1.

1 INTRODUCTION The main approach of this project is to study the Impact of Risk and Return Analysis on top 5 banking company. Investment is both an Art and science. One makes Investment for a higher return than what he can get by keeping the money in the Commercial or Co-Operative bank. In the finance field it is a common knowledge that money or finance is scarce and that the investors try to maximize their return if the risk is also higher. Risk and Return go together and they have a trade-off. All Investments are risky to some degree or others. The art of Investment is to see that the return is maximized with the minimum of risk, which is inherent in the Investment. For making proper Investment, involving risk and return, the investor has to make a study of the alternative investment avenues of Investment, their risk and return characteristics and make proper projections or expectations, of the risk and the return of the alternative investment under consideration. He has to tune the expectations of his/her preference of the risk and return for making a proper Investment decision. The investor has various alternative avenues for investment for his Savings to flow in accordance with his/her preference. Savings flow into investment for a higher return, but savings kept as cash are barren and do not earn anything. Savings are invested in assets depending on their risk and return characteristics. But a minimum amount of cash is always kept in hand for transitions and contingencies.

1.2 OBJECTIVES OF THE STUDY Primary Objective  To study the risk and return of banking shares.  To understand the investor perception towards banking shares. Secondary Objectives  To estimate the risk associated with banks.  To estimate the return associated with banks.  To analyze the effect of risk and return on investment decision.  To compare the top 5 banks.  To analyze the risk and return of top 5 banks.  To analyze the Investors Risk while investing in banking shares.  To analyze the Investors Return while investing in banking shares.  To give suitable suggestion and recommendation towards the investment in banking sector.

1.3 NEED FOR THE STUDY Security analysis involves an examination of expected return and accompanying risks. Securities that have return and risk characteristics of their own, in combination make up a portfolio. The entire process of estimating return and risk for individual securities is known as Securities analysis.

Risk and return will be very central terms in our analysis and it is essential that the reader clearly understands the meaning of each term and how assets with different payout structures can be compared. General utility theory suggests that the average investor is risk averse. Given the same expected return of two assets with different risks, he would prefer the one with less risk. (This assumption may not be perfectly true for all individuals in all situations, but for the investor community as a whole it is probably true). For an asset with uncertain cash flows and payoffs, which are normally distributed, the mean of the distribution will be the expected return while the standard deviation forms some kind of risk. Choosing the less risky asset therefore comes down to choosing the asset with the lowest standard deviation in its payout distribution. An investor could also approach the problem from the other direction, choosing among assets with the same risk and then choose the asset with the highest expected return. Investment decisions are made by investors and managers. Investors commonly perform investment analysis by making use of fundamental analysis, technical analysis and feel. Investment decisions are often supported by decision tools. The portfolio theory is often applied to help the investor achieve a satisfactory return compared to the risk taken. In investment decision making in the capital market, especially the banking sector stocks and all types of investment, time and risks are critical variables to be considered. The preliminary information needed when taking investment decisions are: The size of capital or how much to be invested The cost of capital on the opportunity cost of the amount to be invested The rate of returns on capital or payoffs from investment.

According to Akintoye (1999), in evaluating investments and potential investments, the relevant factors to be considered are liquidity; safety; structure; yield; and growth. The banking sector had made tremendous success in the recent past as all the banks that approached the capital market via public offers and right issues to raise their capital base made huge success. The re-capitalization success of the banks was almost simultaneously followed by increased demand for banking sector stocks thereby giving rise to increased market prices of banking shares, increased earnings and total market turnover greater than 300% being highest among all sectors stocks. However, the primary challenges to an investor in banking sectors would be to know: Which of the banks stocks should be accepted now and for the future? What total amount of capital or money should one invest and for which stock? How should the portfolio of stocks options be financed? The risk and return analysis of top five banking companies has been taken as a study for meeting the primary challenges to an investor in banking sector.

1.4 SCOPE OF THE STUDY This study helps to know the volatility of the share price of ICICI, AXIS, HDFC, Punjab National Bank and State Bank of India. By understanding the market conditions performance of the share price can be predicted the data used for the study was Nifty Index to generalize the overall market. The same approach can be followed for any particular stock. PERIOD OF STUDY The study was conducted for the period of 3 months from December 2011 to March 2011. AREA OF THE STUDY Five banking companies price movement of January 2010 to December 2010

1.5 LIMITATIONS OF THE STUDY 1. The time period of the study was confined only for 3 months. 2. Due to the time constraints the data analysis was only for a period of 12 months (from January 2010 to December2010). 3. The project is only confined to Nifty of selected banks only. 4. The Limited tools used for the study such as standard deviation, co-efficient of variation, expected Return, Alpha, beta and Questionnaire have its own limitation which in turn affects the result of the study. 5. Though the analysis and findings are objectives, the suggestion is given based on researchers judgement.

2.1 INDUSTRY PROFILE Stock exchanges to some extent play an important role as indicators, reflecting the performance of the country's economic state of health. Stock market is a place where securities are bought and sold. It is exposed to a high degree of volatility; prices fluctuate within minutes and are determined by the demand and supply of stocks at a given time. Stockbrokers are the ones who buy and sell securities on behalf of individuals and institutions for some commission. The Securities and Exchange Board of India (SEBI) is the authorized body, which regulates the operations of stock exchanges, banks and other financial institutions.. With the view to improve, discipline and bring greater transparency in this sector, constant efforts are being made and to a certain extent improvements have been made. As the condition of capital markets are constantly improving, it has started drawing attention of lot more people than before. On the career related aspects, professionals have opportunities to choose from for a wide range of jobs available in a number of organizations in this sector and one can expect to have good times ahead of him. National Stock Exchange (NSE) With the liberalization of the Indian economy, it was found inevitable to lift the Indian stock market trading system on par with the international standards. On the basis of the recommendations of high-powered Pherwani Committee, Industrial Development Bank of India, Industrial Credit and Investment Corporation of India, Industrial Finance Corporation of India, all Insurance Corporations, selected commercial banks and others incorporated the National Stock Exchange in 1992. Trading at NSE can be classified under two broad categories: (a) Wholesale debt market and (b) Capital market Wholesale debt market operations are similar to money market operations - institutions and corporate bodies enter into high value transactions in financial instruments such as government securities, treasury bills, public sector unit bonds, commercial paper, certificate of deposit, etc. 7

There are two kinds of players in NSE: (a) Trading members and (b) Participants. Recognized members of NSE are called trading members who trade on behalf of themselves and their clients. Participants include trading members and large players like banks who take direct settlement responsibility. Trading at NSE takes place through a fully automated screen-based trading mechanism, which adopts the principle of an order-driven market. Trading members can stay at their offices and execute the trading, since they are linked through a communication network. The prices at which the buyer and seller are willing to transact will appear on the screen. When the prices match the transaction will be completed and a confirmation slip will be printed at the office of the trading member. NSE has several advantages over the traditional trading exchanges. They are as follows: _ NSE brings an integrated stock market trading network across the nation. Investors can trade at the same price from anywhere in the country. _ Delays in communication, late payments and the malpractices prevailing in the traditional trading mechanism can be done away with greater operational efficiency and informational transparency in the stock market operations, with the support of total computerized network. Unless stock markets provide professionals service, small investors and foreign investors will not be interested in capital market operations. And capital market being one of the major sources of long-term finance for industrial projects, India cannot afford to damage the capital market path.

Bombay Stock Exchange (BSE) Sensex For the premier Stock Exchange that pioneered the stock broking activity in India, 128 years of experience seems to be a proud milestone. A lot has changed since 1875 when 318 persons became members of what today is called "The Stock Exchange, Mumbai" by paying a princely amount of Re1. Since then, the country's capital markets have passed through both good and bad periods. The journey in the 20th century has not been an easy one. Till the decade of eighties, there was no scale to measure the ups and downs in the Indian stock market. The Exchange, Mumbai (BSE) in 1986 came out with a stock index that subsequently became the barometer of the Indian stock market. SENSEX is not only scientifically designed but also based on globally accepted construction and review methodology. First compiled in 1986, SENSEX is a basket of 30 constituent stocks representing a sample of large, liquid and representative companies. The base year of SENSEX is 1978-79 and the base value is 100. The index is widely reported in both domestic and international markets through print as well as electronic media. The Index was initially calculated based on the "Full Market Capitalization" methodology but was shifted to the free-float methodology with effect from September 1, 2003. The "Free-float Market Capitalization" methodology of index construction is regarded as an industry best practice globally. As the oldest index in the country, it provides the time series data over a fairly long period of time (From 1979 onwards). Small wonder, the SENSEX has over the years become one of the most prominent brands in the country. The growth of equity markets in India has been phenomenal in the decade gone by. Right from early nineties the stock market witnessed heightened activity in terms of various bull and bear runs. The SENSEX captured all these events in the most judicial manner. One can identify the booms and busts of the Indian stock market through SENSEX.

