:
Chairman & MD: Mr. K. R. Kamath
Executive Director: Mr. RakeshSethi
Executive Director: Mr. UshaA Subramanian
Executive Director: Mr. S. R. Bansal

Canara Bank
Company Profile

Company Information:

Headquarters: Bangalore, India

Year of Incorporation: 1906
Base interest rate: 10.50%
No. of branches: Over 3,600

49
No. of ATMs: Over 3,100

BUSINESS OVERVIEW:

 Over the years, Canara Bank has been scaling up its market position to emerge
as a major 'Financial Conglomerate' with as many as nine
subsidiaries/sponsored institutions/joint ventures in India and abroad
 Besides commercial banking, the Bank has also carved a distinctive mark in
various corporate social responsibilities areas, namely, serving national
priorities, promoting rural development and enhancing rural self-employment
through several training institutes
 It is the first bank to introduce Centralized Solution for Service
Units(CSSU), developed in-house adopting the latest technology in the IT
Industry’

Key Management

Chairman &Managing Director: Mr. R. K. Dubey

Executive Director: Ms.Archana S. Bhargava
Executive Director: Mr. Ashok Kumar Gupta

COMPANY PROFILE

COMPANY INFORMATION:

Headquarters: Baroda, India

Year of Incorporation: 1908
Base interest rate: 10.50%
No. of branches: Over 4,000
No. of ATMs: Over 1,800

50
BUSINESS OVERVIEW:

 Bank of Baroda is a 103 year old State owned Bank with a good mix of modern
&contemporary personality, offering banking products and services to large
industrial, SME, retail & agricultural customers across the country

 The Bank has developed an Integrated Global Treasury Solution in its major
territories such as the UK, UAE, Bahamas Bahrain, Honkong, Singapore,
Belgium, USA and India to reduce the cost of operations and improve funds
management.
“The Indian banking industry has always been resilient in facing challenges”

KEY MANAGEMENT:
Chairman & MD: Mr. M. D. Mallya
Executive Director: Mr. S. K. Jain
Executive Director: Mr. P. Srinivas
Executive Director: Mr. RanjanDhawan

BANK OF INDIA
COMPANY PROFILE

COMPANY INFORMATION:

Headquarters: Mumbai, India

Year of Incorporation: 1906
Base interest rate: 10.50%
No. of branches: Over 4,000
No. of ATMs: Over 3,000

BUSINESS OVERVIEW:

51
  Bank of India was founded on 7thSeptember, 1906 by a group of eminent
businessmen from Mumbai. The Bank was under private ownership and
control till July 1969, after which it was nationalized along with 13 other
banks
 The Bank has a sizable presence abroad, with a network of 29 branches
(including five representative office) at key banking and financial centers
such as London, New York, Paris, Tokyo, Hong-Kong an Singapore.
International business accounts for around 17.82% of the Bank's total business
 The bank is always looking forward to being more consumers centric and
reaching out especially in the rural belts of the country.

KEY MANAGEMENT:

Chairman & MD: Mr. V. R. Iyer

Executive Director: Mr. N. Seshadri
Executive Director: Mr. M. S. Raghvan
Executive Director: Mr. B. B. Sharma

4.3 DATA ANALYSIS AND INTERPRETATION

NET PROFIT MARGIN RATIO:

52
.TABLE 1.1

Profit margin ratio 2015 2016 2017 2018

STATE BANK OF 12.03 10.54 8.55 9.73

INDIA

ICICI BANK LTD 9.74 12.17 15.91 16.14

PNB BANK 13.76 15.64 14.56 12.09

CANARA BANK 9.61 10.89 13.77 15.65

BANK OF BARODA 12.86 15.37 17.18 15.37

BANK OF INDIA 13.96 15.89 8.59 10.25

CHART 1.1 shows the net profit ratio of selected banks which are as follows:-

53
 20

18

16

14

12

10

0
D

K
A

DA

A
N

N
LT
DI

DI
RO
BA

BA
IN

IN
K
AN

BA
AL

RA
OF

OF
IB

ON

OF
NA
K

K
IC
AN

N
TI

K
CA
IC

BA
N
NA
EB

BA
AT

AB
ST

NJ
PU

INTERPRETATION:

