The Indian banking Industry has been undergoing major changes, reflecting a number of

underlying developments. Advancement in communication and information technology has

facilitated growth in internet banking, ATM Network, Electronic transfer of funds and quick
dissemination of information. Structural reforms in the banking sector have improved the financial
performance of the Indian banking sector.

The reforms recently introduced include the enactment of the Securitization Act to step up loan
recoveries, establishment of asset reconstruction companies, initiatives on improving recoveries
from Non-performing Assets (NPAs) and change in the basis of income recognition has raised
transparency and efficiency in the Indian banking system.

Spurt in treasury income and improvement in loan recoveries has helped the Indian banks to
record better profitability.

In order to have a good benchmark of the Indian banking sector, India Index Service and Product
Limited (IISL) has developed the CNX Bank Index.

 Index Composition

CNX Bank Index is an index comprised of the most liquid and large capitalized Indian Banking
stocks. It provides investors and market intermediaries with a benchmark that captures the capital
market performance of the Indian banks.

The Index has 12 stocks from the banking sector, which trade on the National Stock Exchange.

 Market Representation

CNX Bank Index constituents represent 14.79% of the total free float market capitalization of the
universe of the stocks traded on NSE as on March 31, 2011.

 Selection Criteria
Selection of the index set is based on the following criteria:
Company’s market capitalization rank in the universe of the stocks traded on NSE should be
within 500,
Company’s turnover rank in the universe of the NSE traded stock should be within 500,
Company’s trading frequency should be atleast 90% in the last six months,
Company should have a positive net worth.

A company which comes out with an IPO will be eligible for inclusion in the index, if it fulfills the
normal eligibility criteria for the index for a 3 month period.
 Methodology

CNX Bank Index is computed using free float market capitalization method wherein the level of
the index reflects total free float market value of all the stocks in the index relative to a particular
base market capitalization value.

The method also takes into account constituent changes in the index and importantly corporate
actions such as stock splits, rights, new issue of shares etc. without affecting the index value.

 Base Date and Value

The CNX Bank Index has a base date of Jan 1, 2000 and base value of 1000.

 Index Governance

A professional team at IISL, a company setup by NSE and CRISIL manages CNX Bank Index.
There is a three-tier governance structure comprising the board of directors of IISL, the Index
Policy Committee and the Index Maintenance Subcommittee.

 Index Performance

14000
CNX BANK INDEX
12000

10000
Index Value

8000
6000

4000

2000

0
01-01-2000

24-07-2000

12-02-2001

04-09-2001

28-03-2002

18-10-2002

14-05-2003

27-11-2003

18-06-2004

05-01-2005

25-07-2005

17-02-2006

07-09-2006

03-04-2007

23-10-2007

16-05-2008

11-12-2008

13-07-2009

05-02-2010

26-08-2010

17-03-2011

Date

Volatility Avg. Daily

Period Returns (%) (%) Return (%)
1 year 23.74 1.52 0.10
3 years 75.89 2.58 0.11
5 years 151.11 2.46 0.10
Since Inception 1070.55 2.14 0.11
 Company Size (Rs. Mn.)

Largest 1285207
Smallest 47674
Average 336028
Median 161546

 Market Capitalization and Weightage

Mkt. Cap.* Rs.

Company Name Mn. Weight (%)
Axis Bank Ltd. 360696 8.95
Bank of Baroda 162352 4.03
Bank of India 88698 2.20
Canara Bank 89554 2.22
HDFC Bank Ltd. 835130 20.71
ICICI Bank Ltd. 1285207 31.87
IDBI Bank Ltd. 48894 1.21
Kotak Mahindra Bank Ltd. 161729 4.01
Oriental Bank of Commerce 47674 1.18
Punjab National Bank 161363 4.00
State Bank of India 712870 17.68
Union Bank of India 78172 1.94
Total 4032340 100.00
* Free-float Mkt. Cap. as on March 31, 2011