COMPETITORS
India bulls India bulls Securities Limited (ISL) is the pioneer in Retail Broking Industry having a pan India presence and providing services to a customer base exceeding half a million. ISL is in the business of providing securities broking and advisory services and is a corporate member of capital market, wholesale debt market and derivative segment of NSE and of the capital market and derivative segment of BSE. ISL is the first and only brokerage house to be assigned the highest rating BQ-1 by CRISIL. The company through various types of brokerage accounts provides product and services related to purchase and sale of securities listed in NSE and BSE. It also provides depository services, equity research services, mutual fund, IPO distribution to its clients. The company provides these services through on-line and off-line distribution channel.

Angel Broking Angel Broking is the retail broking arm of SSKI, an organization with more than eight decades of trust & credibility in the stock market. It is India's leading retail financial Services Company with We have over 250 share shops across 115 cities in India. While our size and strong balance sheet allow us to provide you with varied products and services at very attractive prices, our over 750 Client Relationship Managers are dedicated to serving your unique needs. Angel Broking is lead by a highly regarded management team that has invested crores of rupees into a world class Infrastructure that provides our clients with real-time service & 24/7 access to all information and products. Our flagship Angel Broking Professional Network offers real-time prices, detailed data and news, intelligent analytics, and electronic trading capabilities, right at your fingertips. This powerful technology complemented by our knowledgeable and customer focused Relationship Managers.

10

Reliance Securities Reliance Securities Limited is a Reliance Capital company and part of the Reliance Anil Dhirubhai Ambani Group. Reliance Securities is a permitted user of the brand "Reliance Money" for promoting its various products and services. Reliance Securities endeavors to change the way investors transact in equities markets and avails services. It provides customers with access to Equity, Derivatives, Portfolio Management Services, Investment Banking, Mutual Funds & IPOs. It also offers secured online share trading platform and investment activities in secure, cost effective and convenient manner. To enable wider participation, it also provides the convenience of trading offline through variety of means, including Call & Trade, Branch dealing Desk and its network of affiliates. The following are the Scheduled Banks in India (Public Sector): 1. State Bank of India 2. State Bank of Bikaner and Jaipur 3. State Bank of Hyderabad 4. State Bank of Indore 5. State Bank of Mysore 6. State Bank of Patiala 7. State Bank of Saurashtra 8. State Bank of Travancore 9. Andhra Bank 10. Allahabad Bank 11. Bank of Baroda 12. Bank of India 13. Bank of Maharashtra 14. Canara Bank 15. Central Bank of India 16. Corporation Bank 11

17. Dena Bank 18. India Overseas Bank 19. Indian Bank 20. Oriental Bank of Commerce 21. Punjab National Bank 22. Punjab and Sind Bank 23. Syndicate Bank 24. Union Bank of India 25. United Bank of India 26. UCO Bank 27. Vijaya Bank

The following are the scheduled Banks in India (Private Sector): 1. Vysya Bank Ltd 2. Axis Bank Ltd 3. Indusind Bank Ltd 4. ICICI Banking Corporation Bank Ltd 5. Global Trust Bank Ltd 6. HDFC Bank Ltd 7. Centurion Bank Ltd 8. Bank of Punjab Ltd 9. IDBI Bank Ltd The following are the Scheduled Foreign Banks in India 1. American Express Bank Ltd 2. ANZ Gridlays Bank PLc. 3. Bank of America NT & SA 4. Bank of Tokyo Ltd 5. Banquc National de Paris 12

6. Barclays Bank Plc 7. Citi Bank N.C. 8. Deutsche Bank A.G. 9. Hong Kong and Shanghai Banking Corporation 10. Standard Chartered Bank. 11. The Chase Manhattan Bank Ltd. 12. Dresdner Bank A.G.

STATE BANK OF INDIA The bank is actively involved since 1973 in non-profit activity called community Services Banking. All our branches and administrative offices throughout the country sponsor and participate in large number of welfare activities and social causes. Our business is more than banking because we touch the lives of people anywhere in many ways. State Bank of India, The countrys largest commercial Bank in terms of profits, assets, deposits, branches and employees, welcomes you to its Investors Relations Section. SBI, with its heritage dating back to the year 1806, strives to continuously provide latest and up to date information on its financial performance. It is our endeavor to walk on the path of transparency and allow complete access to all the stakeholders enabling total awareness about the Bank. The Bank communicates with the stakeholders through a variety of channels, such as through e-mail, website, conference call, one-on-one meeting, analysts meet and attendance at Investor Conference throughout the world. SBI has always been fundamentally strong in its core business which is mirrored in its results- year after year.

13

HDFC BANK The housing development finance corporation limited HDFC was the amongst the first to receive an in principle approval from the reserve bank of India RBI to set up a bank in the private sector as a part of the RBIs liberalization of the Indian banking industry in 1994. The bank was incorporated in august 1994 in the name HDFC bank limited with its registered office in Mumbai, India HDFC bank commenced operation as a schedule commercial bank in January 1995. Capital Structure: The authorized capital of HDFC bank is (Rs 4.5 billion). The paid up capital is Rs 311.9 crore (Rs 3.1 billion). The HDFC group holds 22.1% of the banks equity and about 19.4% of the equity is held by the ADS depository shares ADS issue roughly 31.3% of the equity is held by foreign institutional investors (flls) and the bank has about 190000 shareholders. The shares are listed on the stock exchange Mumbai and the national stock exchange. The banks American depository shares are listed on the New York Exchange (NYKE) under the symbol HDB. HDFC banks mission is to be a world class Indian bank. The objective is to build sound customer franchises across distant businesses so as to be the preferred provider of banking services for target retail and wholesaler customer segments, and to achieve healthy growth in profitability. Consistent with the bank risk appetite. The bank is committed to maintain the highest level of ethical standards, professional integrity, corporate governance and regulatory compliance. HDFC banks business philosophy is based on four core values-operational excellence, customer focus, product leadership and people.

AXIS BANK Axis bank was the first of the new private banks to have begum operation in 1994, after the government of Indian allowed new private banks to be established. The bank was promoted jointly by the administrator of the specified undertaking of the unit trust of India (UTI), life insurance corporation of India (LIC) and general insurance corporation of India ltd and other four PSU 14

companies, i.e. national insurance company ltd., the new India assurance company, the oriental insurance corporation and united insurance company ltd. The bank today capitalized to the extent to the extent of Rs. 357.48 crore with the public holding (other than promoters) at 57.03%. The bank registered office is at Ahmadabad and its central office is located at Mumbai. Presently, the bank has very wide network of more than 608 branch offices and extension counters. The bank has a network of over 2595 ATMs providing 24 hrs a day banking convenience to its customers. This is one of the largest ATM networks in the country. The bank has strengths in both retail and corporate banking and its committed to adopting the best industry practices internationally in order to achieve excellence.

ICICI BANK ICICI bank is Indias second largest bank with total assets of Rs.376700 billion (US$ 96 billion) at December 31st 2007 and profit after tax of Rs 30.08 billion for the nine months ended December 31, 2007 ICICI bank is second amongst all the companies listed on the Indian stock exchanges in terms of free float market capitalization. The bank has a network of about 955 branches and 3687 ATMs in India and present in 17 countries. ICICI bank offers a wide range of banking products and financial services to corporate and retail customer through its specialized subsidiaries and facilities in the areas of investment banking, life and non life insurance, venture capital and asset management. The bank currently has subsidiaries in the united kingdom, Russia, and Canada branches in United states, Singapore, Bahrain, Hong Kong, Srilanka, Qutar and Dubai international finance centre and representative office in United Arab Emirates, China, South Africa, Bangladesh, Thailand and Indonesia.

15

ICICI banks equity shares are listed in India on Bombay Stock Exchange and the National Stock Exchange of India limited and its American Depositary (ADRs) are listed on the New York Stock Exchange (NYSE). Punjab National Bank Punjab National Bank maintains with over 200 leading international banks all over the world enhances its capabilities to handle transactions world wide. Besides, bank has rupee Drawing Arrangements with 15 exchange companies in the Gulf and one in Singapore. Bank is member of the SWIFT and over 150 branches of the bank are connected through its computerbased terminal at Mumbai. With its state-of-art dealing rooms and well-trained dealers, the bank offers efficient forex dealing operations in India.