The net profit margin is a good way of comparing companies in the same industry,
since such companies are generally subject to similar business conditions. However, the
net profit margins are also a good way to compare companies in different industries in
order to gauge which industries are relatively more profitable. Also called net margin.
A higher profit margin indicates a more profitable company that has better control
over its costs compared to its competitors. Profit margin. The profit margin ratio, also
known as the operating performance ratio, measures the company’s ability to turn its
sales into net income. To evaluate the profit margin, it must be compared to competitors
and industry statistics. It is calculated by dividing net income by net sales

STATE BANK OF INDIA: In table 1.1 chart shows decreasing trend till 2017 and
from 2018 it shows increasing trend .

54
ICICI BANK: Its shows increasing trend in 2017 and 2018 it has slightly increase
which indicate more profit margin.
PUNJAB NATIONAL BANK : Every year its fluctuating but only in 2016 it increases.
CANARA BANK: It shows increasing trend at increasing rate.
BANK OF BARODA: It has increases till 2017 but in 2018 it has decreases.
BANK OF INDIA: Every year it has fluctuate.

DIVIDEND PAY OUT RATIO:

TABLE 1.2:-
DIVIDEND PAYOUT RATIO 2015 2016 2017 2018
NET PROFIT
STATE BANK OF INDIA 22.90 23.36 26.03 22.59

ICICI BANK LTD 36.60 37.31 35.23 32.82

PUNJAB NATIONAL BANK 23.86 20.74 18.27 17.75

CANNARA BANK 24.53 18.51 15.88 14.09

BANK OF BARODA 17.22 20.90 17.76 16.22

BANK OF INDIA 12.23 16.34 24.61 17.85

Chart 1.2 which shows the dividend payout ratio of selected banks:-

55
 40

35

30

25

20

15

10

0
A D NK A A
DI LT NK OD DI
IN K BA BA R I N
OF AN AL A
FB
A
OF
I B
ON AR
AN
K IC TI N O NK
B IC NA CA NK BA
TE AB BA
STA NJ
PU

INTERPRETATION:
The part of the earnings not paid to investors is left for investment to provide for
future earnings growth. Investors seeking high current income and limited capital
growth prefer companies with high Dividend payout ratio. However investors seeking
capital growth may prefer lower payout ratio because capital gains are taxed at a lower
rate. High growth firms in early life generally have low or zero payout ratios. As they
mature, they tend to return more of the earnings back to investors

STATE BANK OF INDIA: There is a slightly increase inyear 2017 and decrease in
2018
ICICI BANK LTD:There is a decrease from year 2016 to 2018
PUNJAB NATIONAL BANK: There is decreasing trend in the following year
CANARA BANK:There is decreasing trend at faster rate

56
BANK OF BARODA:There is decrease in the year from 2016
BANK OF INDIA: There is increasing trend before the year 2017 but decrease in year
2018.
EARNING PER SHARE:

TABLE 1.3 Shows the profitability ratios EPS

Earnings per share 2015 2016 2017 2018

STATE BANK OF 143.67 144.37 116.07 174.15

INDIA

ICICI BANK LTD 33.76 36.10 44.73 56.09

PUNJAB NATIONAL 98.03 123.86 139.94 144

BANK

CANARA BANK 38.17 50.55 73.69 90.88

BANK OF BARODA
61.14 83.96 108.33 121.79

BANK OF INDIA 57.26 33.15 45.54 46.66

Chart 1.3 shows the position of EPS ratio of selected banks which are as follows:

57
 200
180
160
140
120
100
80
60
40
20
0
IA NK NK NK DA IA
I ND I BA L BA BA ARO I ND
O F IC A RA FB O F
K IC ON NA O NK
AN TI CA
NK
B NA BA
TE AB BA
STA NJ
PU