16

2.2 COMPANY PROFILE

Share khan is one of India's leading financial services companies. Share khan provides a complete life-cycle of investment solution in Equities, Derivatives, Commodities, IPO, Mutual Funds, Depository Services, Portfolio Management Services and Insurance. Share khan traces its lineage to SSKI, an organization with more than eight decades of trust & credibility in the stock mark decades of trust & credibility in the stock market. Share khan Ltd is Indias leading online retail broking house with its presence through 1288Share Shops in 325 cities and serving more than 8,00,000 customers across the nation. Launched on Feb 8th 2000 as an online trading portal, Share khan offers its clients trade execution facilities for cash as well as derivatives, on BSE and NSE, depository services, mutual funds, initial public offerings (IPOs), and commodities trading facilities on MCX and NCDEX. Besides high quality investment advice from an experienced research team Share khan provides market related news, stock quotes fundamental and statistical information across equity, mutual funds, IPOs and much more. Share khan has set category leadership through pioneering initiatives like Speed Trade, a net based executable application that emulates a broker terminal besides providing information relevant to Day traders. Their second initiative, First Step is targeted at empowering first time investors. Share khan has also set their global footprints through the India First initiative, a series of seminars conducted by Share khan to help NRIs participate and benefit from the huge investment opportunities in India. The company has a full-fledged research division involved in Macro Economic studies, Sectorial research and Company Specific Equity Research combined with a strong and well networked sales force which helps deliver current and up to date market information and news. Share khan is an equities focused organization tracing its lineage to SSKI, a veteran equities solutions company with over five decades of experience in Indian stock markets. 17

SHAREKHAN LIMITED Share khan is one of the top retail brokerage houses in India with a strong online trading platform. The company provides equity based products (research, equities, derivatives, depository, margin funding, etc.). It has one of the largest networks in the country with 704 share shops in 280 cities and Indias premier online trading portal www.sharekhan.com. With their research expertise, customer commitment and superior technology, they provide investors with end-to-end solutions in investments. They provide trade execution services through multiple channels - an Internet platform, telephone and retail outlets. Share khan was established by Morakhia family in 1999-2000 and Morakhia family, continues to remain the largest shareholder. It is the retail broking arm of the Mumbai-based SSKI [SHANTILAL SHEWANTILAL KANTILAL ISWARNATH LIMITED] Group. SSKI which is established in 1930 is the parent company of Share khan ltd. With a legacy of more than 80 years in the stock markets, the SSKI group ventured into institutional broking and corporate finance over a decade ago. Presently SSKI is one of the leading players in institutional broking and corporate finance activities. Share khan offers its customers a wide range of equity related services including trade execution on BSE, NSE, and Derivatives. Depository services, online trading, Investment advice, Commodities, etc. Share khan Ltd. is a brokerage firm which is established on 8th February 2000 and now it is having all the rights of SSKI. The company was awarded the 2005 Most Preferred Stock Broking Brand by Awwaz Consumer Vote. It is first brokerage Company to go online. The Company's online trading and investment site - www.Sharekhan.com - was also launched on Feb 8, 2000. This site gives access to superior content and transaction facility to retail customers across the country. Known for its jargon-free, investor friendly language and high quality research, the content-rich and research oriented portal has stood out among its contemporaries because of its steadfast dedication to offering customers best-of-breed technology and superior market information. Sharekhan has one of the best states of art web portal providing fundamental and statistical information across equity, mutual funds and IPOs. One can surf across 5,500 companies for indepth information, details about more than 1,500 mutual fund schemes and IPO data.

18

One can also access other market related details such as board meetings, result announcements, FII transactions, buying/selling by mutual funds and much more. Share khans management team is one of the strongest in the sector and has positioned Share khan to take advantage of the growing consumer demand for financial services products in India through investments in research, pan-Indian branch network and an outstanding technology platform. Further, Share khans lineage and relationship with SSKI Group provide it a unique position to understand and leverage the growth of the financial services sector. We look forward to providing strategic counsel to Share khans management as they continue their expansion for the benefit of all shareholders." SSKI Corporate Finance Private Limited (SSKI) is a leading India-based investment bank with strong research-driven focus. Their team members are widely respected for their commitment to transactions and their specialized knowledge in their areas of strength. The team has completed over US$5 billion worth of deals in the last 5 years - making it among the most significant players raising equity in the Indian market. SSKI, a veteran equities solutions company has over 8 decades of experience in the Indian stock markets. If we experience their language, presentation style, content or for that matter the online trading facility, we'll find a common thread; one that helps us make informed decisions and simplifies investing in stocks. The common thread of empowerment is what Share khans all about! "Sharekhan has always believed in collaborating with like-minded Corporate into forming strategic associations for mutual benefit relationships" says Jaideep Arora, Director - Sharekhan Limited. Sharekhan is also about focus. Sharekhan does not claim expertise in too many things. Share khans expertise lies in stocks and that's what he talks about with authority. So when he says that investing in stocks should not be confused with trading in stocks or a portfolio-based strategy is better than betting on a single horse, it is something that is spoken with years of focused learning and experience in the stock markets. And these beliefs are reflected in everything Sharekhan does for us! Sharekhan is a part of the SSKI group, an Indian financial services power house, with strong presence in Retail equities Institutional equities Investment banking.

19

FINANCIAL SERVICES: The financial is one of the most important inventions of the modern society. The phenomenon of imbalance in the distribution of capital or funds existed in every economic system. There are areas or people with surplus funds and there are those with a deficit. A financial system functions as an intermediary and facilitates the flow of funds from the areas of surplus to the areas of deficit. A financial system is a composition of various institutions, markets, regulations and laws, practices, money managers, analysts, transactions and claims and liabilities. The functions performed by a financial system are: THE SAVINGS FUNCTION: LIQUIDITY FUNCTION: PAYMENT FUNCTION: RISK FUNCTION: POLICY FUNCTION: Sharekhan provides 4 in 1 account. Demat a/c Trading a/c: for cash calculation Bank a/c: for fund transfer Dial and Trade: for query relating trading

Products:        Mutual fund schemes Insurance Portfolio Management System Shares online and offline Bonds Fixed Deposits Commodities

20

Services of Share Khan

21

DEMAT ACCOUNT: Sharekhan is a depository participant. This means that we can keep the shares in dematerialized form in Sharekhan. But for this one has to the demat account in Sharekhan. Dematerialization is the process by which a client can get physical certificates converted into electronic balances maintained in his account with the DP. In Sharekhan, under demat account there are two types of terminals.

TYPE

OF

DEMAT DEPOSIT (Refundable)

CHARGES (nonrefundable)

ACCOUNT TERMINAL CLASSIC Rs.5000 Rs.10000 TRADETIGER Rs.5000 Rs.10000/25000 Rs.750 Nil Rs.1000 Nil

Its core services are: Equities, and Derivatives trading on the National Stock Exchange of India Ltd. (NSE), and Bombay Stock Exchange Ltd. (BSE),      Commodities trading on National Commodity and Derivatives Exchange India (NCDEX) and Multi Commodity Exchange of India Ltd. (MCX), Depository services, Online trading services, IPO Services, Dial-n-Trade 22

          

Portfolio management services, Fundamental and Technical Research services, In addition to this they also provide advisory services and distributions for funds. Sharekhan Value Line (a monthly publication with reviews of recommendations, stocks to watch out for etc.) Daily research reports and market review (High Noon & Eagle Eye) Pre-market Report Daily trading calls based on Technical Analysis Cool trading products (Daring Derivatives and Market Strategy) Personalized Advice Live Market Information Sharekhan First Step mutual

Sharekhan First Step The Sharekhan First Step is a brand new program designed especially for those who are new to investing in shares. All one have to do is open a Sharekhan First Step account and they guide us through the investing process.

Market Share Sharekhan enjoyed about 20 per cent market share in Web business (Internet trading) in stock markets. Three years ago, Web trading showed lot of promise but with the market witnessing a downturn, there was not much interest among retail customers.

23

Profits The share of Web trading constituted 22 per cent of the revenue. As Share khans daily trading volume was over Rs 200 crore, the share of Web trading at about Rs 40 crore a day was substantial and a larger part of the volume was coming from day traders. BROKERAGE STRUCTURE OF SHAREKHAN BROKERAGE: INTRADAY CASH- EQUITIES F&O PREPAID SCHEME 0.05% 0.05% 0.025% DELIVERY 0.5% 0.05% 0.25%

Share khan has tie up with the following banks: y y y y y y y y HDFC Axis Bank IDBI Citi Bank IndusInd Bank Union Bank ICICI Oriental Bank of Commerce

MINIMUM INVESTMENT IN MUTUAL FUND: INVESTMENT Mutual Fund (Any Company) MINIMUM AMOUNT 5000

Systematic Investment Plan (Any Company) 500

24

3. REVIEW OF LITERATURE
3.1 CONCEPTUAL REVIEW TYPES OF SECURITIES Where a security is traded (primary or secondary trading) is called a market. The different types of securities that are traded are also known as markets. These securities may be traded on separate exchanges or in different over the counter markets. BONDS This market trades in the debt instruments issued by governments, government agencies, such as municipalities, and corporations. The bond market usually attracts more interest from professional and institutional investors than from the general public. Institutional investors include pension funds, insurance companies, bank trust departments and collective investment schemes. EQUITIES The principal focus of securities regulation is on the equities market because it attracts much more interest from the general public which are usually less sophisticated than professional or institutional investors. This market trades shares of common stocks issued by corporations. COMMODITIES A commodity is not technically a security, but the contract to buy or sell the commodity is a security. Because it is the contracts to buy or sell that are being traded, investors deal with these securities without ever seeing the commodity that is the subject of the contract. The commodity is described in the contract and the need to see or handle the actual commodity does not arise. The commodities market involves the purchase or sale of products such as oil, gold, silver, copper, and many agricultural products. Currency markets have become the ultimate commodity markets with worldwide influence. Interest rates and specific stock indexes are two other of the most recently introduced subjects of commodity contracts. 25

WHAT IS SHARES? In finance a share is a unit of account for various financial instruments including stocks, mutual funds, limited partnerships, and REIT's. In British English, the usage of the word share alone to refer solely to stocks is so common that it almost replaces the word stock itself. In simple Words, a share or stock is a document issued by a company, which entitles its holder to be one of the owners of the company. A share is issued by a company or can be purchased from the stock market.

Investment Invest is a word that is used frequently in economics, as the quotations above suggest. One can invest in developing new ideas, as suggested by Benjamin Franklin. One can invest in human capital, as suggested by Winston Churchill. Or one can invest in nancial assets, perhaps the most common use of this word in the business world. Interestingly, none of these uses conveys the most common meaning of investment in macroeconomics: investment in the national income accounting sense. In this context, investment refers to the accumulation of physical capital roads, houses, computers, and machine tools. Nevertheless, each of these uses of the word invest captures something essential: it is by investing that our actions today inuence our opportunities in the future. Technical Analysis The methods used to analyze securities and make investment decisions fall into two very broad categories: fundamental analysis and technical analysis. Fundamental analysis involves analyzing the characteristics of a company in order to estimate its value. Technical analysis takes a completely different approach; it doesn't care one bit about the "value" of a company or a commodity. Technicians (sometimes called chartists) are only interested in the price movements in the market. Despite all the fancy and exotic tools it employs, technical analysis really just studies supply and demand in a market in an attempt to determine what direction, or trend, will continue in the 26

future. In other words, technical analysis attempts to understand the emotions in the market by studying the market itself, as opposed to its components. If you understand the benefits and limitations of technical analysis, it can give you a new set of tools or skills that will enable you to be a better trader or investor. In this tutorial, we'll introduce you to the subject of technical analysis. It's a broad topic, so we'll just cover the basics, providing you with the foundation you'll need to understand more advanced concepts down the road. Fundamental analysis Fundamental analysis is the cornerstone of investing. In fact, some would say that you aren't really investing if you aren't performing fundamental analysis. Because the subject is so broad, however, it's tough to know where to start. There are an endless number of investment strategies that are very different from each other, yet almost all use the fundamentals. The goal of this tutorial is to provide a foundation for understanding fundamental analysis. It's geared primarily at new investors who don't know a balance sheet from an income statement. While you may not be a "stock-picker extraordinaire" by the end of this tutorial, you will have a much more solid grasp of the language and concepts behind security analysis and be able to use this to further your knowledge in other areas without feeling totally lost.

RISK AND RETURN Risk and return or inseparable to ignore and in investment decision. The investment process must be considered in terms of aspect risk and return. Return is precise statistical term it is not a simple expectation of investors return but is measurable also. The investor should keep the risk associated with the return proportional as risk is directly correlated with return.

27

3.2 APPLIED REVIEW ANALYSIS OF INVESTMENT HOLDING-PERIOD, RETURN, AND RISK ABSTRACT Dr. (Ms.) M.Thenmozhi This study examines the effect of the holding-periods on investments risk and return. Sample of this study is the 50 most active stocks by trading volume. The stocks are listed in Indonesia Stock Exchange. The variables are constructed following the previous research conducted by Riyanto, Atmaja, and Coadi (1998), Subrata (2005), Sudana and janiarit (2000), while the holding periods are defined as: 1-Week, 4-Week, and 12Week.There are two main hypotheses, (1) the holding-period do not affect investment stock returns; (2) the holding-period do not affect investment stock risks. ANOVA and Multiple Pair Wise Comparison of Means are applied in this study. The empirical analysis finds that the investment stock returns are significantly affected by the holding-period, while the investment stock risks are significantly not affected by the holding-period.

Analysis of the Value Added by Risk Management Abstract Dr. (Ms.) Manigandan The value of an asset is composed of a series of factors. When the volatility of these factors is high, the execution of a risk hedging strategy can add value to the company. This study aims to measure the value added by a risk hedging strategy that assures the creation of value each period, seeking to give subsidies to managers to decide if risk hedging is economically viable. Through a case study methodology of a beef industry investment, the real options concept was utilized in which the hedge is seen as an insurance of the asset companys value, using the creation of value proposed in the Ohlson model (1995) as a parameter. Results indicate that this strategy can add value to an investment, but this value depends on the level of risk to which the company is exposed, as well as the volatility of the factors affecting this value. 28

An Empirical Analysis of Indian Banking Sector Abstract Dr. (Ms.) Abdullah This paper investigates the relationship between the changing patterns of banks source of income and risk adjusted performance. A database of 77 banks over the period of 1999 to 2004 is constructed for the 27 public sector banks, 22 private banks, 25 foreign banks and 3 cooperative banks to compare their change in income composition. Banks performance is measured by risk adjusted return on BIS risk allocated capital (RARORAC). To examine the relationship between ownership pattern and performance, we compare the difference between new generation private sector banks and foreign banks with their public sector and cooperative banks counterparts. We argue that in a competitive financial market in order to change the profitability drivers in banking, Indian banks need to improve their non-interest income and also augment risk adjusted interest income through better risk based pricing.

29

4. RESEARCH METHODOLOGY
Research methodology is a way to systematically solve the research problem. It is a science of studying how research is done scientifically. The research cannot be preceded abruptly. The researchers also need to understand the assumptions underlying various technique and they need to know the criteria by which they can decide that certain techniques and procedures will be applicable to certain problems and others will not. OBJECTIVES OF THE STUDY: The objective of the study is on the impact of stock market fluctuations on banking shares. DATA COLLECTION: There are two types of collecting data viz., 1. Primary data: Data is collected directly from the Sample investors. 2. Secondary data: Data is collected directly from secondary sources such as company profile, magazines, monthly updates, etc. RESEARCH DESIGN:  The research design taken for the study is descriptive study, which is concerned with describing the characteristics of a particular individual or of a group using primary data.  Analytical research design is applied which is based on secondary data. SAMPLING TECHNIQUE: The sampling technique used for this design is convenience sampling, a form of nonprobability sampling. SAMPLE SIZE: The size of the sample is 60 investors. 30

DESCRIPTIVE RESEARCH: Descriptive research includes surveys and fact-finding enquiries of different kinds. The major purpose of descriptive research is description of the state of affairs as it exists at present .The main characteristics of this method is that researcher has no control over the variables; he can only report what has happened or what is happening. The methods of research utilized in Descriptive research are survey method of all kinds, including comparative and correlation methods. TOOLS USED FOR DATA COLLECTION: As far as this research is concerned, primary data collection is done through questionnaire method and personal interview. METHODOLOGY Sample Frame Sample Size Sampling procedure QUESTIONNAIRE Structural Questionnaire was selected as the tool for data collection, which included a set of various questions concerning different aspect of the subject for the study. Several types of questions were included in the questionnaire such as open end choice questions. PERSONAL INTERVIEW This method was also used to collect data. This has helped to collect valuable information from the company executives and other concerned authorities. : Investor in banking sector : 60 : Convenient sampling

31

ANALYTICAL TOOLS USED Alpha and Beta analysis: Meaning Alpha: The intercept of the characteristic regression line is alpha i.e. the distance between the intersection and the horizontal axis. It indicated that the return is independent of the market return. A positive value of alpha is a healthy sign. Positive alpha values would yield profitable return. According to the portfolio theory, in a well diversified portfolio the average value of alpha of all stocks turns out to be zero. Steps (I) (II) (III) (IV) (V) (VI) First calculate the index return of NSE and all BANKS stocks. Second assign the X for NSE index and Y for all BANKS index. Then find out the beta values through using the beta formula. After computing the beta value, we have to find out the Alpha value through using If the beta value more than the one, it would be high systematic risk, it the beta If the beta value below one, it would be low systematic risk.

beta Value. equal to One it would be the systematic risk same as the market.

FORMULA

= n xy (x) (y) nx2 (x)2 =y x

32

Risk and Return ratio: The risk and return ration shows the percentage of profits and loss of BANKS shares and risk and return of BANKS stocks. Step (I) (II) (III) FORMULA Risk and return ratio = Alpha/Beta First take alpha and beta values for calculating the risk and return ratio The second steps is substitute the values to the risk and return ratio formula Finally we will get the risk and return ratio.

Standard Deviation: Standard Deviation is a statistical tool. Which measures the variability of returns from the expected value, or volatility. It is denoted by sigma(s). It is calculated using the formula mentioned below: = ((x-x)2) N

Where, x is the sample mean, xs are the observations (returns), and N is the total number of observation or the sample size.