INTERPRETATION:-
The portion of a company’s profit allocated to each outstanding share of common stock.
Earnings per share serves as an indicator of a company’s profitability. Earnings per
share is generally considered to be the single most important variable in determining a
share’s price. It is also a major component used to calculate the price-to-earnings
valuation ratio

This chart shows that all selected banks are increasing, STATE BANK OF INDIA
reduced 144 in year 2016 to 116 in year 2017 then again by 58 in year 2018 ICICI
BANK, PUNJAB NATIONAL BANK ,CANARA BANK , BANK OF BARODA
Shows increasing trend but again bank of India reduced in year 2016 then again
increase gradually from year 2017.

DIVIDEN PER SHARE:

TABLE 1.4 SHOWS PROFITABILITY RATIOS OF SECLECTED

Dividend per share 2015 2016 2017 2018

STATE BANK OF 29 30 30 35

58
INDIA

ICICI BANK LTD 11 12 14 16.50

PUNJAB NATIONAL 20 22 22 22
BANK

CANARA BANK 8 8 10 11
BANK OF BARODA
9 15 16.50 17

BANK OF INDIA 4 8 7 7

Chart 1.4 shows from the following:-

40

35

30

25

20

15

10

0
IA LT
D
AN
K NK OD
A IA
I ND NK B BA R I ND
O F BA AL AR
A BA O F
NK IC
I ON N OF NK
TI CA NK
BA IC NA BA
TE B BA
STA NJA
PU

INTERPRETATION:

59
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
This chart1.4 indicates a positive trend as all are increasing except BANK OF INDIA.

CURRENT RATIO:

TABLE 1.5 OF 6 SECLECTED BANKS ACCORDING TO INCOMEWISE ARE AS

FOLLOWS:

CURRENT RATIO 2015 2016 2017 2018

STATE BANK OF 0.04 0.04 0.04 0.05

INDIA
ICICI BANK LTD 0.13 0.14 0.11 0.13

PUNJAB 0.02 0.02 0.03 0.02

NATIONAL BANK
CANNARA BANK 0.02 0.02 0.01 0.02

BANK OF 0.02 0.02 0.02 0.03

BARODA
BANK OF INDIA 0.02 0.03 0.02 0.04

CHART 1.5 SHOWS THE POSITION OF SECLECTED BANKS AS FOLLOWS:-

60
 0.16
0.14
0.12
0.1
0.08
0.06
0.04
0.02
0
IA K NK NK DA IA
I ND BAN BA BA RO I ND
F I L RA A F
O
IC
IC
ON
A
NA FB O
AN
K
TI A O NK
B NA C NK BA
TE AB BA
STA NJ
P U

INTERPRETATION:

A liquidity ratio measures a company’s ability to pay short-term obligations.

This chart 1.5 indicates that there is frequent fluctuations except State Bank Of India
and Bank Of Baroda which has gradually increase in year 2018.

QUICK RATIO:

TABLE 1.6 SHOWS THE quick ratio of selected banks which are as follows:-

QUICK RATIO 2015 2016 2017 2018

STATE BANK OF 5.74 9.07 8.50 12.05

INDIA
ICICI BANK LTD 5.94 14.70 15.86 16.71

P & B BANK 9.75 20.47 22.24 23.81

61
CANARA BANK 9.17 11.29 26.98 30.86

BANK OF 9.62 21..88 26.38 28.00

BARODA
BANK OF INDIA 11.63 12.30 22.15 19.06

\
CHART 1.6 SHOWS the position of selected banks:-

35

30

25

20

15

10

0
STATE BANK OF INDIA ICICI BANK LTD P & B BANK CANARA BANK BANK OF BARODA BANK OF INDIA

62
INTERPRETATION:

An indicator of a company’s short-term liquidity. The quick ratio measures a company’s

ability to meet its short-term obligations with its most liquid assets. The higher the
quick ratio, the better the position of the company.