33

Co-efficient Variation: It is in such problems where we want to compare the variability of two rr more than two series. That series for which Co-efficient of variation is greater is said to be more variable or conversely less consistent, less uniform, less stable or less homogeneous. On the other hand, the series for which Co-efficient of variation is less is said to be less variable or more consistent, more uniform, more stable or more homogeneous. Co-efficient of variation is denoted by C.V. and is obtained as follows: CV% = SD X

Expected Return: The average of a probability distribution of possible returns, calculated by using the following formula:

Percentage Analysis: Percentage Analysis shows the entire Population on terms of percentages. It reveals the number of belonging in a particular category or the number of people preferring a particular thing in terms of percentage. In this study, the number of people who responded in a particular manner is interpreted in forms of percentages. Each table has been calculated on the basis of percentage.

Percentage =

Noofrespondents *100 Totalrespondents

34

Analysis of variance: ANOVA is specially designed to test whether the means of more than two quantitative populations are equal. It consists of classifying and cross classifying statistical result and test whether the means of a specified classification differ significantly. Object of f-test is to find out whether the two independent estimates of population variance differ significantly. Steps followed while using the statistical tool one way ANOVA: Step I: Correction factor (C.F) = T2 / N Step II: Total sum of square (TSS) =( x12 + . . . . . . . +xn2 C.F) Step III: Sum of square of column (SSC) = Step IV: Sum of square of error (SSE) = TSS - SSC Step V: Construct ANOVA table and find the calculated value of F with their respective degrees of freedom. If calculated F < Table Value F then We accept null hypothesis. If calculated F > Table Value F then We reject null hypothesis.

x
n1

2 1

x ......+
ni

2 n

-C.F

35

5. DATA ANALYSIS AND INTERPRETATION

TABLE NO: 5.1 The table showing Alpha and Beta calculation for SBI (NSE)

MONTH

NSE 4882 4922 5249 5278 5086 5312 5368 5402 6030 6018 5863 6134

SBI 2057 1974 2078 2300 2269 2302 2503 2766 3240 3150 2992 2812

X 0.82 6.64 0.55 -3.6 4.44 1.05 0.63 11.6 -0.2 -2.6 4.62 X= 24

Y -4.04 5.268 10.68 -1.35 1.454 8.732 10.51 17.14 -2.78 -5.02 -6.02 Y=34.59

XY -3.306 35.002 5.9024 4.90304 6.46266 9.20493 6.6552 199.219 0.55279 12.9189 -27.807 XY= 250

X 0.67 44.1 0.31 13.2 19.7 1.11 0.4 135 0.04 6.63 21.4 x=243

January Feb March April May June July Aug Sep Oct Nov Dec

36

CALCULATION Beta Calculation = n xy - x + y nx2 (x)2 11(250) (24 x 34.59) 11 (243) (24)2 = 1920 2097 = 0.91 Alpha calculation =y x = 3.14 - (0.91) (2.18) = 1.15 Risk and Return Ratio Alpha/Beta = 1.15/0.91 = 1.26

INTERPRETATION: Beta refers to the risk. Since, the Beta is less than 1 the stock will follow the market but, will not be as volatile as market. The alpha be the stock is positive indicating that, in given the risk, the stock gives excess return. And also we can find here the Risk and Return Ratio is 1.26 it refers of the excess returns than NSE.

37

TABLE NO: 5.2 The table showing Alpha and Beta calculation for HDFC (NSE)

MONTH January Feb March April May June July Aug Sep Oct Nov Dec

NSE 4882 4922 5249 5278 5086 5312 5368 5402 6030 6018 5863 6134

HDFC 1631.1 1704.8 1933.5 2000.5 1888.5 1919 2126.9 2134.3 2489.4 2279.9 2285.4 2346.4

X 0.82 6.64 0.55 -3.64 4.44 1.05 0.63 11.6 -0.2 -2.58 4.62 X=24

Y 4.518 13.42 3.465 -5.6 1.615 10.83 0.348 16.64 -8.42 0.241 2.669 Y=39.73

XY 3.7021 89.125 1.9145 20.366 7.1765 11.421 0.2204 193.42 1.6748 -0.621 12.337 XY=340.74

X 0.671 44.14 0.305 13.23 19.75 1.111 0.401 135.1 0.04 6.634 21.36 X=243

38

CALCULATION Beta Calculation = n xy - x + y nx2 (x)2 11(340.74) (24 x 39.73) 11 (243) (24)2 = 2795 2097 = 1.33 Alpha calculation =y x = 3.61 - (1.33) (2.18) = 0.71 Risk and Return Ratio Alpha/Beta = 0.71/1.33 = 0.526

INTERPRETATION
Since the Beta is more than 1 the stock will be more volatile it means high systematic risk, and the Alpha indicates the very less return. The Risk and Return Ratio is 0.526

39

TABLE NO: 5.3 The table showing Alpha and Beta calculation for AXIS (NSE)

MONTH January Feb March April May June July Aug Sep Oct Nov Dec

NSE 4882 4922 5249 5278 5086 5312 5368 5402 6030 6018 5863 6134

AXIS 1025.7 1124.5 1168.3 1270 1232.4 1242.4 1343.5 1330.7 1536.6 1471.1 1366.9 1350.1

X 0.82 6.64 0.55 -3.6 4.44 1.05 0.63 11.6 -0.2 -2.6 4.62 X=24

Y 9.632 3.895 8.705 -2.96 0.811 8.137 -0.95 15.47 -4.26 -7.08 -1.23 Y=30.17

XY 7.89 25.9 4.81 10.8 3.61 8.58 -0.6 180 0.85 18.2 -5.68 XY=254

X 0.671 44.14 0.305 13.23 19.75 1.111 0.401 135.1 0.04 6.634 21.36 X=243

40

CALCULATION Beta Calculation = n xy - x + y nx2 (x)2 11(254) (24 x 30.17) 11 (243) (24)2 = 2070 2097 = 0.98 Alpha calculation =y x = 2.74 - (0.98) (2.18) = 0.60 Risk and Return Ratio Alpha/Beta = 0.60/0.98 = 0.612

INTERPRETATION: Beta refers to the risk. Since, the Beta is less than 1 the stock will follow the market but, will not be as volatile as market. The alpha be the stock is positive indicating that, in given the risk, the stock gives excess return. And also we can find here the Risk and Return Ratio is 0.612 it refers of the excess returns than NSE.

41

TABLE NO: 5.4 The table showing Alpha and Beta calculation for ICICI (NSE)

MONTH January Feb March April May June July Aug Sep Oct Nov Dec

NSE 4882 4922 5249 5278 5086 5312 5368 5402 6030 6018 5863 6134

ICICI 830.35 872.15 952.5 951.95 868.3 861.7 904.9 977.7 1113 1163 1142.1 1145.1

X 0.82 6.64 0.55 -3.6 4.44 1.05 0.63 11.6 -0.2 -2.6 4.62 x=24

Y 5.034 9.213 -0.06 -8.79 -0.76 5.013 8.045 13.84 4.492 -1.8 0.263 y=34.5

XY 4.12 61.2 -0.03 32 -3.38 5.29 5.1 161 -0.89 4.63 1.21 xy=270

X 0.671 44.14 0.305 13.23 19.75 1.111 0.401 135.1 0.04 6.634 21.36 x=243

42

CALCULATION Beta Calculation = n xy - x + y nx2 (x)2 11(270) (24 x 34.5) 11 (243) (24)2 = 2142 2097 = 1.02

Alpha calculation =y x = 2.63 - (1.02) (2.18) = 0.40

Risk and Return Ratio Alpha/Beta = 0.40/1.02 = 0.39

INTERPRETATION
Since the Beta is more than 1 the stock will be more volatile it means high systematic risk, and the Alpha indicates the very less return.

43

TABLE NO: 5.5

The table showing Alpha and Beta calculation for PNB (NSE)

MONTH January Feb March April May June July Aug Sep Oct Nov Dec

NSE 4882 4922 5249 5278 5086 5312 5368 5402 6030 6018 5863 6134

PNB 898.65 901 1012.8 1039.5 1002.5 1049 1070.5 1180.3 1293.2 1290.8 1218.6 1222

X 0.82 6.64 0.55 -3.6 4.44 1.05 0.63 11.6 -0.2 -2.6 4.62 x=24

Y 0.262 12.41 2.636 -3.56 4.638 2.05 10.26 9.565 -0.19 -5.59 0.279 y=32.76

XY 0.21 82.4 1.46 12.9 20.6 2.16 6.5 111 0.04 14.4 1.29 xy=253

X 0.671 44.14 0.305 13.23 19.75 1.111 0.401 135.1 0.04 6.634 21.36 x=243

44

CALCULATION Beta Calculation = n xy - x + y nx2 (x)2 11(253) (24 x 32.76) 11 (243) (24)2 = 1997 2097 = 0.95 Alpha calculation =y x = 2.98 - (0.95) (2.18) = 0.90 Risk and Return Ratio Alpha/Beta = 0.90/0.95 = 0.95

INTERPRETATION: Beta refers to the risk. Since, the Beta is less than 1 the stock will follow the market but, will not be as volatile as market. The alpha be the stock is positive indicating that, in given the risk, the stock gives excess return. And also we can find here the Risk and Return Ratio is 0.95 it refers of the excess returns than NSE.

45

TABLE NO: 5.6 Table Showing the Calculation of Risk and Return Ratio

BANKS SBI HDFC AXIS ICICI PNB 1.15 0.71 0.61 0.40 0.90 0.91 1.33 0.98 1.02 0.95

Risk Return Ratio 1.26 0.526 0.612 0.39 0.95

INTERPRETATION: The above table shows that  SBI - is 1.15 and higher than the risk. is 0.91 and Risk & Return Ratio is 1.26. It shows that Return is

 HDFC - is 0.71 and is 1.33 and Risk & Return Ratio is 0.526. It shows that Risk is higher than the Return.  AXIS - is 0.61 and higher than the return.  ICICI - is 0.40 and higher than the return. is 0.98 and Risk & Return Ratio is 0.612. It shows that Risk is is 1.02 and Risk & Return Ratio is 0.39. It shows that Risk is

 PNB - is 0.90 and is 0.95 and Risk & Return Ratio is 0.95. It shows that Risk is higher than the return.

46

CHART NO: 5.1 Chart Showing the Calculation of Risk and Return Ratio

47

TABLE NO: 5.7

Table Showing Calculation of standard deviation and co-variance for SBI

Month January February March April May June July August September October November December

_ (X x) -7.183090909 2.124909091 5.268 7.536909091 10.68 -1.35 1.454 8.732 10.51 17.14 -2.78 -5.02 13.99690909 -5.923090909 -8.163090909 -9.163090909 -4.493090909 -1.689090909 5.588909091 7.366909091

_ (X x)2 51.59679501 4.515238645 56.80499865 20.18786592 2.853028099 31.23590483 54.27134956 195.9134641 35.08300592 66.63605319 83.96223501 603.0599389

-4.04

-6.02 x = 34.574

48

x= x N =3.143090909

SD = (x x) N SD = 603.0599389 11 = 2.23 CV% = SD X = 0.7094

Interpretation The Standard Deviation for SBI share is 2.23 and coefficient of variations is 0.7094 Thus it can be concluded that the risk of investment in SBI Bank shares is moderately risky in the study period.

49

TABLE NO: 5.8

Table Showing Calculation of standard deviation and co-variance for HDFC

Month January February

_ (X x) 0.906545455 9.808545455 -0.146454545

_ (X x)2 0.821824661 96.20756394 0.021448934 84.85089483 3.98583075 52.10739849 10.65013557 169.7429967 144.7558985 11.35996384 0.888220569 575.3921767

4.518

March April

13.42 3.465

May June July August

-5.6 1.615 10.83

-9.211454545 -1.996454545 7.218545455 -3.263454545

0.348 September October November 0.241 December 2.669 X=39.726 -0.942454545 16.64 -8.42 13.02854546 -12.03145455 -3.370454545

50

x= x N =3.611 SD = (x x) N SD = 575.3921767 11 = 2.18 CV% = SD X = 0.6038

Interpretation The Standard Deviation for HDFC share is 2.18 and coefficient of variations is 0.6038 Thus it can be concluded that the risk of investment in HDFC Bank shares is moderately risky in the study period.

51

TABLE NO: 5.9 Table Showing Calculation of standard deviation and co-variance for AXIS

Month January February March

_ (X x) 6.889272727 1.152272727

_ (X x)2 47.46207871 1.327732437 35.54869607 32.52109835 3.731570257 29.09817825 13.63623471 161.9834711 49.03818926 96.48597108 15.78256199 486.6157822

9.632 3.895

April 8.705 May June 0.811 July 8.137 August September October November December -0.95 15.47 -4.26 -7.08 -1.23 X=30.17 -2.96

5.962272727 -5.702727273 -1.931727273 5.394272727 -3.692727273 12.72727273 -7.002727273 -9.822727273 -3.972727273

52

x= x N =2.74 SD = (x x) N SD = 486.6157822 11 = 2.005 CV% = SD X

= 0.7317

Interpretation The Standard Deviation for AXIS share is 2.005 and coefficient of variations is 0.7317 Thus it can be concluded that the risk of investment in AXIS Bank shares is moderately risky in the study period.

53

TABLE NO: 5.10 Table Showing Calculation of standard deviation and co-variance for ICICI

Month January

_ (X x) 1.898545455 6.077545455

_ (X x)2 3.604474843 36.93655876 10.21092975 142.2164661 15.17456611 3.525176936 24.10363657 114.5872934 1.840215571 24.35871157 8.250995113 384.8090247

February March April May June July August

5.034 9.213 -0.06 -8.79 -0.76 5.013 8.045

-3.195454545 -11.92545455 -3.895454545 1.877545455 4.909545455

September October

13.84 4.492

10.70454546 1.356545455

November December

-1.8 0.263 X=34.49

-4.935454545 -2.872454545

54

x= x N =3.135 SD = (x x) N SD = 384.8090247 11 = 1.78 CV% = SD X

= 0.5677

Interpretation The Standard Deviation for ICICI share is 1.78 and coefficient of variations is 0.5677 Thus it can be concluded that the risk of investment in ICICI Bank shares is moderately risky in the study period.

55

TABLE NO: 5.11

Table Showing Calculation of standard deviation and co-variance for PNB

Month January February

_ (X x) -2.716181818 9.431818182 -0.342181818

_ (X x)2 7.377643669 88.95919422 0.117088397 42.74782149 2.754996397 0.861521487 53.02487604 43.38617376 10.03737603 73.41373967 7.285582487 329.9660136

0.262

March April

12.41 2.636

May June

-3.56 4.638

-6.538181818 1.659818182 -0.928181818

July 2.05 August September October November December 0.279 X=32.76 10.26

7.281818182 6.586818182 9.565 -0.19 -5.59 -3.168181818 -8.568181818 -2.699181818

56

x= x N =2.978 SD = (x x) N SD = 329.9600136 11 = 1.65 CV% = SD X

= 0.554

Interpretation The Standard Deviation for PNB share is 1.65 and coefficient of variations is 0.554 Thus it can be concluded that the risk of investment in PNB Bank shares is moderately risky in the study period.

57

TABLE NO: 5.12 Table showing Expected Return calculation for SBI

MONTH January Feb March April May June July Aug Sep Oct Nov Dec

SBI 2057 1974 2078 2300 2269 2302 2503 2766 3240 3150 2992 2812

R% -4.04 5.268 10.68 -1.35 1.454 8.732 10.51 17.14 -2.78 -5.02 -6.02

Probability -0.3672727 0.4789091 0.9709091 -0.1227273 0.1321818 0.7938182 0.9554545 1.5581818 -0.2527273 -0.4563636 -0.5472727 ( R )=3.14

INTERPRETATION: The above table shows for Expected Return for SBI is 3.14%

58

TABLE NO: 5.13 Table showing Expected Return calculation for HDFC

MONTH January Feb March April May June July Aug Sep Oct Nov Dec

HDFC 1631.1 1704.8 1933.5 2000.5 1888.5 1919 2126.9 2134.3 2489.4 2279.9 2285.4 2346.4

R% 4.518 13.42 3.465 -5.6 1.615 10.83 0.348 16.64 -8.42 0.241 2.669

Probability 0.4107273 1.22 0.315 -0.5090909 0.1468182 0.9845455 0.0316364 1.5127273 -0.7654545 0.0219091 0.2426364 ( R )=3.61

INTERPRETATION: The above table shows for Expected Return for HDFC is 3.61%

59

TABLE NO: 5.14 Table showing Expected Return calculation for AXIS

MONTH January Feb March April May June July Aug Sep Oct Nov Dec

AXIS 1025.7 1124.5 1168.3 1270 1232.4 1242.4 1343.5 1330.7 1536.6 1471.1 1366.9 1350.1

R% 9.632 3.895 8.705 -2.96 0.811 8.137 -0.95 15.47 -4.26 -7.08 -1.23

Probability 0.8756364 0.3540909 0.7913636 -0.2690909 0.0737273 0.7397273 -0.0863636 1.4063636 -0.3872727 -0.6436364 -0.1118182 ( R )=2.74

INTERPRETATION: The above table shows for Expected Return for AXIS is 2.74%

60

TABLE NO: 5.15 Table showing Expected Return calculation for ICICI

MONTH January Feb March April May June July Aug Sep Oct Nov Dec

ICICI 830.35 872.15 952.5 951.95 868.3 861.7 904.9 977.7 1113 1163 1142.1 1145.1

R% 5.034 9.213 -0.06 -8.79 -0.76 5.013 8.045 13.84 4.492 -1.8 0.263

Probability 0.4576364 0.8375455 -0.0054545 -0.7990909 -0.0690909 0.4557273 0.7313636 1.2581818 0.4083636 -0.1636364 0.0239091 ( R )= 3.13