This chart 1.6 indicates increasing or positive trend except BANK OF INDIA which
shows the downfall in year 2018.

TABLE 1.7shows the gross non-performing assets: -

GROSS NON- 2015 2016 2017 2018

PERFORMING ASSETS
STATE BANK OF INDIA 15,714.00 19,534.89 25,326.29 39,676.46

ICICI BANK LTD 9,649.31 9,480.65 10,034.26 9,475.33

PUNJAB NATIONAL 2,506.90 3,214.41 4,379.39 8,719.62

BANK
CANARA BANK 2,167.97 2,590.31 3,137.36 4,031.75

BANK OF BARODA 1,842.92 2,400.69 3,152.50 4,464.75

BANK OF INDIA 2,470.88 4,882.65 4,811.55 5,893.97

CHART 1.7 shows the movements of bank positions below: -

63
45000
40000
35000
30000
25000
20000
15000
10000
5000
0
IA LT
D
AN
K NK OD
A IA
I ND NK B BA R I ND
O F BA AL AR
A BA O F
K IC
I ON N OF NK
AN IC TI CA NK
B NA BA
TE B BA
STA NJA
PU

64
DATA INTERPRETATION:-
A debt obligation where the borrower has not paid any previously agreed upon interest
and principal repayments to the designated lender for an extended period of time. The
nonperforming asset is therefore not yielding any income to the lender in the form of
principal and interest payments. Chart 1.7 shows a positive trend for every selected
banks except ICICI BANK LTD which shows fluctuations in every year.

65
CHAPTER-5
FINDINGS

66
5.1 From the data analysis and interpretations of the ratios of six selected banks the
following findings have been given:

1. State bank of India: - In net profit margin ratio 2017 it has decrease in year 2017
from 10.54 to 8.55 i.e., 1.99 times and again it has increased in 2018 1.18 times. In
dividend payout ratio it has gradually increase in year 2016 by 0.46 times, in tear 2017
by 2.67 times which has reduced again in year 2018 by 3.47 times. Earnings per share
have increase in year 2018 by 58.08 times which has decrease in year 2017 by 28.30
times. Dividend per share and Non-performing assets has also increase in every year.
Current ratio has increase form 0.1 times in year 2018 and quick ratio has also
frequently increases.

2. ICICI BANK LTD: -net profit margin, it has gradually increases in every year. In
2016 dividend payout ratio increases by 1 times but again it slowly it starts decreasing.
Earnings per share, dividend per share & quick ratio increases frequently in every year.
Current ratio there is frequent fluctuations. Non-performing assets fluctuates in every
year.

3. PUNJAB NATIONAL BANK: - From year 2015 net profit margin has gradually
increase but in year 2018 it has reduced to 2.47 times. Dividend payout ratio has
decreased in every year frequently but Earning per share, Dividend per share , Quick
ratio& Non-performing assets has increase frequently in every year. Current ratio has
increase in year 2017 by 0.01 times and remains same in every 3 years.

67
4. CANARA BANK: -net profit margin ratio, Earnings per share has frequently
increased in every year but dividend payout ratio has decreased gradually in every year.
Dividend per share increases by 1 times in year 2018. In 2017 current ratio has decrease
by 0.01 times and remains same in all the 3 years. Quick ratio has increases slowly in
every year.

5. BANK OF BARODA: -net profit margin ratio has slowly increases in year 2015 but
in 2018 it has decreases by 2 times in year 2018.dividend payout ratio has frequent
fluctuates in every year. Earnings per share Quick ratio, dividend per share& Non-
performing assets has increases slowly in every year. Current ratio increases in year
2018 by 0.01 times.

6. BANK OF INDIA: - Net profit margin ratio has gradually increase but in year 2017
it has reduced to 7 times and again it has increase. Dividend payout ratio has slowly
increased but in 2018 it decreases by 7 times. Earnings per share have decrease in year
2016 by 24 times and again started increasing. Dividend per share has increased by 4
times in year 2016and form year 2017 it started decreasing. Current ratio has frequent
fluctuations by 0.01 times and quick ratio has increases every year slowly. Non –
performing assets has increases in every year.