INTERPRETATION: The above table shows for Expected Return for ICICI is 3.13%

61

TABLE NO: 5.16 Table showing Expected Return calculation for PNB

MONTH January Feb March April May June July Aug Sep Oct Nov Dec

PNB 898.65 901 1012.8 1039.5 1002.5 1049 1070.5 1180.3 1293.2 1290.8 1218.6 1222

R% 0.262 12.41 2.636 -3.56 4.638 2.05 10.26 9.565 -0.19 -5.59 0.279

Probability 0.0238182 1.1281818 0.2396364 -0.3236364 0.4216364 0.1863636 0.9327273 0.8695455 -0.0172727 -0.5081818 0.0253636 ( R )= 2.98

INTERPRETATION: The above table shows for Expected Return for Punjab National Bank is 2.98%

62

TABLE NO: 5.17

Occupation Classification of Respondents

Cumulative Frequency 9 29 16 6 60 Percent 15.0 48.3 26.7 10.0 100.0 Valid Percent 15.0 48.3 26.7 10.0 100.0 Percent 15.0 63.3 90.0 100.0

Occupation
Business Employee Professional Govt Employee Total

INTERPRETATION: The above table shows that  15% of the respondents own business  48% of the respondents are employees  27% of the respondents are Professionals  10% of the respondents are government employees

63

CHART NO: 5.2

64

TABLE NO: 5.18

Gender Classification of Respondents

Gender
Frequency Male Female Total 53 7 60 Percent 88.3 11.7 100.0 Valid Percent 88.3 11.7 100.0

Cumulative Percent 88.3 100.0

INTERPRETATION: The above table shows that  88.3% of the respondents are Male.  11.7% of the respondents are Female.

65

CHART NO: 5.3

66

TABLE NO: 5.19

Income Classification of Respondents

Cumulative Income < 200000 200000-300000 300001-400000 400001-500000 500001&above Total Frequency 14 30 11 3 2 60 Percent 23.3 50.0 18.3 5.0 3.3 100.0 Valid Percent 23.3 50.0 18.3 5.0 3.3 100.0 Percent 23.3 73.3 91.7 96.7 100.0

INTERPRETATION: The above table shows that  The Annual Income of 23.3% of the respondents is < 200000  The Annual Income of 50% of the respondents is 200000 - 300000  The Annual Income of 18.3% of the respondents is 300001 - 400000  The Annual Income of 5% of the respondents is 400001 - 500000  The Annual Income of 3.3% of the respondents is 500000 & Above

67

CHART NO: 5.4

68

TABLE NO: 5.20

Opinion Towards Plan to Invest in Bank Shares

Response Yes No Total

Frequency 47 13 60

Percent 78.3 21.7 100.0

Valid Percent 78.3 21.7 100.0

Cumulative Percent 78.3 100.0

INTERPRETATION: The above table shows that  78.3% of the respondents have a plan to invest in bank shares in next one year.  21.7% of the respondents do not have a plan to invest in bank shares in next one year.

69

CHART NO: 5.5

70

TABLE NO: 5.21

Preferred Stock Exchange

Stock Exchange Frequency BSE NSE BOTH Total 5 12 43 60 Percent 8.3 20.0 71.7 100.0 Valid Percent 8.3 20.0 71.7 100.0 Cumulative Percent 8.3 28.3 100.0

INTERPRETATION: The above table shows that  8.3% of the respondents Prefer Bombay Stock exchange.  20% of the respondents Prefer National Stock exchange.  17.7% of the respondents Prefer Both.

71

CHART NO: 5.6

72

TABLE NO: 5.22

Duration of Trading in Shares

Cumulative Duration Less than 6 months 6months-1year 1year-3years 3years&above Total Frequency 14 24 13 9 60 Percent 23.3 40.0 21.7 15.0 100.0 Valid Percent 23.3 40.0 21.7 15.0 100.0 Percent 23.3 63.3 85.0 100.0

INTERPRETATION: The above table shows that  23.3% of the respondents are trading in shares for less than 6 months.  40% of the respondents are trading in shares for 6 months-1years.  21.7% of the respondents are trading in shares for 1year-3years.  15% of respondents are trading in shares for 3years &above.

73

CHART NO: 5.7

74

TABLE NO: 5.23

Details on Investment Avenues

Options Stock market Fixed Deposits Insurance Bonds Mutual Funds Post office Total

Frequency 12 9 12 15 7 5 60

Percent 20.0 15.0 20.0 25.0 11.7 8.3 100.0

Valid Percent 20.0 15.0 20.0 25.0 11.7 8.3 100.0

Cumulative Percent 20.0 35.0 55.0 80.0 91.7 100.0

INTERPRETATION: The above table shows that  20% of the respondents prefer to invest in stock market.  15% of the respondents prefer to invest in fixed deposits.  20% of the respondents prefer to invest in Insurance.  25% of the respondents prefer to invest in Bonds.  11.7% of the respondents prefer to invest in mutual funds.  8.3% of the respondents prefer to invest in post office.

75

CHART NO: 5.8

76

TABLE NO: 5.24

Objectives of Investment

Objectives Frequency long-term profit Short-term gain Both a & b not particular Total 14 18 10 18 60 Percent 23.3 30.0 16.7 30 100.0 Valid Percent 23.3 30.0 16.7 30 100.0

Cumulative Percent 23.3 53.3 70.0 100.0

INTERPRETATION: The above table shows that  23.3% of the respondents are aiming at while investing long term profit.  30% of the respondents are aiming at while investing short term profit.  16.7% of the respondents are aiming at while investing both A & B.  30% of the respondents are aiming at while investing not particular.

77

CHART NO: 5.9

78

TABLE NO: 5.25

Preferred Investment Sector

Cumulative Sector Automobile IT Banking Pharmaceuticals FMCG Total Frequency 4 9 22 16 9 60 Percent 6.7 15.0 36.7 26.7 15.0 100.0 Valid Percent 6.7 15.0 36.7 26.7 15.0 100.0 Percent 6.7 21.7 58.3 85.0 100.0

INTERPRETATION: The above table shows that  6.7% of the respondents prefer to invest in Automobile Shares.  15% of the respondents prefer to invest in IT Shares.  36.7% of the respondents prefer to invest in Banking Shares.  26.7% of the respondents prefer to invest in Pharmaceuticals Shares.  15% of the respondents prefer to invest in FMCG shares.

79

CHART NO: 5.10

80

TABLE NO: 5.26

Source of Information

Cumulative Sources Media Internet Peers Advisors Brokers Total Frequency 7 16 13 14 10 60 Percent 11.7 26.7 21.7 23.3 16.7 100.0 Valid Percent 11.7 26.7 21.7 23.3 16.7 100.0 Percent 11.7 38.3 60.0 83.3 100.0

INTERPRETATION: The above table shows that  11.7% of the respondents get information through Media.  26.7% of the respondents get information through Internet.  21.7% of the respondents get information through Peers.  23.3% of the respondents get information through Advisors.  16.7% of the respondents get information through Brokers.

81

CHART NO: 5.11

82

TABLE NO: 5.27

Factor Influencing Investing in Banking Sector

Cumulative Factors Political Factor Technological Factor Natural Factor Economic Factor Total Frequency 13 21 13 13 60 Percent 21.7 35.0 21.7 21.7 100.0 Valid Percent 21.7 35.0 21.7 21.7 100.0 Percent 21.7 56.7 78.3 100.0

INTERPRETATION: The above table shows that  21.7% of the respondents feel that Political factor influence investment in Banking Sector.  35% of the respondents feel that Technological factor influence investment in Banking Sector.  21.7% of the respondents feel that Natural factor influence investment in Banking Sector.  21.7% of the respondents feel that Economic factor influence investment in Banking Sector.

83

CHART NO: 5.12

84

TABLE NO: 5.28

Level of agreement towards Banking Share Investments Risk Reduction

Level of Agreement Frequency Strongly agree Agree Disagree Strongly Disagree Neither agrees nor disagrees Total 18 22 4 9 7 60 Percent 30.0 36.7 6.7 15.0 11.7 100.0 Valid Percent 30.0 36.7 6.7 15.0 11.7 100.0

Cumulative Percent 30.0 66.7 73.3 88.3 100.0

INTERPRETATION: The above table shows that

 30% of the respondents strongly agree that Investing in Banking Share Reduce risk.  36.7% of the respondents agree that Investing in Banking Share Reduce risk.  6.7% of the respondents disagree that Investing in Banking Share Reduce risk.  15% of the respondents strongly disagree that Investing in Banking Share Reduced risk.  11.7% of the respondents are nither agrees nor disagrees that Investing in Banking Share Reduced risk. 85

CHART NO: 5.13

86

TABLE NO: 5.29

Cross table showing Occupation vs Invest in Banking shares

Invest in banking shares Occupation Business Employee Professional Govt Employee Total Yes 4 24 13 6 47 No 5 5 3 0 13 Total 9 29 16 6 60

H0= There is no significant relationship between occupation and Invest in Bank Shares.(Null Hypothesis) H1= There is significant relationship between occupation and Invest in Bank Shares.(Alternative Hypothesis)
ANOVA TABLE

Occupation Between Groups Within Groups Total

Sum of Squares 3.674 39.309 42.983

df 1 58 59

Mean Square 3.674 .678

F 5.421

Sig. .023

Interpretation: Since the Significance level is less than 0.05, Null Hypothesis is Rejected. There is significant relationship between occupation and Invest in Bank Shares.