68
 SUGGESTIONS

 High growth of Indian Economy:

The growth of the banking industry is closely linked with the growth of the overall
economy. India is one of the fastest growing economies in the world and is set to
remain on that path for many years to come. This will be backed by the stellar
growth in infrastructure, industry, services and agriculture. This is expected to boost
the corporate credit growth in the economy and provide opportunities to banks to
lend to fulfill these requirements in the future.

 Rising per capita income:

The rising per capita income will drive the growth of retail credit. Indians have a
conservative outlook towards credit except for housing and other necessities. However,
with an increase in disposable income and increased exposure to a range of products,
consumers have shown a higher willingness to take credit, particularly, young
customers. A study of the customer profiles of different types of banks, reveals that
foreign and private banks share of younger customers is over 60% whereas public
banks have only 32% customers under the age of 40. Private Banks also have a much
higher share of the more profitable mass affluent segment.

 New channel – Mobile banking is expected to become the second largest

channel for banking after ATMs:
New channels used to offer banking services will drive the growth of banking industry
exponentially in the future by increasing productivity and acquiring new customers.
During the last decade, banking through ATMs and internet has shown a tremendous
growth, which is still in the growth phase.
 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. Financial inclusion is the delivery of banking

69
services at an affordable cost to the vast sections of disadvantaged and low income
groups.
 Investors shouldn’t be depending upon the rumors and TV news which might
affect the shares only for a short span of time.
 The banks can expand its network by increasing its branches.Investments are to
be made in those banks which give fairly good returns, dividends every year.
 Financial inclusion initiatives also need to be taken care of as India fares very
poorly on this regard as half the population does not have access to banking
services.

70
 CONCLUSION

 The economic growth of the country is an apt indicator for the growth of the
banking sector. The Indian economy is projected to grow at a rate of 5-6
percent34 and the country’s banking industry is expected to reflect this growth.

 The onus for this lies in the capabilities of the Reserve Bank of India as an able
central regulatory authority, whose policies have shielded Indian banks from
excessive leveraging and making high risk investments.

 During 2017-12, majority of public sector banks failed to meet the priority
sector target. Though at an aggregate level, foreign banks’ performance was
better as compared to domestic banks, bank-wise data revealed that some
foreign banks also failed to meet the priority sector lending target.

 Performance of banks during 2017-12 was conditioned by slowdown in the

domestic economy coupled with higher interest rate environment.

 There are emerging challenges, which appear in the forms of consolidation;

recapitalization, prudential regulation weak banks, and non-performing assets
legal framework etc. needs urgent attention. The paper concludes that, from a
regulatory perspective, the recent developments in the financial sector have led
to an appreciation of the limitations of the present segmental approach to
financial regulation and favors adopting a consolidated supervisory approach to
financial regulation and supervision, irrespective of its structural design.

 The Indian banking sector has been relatively well shielded by the central bank
and has managed to sail through most of the crisis. But, currently in light of
slowing domestic GDP growth, persistent inflation, asset quality concerns and
elevated interest rates, the investment cycle has been wavering in the country.

BIBLIOGRAPHY

71
The following articles from internet have been used for the study purpose:

(a) www.nseindia.com
(b) www.bseindia.com
(c) www.sharegyan.com
(d) www.moneycontrol.com
(e) www.statebankofindia.com
(f)www.icicibank.com
(g)www.punjabnationalbank.com
(h)www.canarabank.com
(i)www.bankofindia.com
(j)www.bankofbaroda.com
(k) Guidance from company mentor Mr. Gireesh Kumar
(l)http://www.indiainfoline.com/Markets/News/Indian-Banking-Sector-Outlook-2013-
Dun-and-Bradstreet/5571598340

(m)www.livemint.com

72