87

TABLE NO: 5.30

Cross table showing Annual Income vs Duration of Trading in Shares

Duration of Trading in Shares Annual Income Less then 6 months < 200000 20001-300000 300001-400000 400001-500000 500001&above Total 5 7 2 0 0 14 6months-1year 7 13 3 0 1 24 1year-3years 1 5 3 3 1 13 3years&above 1 5 3 0 0 9 Total 14 30 11 3 2 60

H0= There is no significant relationship between Annual Income and Duration of Trading in Shares.(Null Hypothesis) H1= There is significant relationship between Annual Income and Duration of Trading in Shares.(Alternative Hypothesis)

ANOVA TABLE

Annual Income Between Groups Within Groups Total

Sum of Squares 9.087 44.563 53.650

df 3 56 59

Mean Square 3.029 .796

F 3.806

Sig. .015

Interpretation: Since the Significance level is less than 0.05, Null Hypothesis is Rejected. There is significant relationship between Annual Income and Duration of Trading in Shares. 88

6. FINDINGS OF THE STUDY

The Following are the findings of the study

(1) Findings from Alpha & Beta Calculations:

STATE BANK OF INDIA

 The Alpha Value for SBI is 0.91  The Beta Value for SBI is 1.15  The Risk and Return Ratio for SBI is 1.26

HDFC BANK
 The Alpha Value for HDFC is 0.71  The Beta Value for HDFC is 1.33  The Risk and Return Ratio for HDFC is 0.526

AXIS BANK
 The Alpha Value for AXIS is 0.98  The Beta Value for AXIS is 0.60  The Risk and Return Ratio for AXIS is 0.612

ICICI BANK
 The Alpha Value for ICICI is 0.40  The Beta Value for ICICI is 1.02  The Risk and Return Ratio for ICICI is 0.39

PUNJAB NATIONAL BANK

 The Alpha Value for PNB is 0.90  The Beta Value for PNB is 0.95  The Risk and Return Ratio for PNB is 0.95

The Return of AXIS Bank is higher than all the other banks. The systematic risk is very high for HDFC Bank & its low for AXIS. Based on Risk and Return ratio, SBI Performance is better. 89

(2) Findings from standard deviation and co-variance Calculations: STATE BANK OF INDIA
 The Standard deviation for SBI is 2.23  The Co-Variance for SBI is 0.7094

HDFC BANK
 The Standard deviation for HDFC is 2.18  The Co-Variance for HDFC is 0.6038

AXIS BANK
 The Standard deviation for AXIS is 2.005  The Co-Variance for AXIS is 0.7317

ICICI BANK
 The Standard deviation for ICICI is 1.78  The Co-Variance for ICICI is 0.5677

PUNJAB NATIONAL BANK

 The Standard deviation for PNB is 1.65  The Co-Variance for PNB is 0.5540

The Expected Risk is very high for SBI & Co-Variance is high for AXIS. Investment in SBI is very risky. (3) Findings from expected return Calculations:
 The Expected Return for SBI is 3.14%  The Expected Return for HDFC is 3.61%  The Expected Return for AXIS is 2.74%  The Expected Return for ICICI is 3.13%  The Expected Return for PNB is 2.98%

The Company Performance is very good for HDFC and has got the highest return percentage. 90

(4) Finding from Primary data:  Majority (48%) of the respondents are employees.  Majority (88.3%) of the respondents are male.  Majority (50%) the annual income of the respondents is 200000 300000  Majority (78.3%) of the respondents have a plan to invest in bank shares in next one year.  Majority (20%) of the respondents prefer National Stock Exchange.  Majority (40%) of the respondents are trading in shares for 6 months 1 year.  Majority (25%) of the respondents prefer to invest in bonds.  Majority (30%) of the respondents are aiming at while investing short term profit.  Majority (36.7%) of the respondents are prefer to invest in Automobile shares.  Majority (26.7%) of the respondents get information through internet.  Majority (35%) of the respondents feel that Technological factor influence the investment in banking sector.  Majority (36.7%) of the respondents agree that investing in banking share Reduce risk.  There is significant relationship between occupation and Invest in Bank Shares.  There is significant relationship between Annual Income and Duration of Trading in Shares.

91

7.SUGGESTIONS AND RECOMMENDATIONS

1) AXIS Bank Shares is highly suitable for the investors with the objective of higher returns. 2) The Investors with the investment objective of minimising risk can invest in AXIS. 3) The Investors interested to balance risk and return can invest in SBI Shares. 4) The Business performance of SBI is relatively risky. So the investors should analysis the financial and operating performance of SBI and invest. 5) The Business performance of HDFC is excellent. Hence investment in HDFC is very attractive. 6) Sharekhan can recommend to its client to invest SBI , HDFC and AXIS. 7) Sharekhan can promote Short- term investment in bank shares among its clients by providing more information through internet media and insist that investment in bank shares can reduce risk.

92

8.CONCLUSION

Risk and return or inseparable to ignore in investment decision. The investment process must be considered in terms of aspect risk and return. Return is precise statistical term it is not a simple expectation of investors return but is measurable also. The investor should keep the risk associated with the return proportional as risk is directly correlated with return.

The Major finding of the study is the systematic risk is very high for HDFC Bank and the return is very high for AXIS Bank. The Expected Risk is very high for SBI & Co-Variance is high for AXIS. Investment in SBI is very risky. The Company Performance is very good for HDFC and has got the highest return percentage. The Suggestion to invest in AXIS Bank, SBI and HDFC Bank.

93

APPENDIX
QUESTIONNAIRE A Study on the Impact of Stock Market Fluctuations on banking shares Personal Details Name Occupation : : a) Business c) Professional Gender : a) Male b) Employee d) Govt employee b)Female

Annual Income: a) < 200000 c) 300001-400000 e) 500001&above 1. Are you planning to invest in banking shares in the next one year? a) Yes b) No b) 200000-300000 d) 400001-500000

2. Which Stock Exchange do you prefer to trade? a) BSE b) NSE c) Both

3. How long you have been trading in shares? a) Less than 6 months c) 1year-3years b) 6months-1year d) 3years &above. 94

4. What is your Investment avenues? a) Stock market [ ] c) Insurance [ ] e) Mutual funds [ ] 5. While investing you are aiming at... a) Long-term profit c) Both a & b b) short-term gain d) not particular b) Fixed Deposits [ ] d) Bonds e) Post office [ ] [ ]

7. In which sector do you prefer to invest in the current scenario? a) Automobile c) Banking e) FMCG 8.What is the source of information to invest in banking shares? a) Media c) Peers e) Brokers 9. Which factors influence investing in banking sector? a) Political factor [ ] c) Natural factor [ ] b) Technological factor [ ] d) Economic factor [ ] b) Internet d) Advisors b) IT d) Pharmaceuticals

10.Investment in banking share Alternatives reduce risk-How far you agree with the statement? a) Strongly agree c) Disagree b) Agree d) strongly disagree e) Neither agrees nor disagrees

95

TABLE 1
Table showing SBI Jan to Dec 2010 Indices :SBI Period : JAN 2010 TO DEC 2010

Date 29/01/2010 26/02/2010 31/03/2010 30/04/2010 31/05/2010 30/06/2010 30/07/2010 31/08/2010 30/09/2010 29/10/2010 30/11/2010 31/12/2010

Qty 37899730 36478960 29674820 34613310 37541400 29996680 28656180 38153480 38681620 24274830 56626170 56585770

Open 2275 2148 1990.6 2080 2290 2251.1 2291.1 2520 2775 3239.4 3195 2999

High 2315 2148 2122 2318.9 2349 2630.1 2522 2884.8 3274.7 3324.9 3515 3173.6

Low 1955.1 1863.1 1974.2 2012 2138 2202.1 2253.6 2512 2737.3 3076 2775 2655.5

Close 2056.6 1974.3 2078.2 2300.7 2268.8 2302 2502.9 2766.4 3240.5 3150.6 2992.2 2812

96

TABLE 2
Table showing HDFC Jan to Dec 2010 Indices :HDFC Period : JAN 2010 TO DEC 2010

Date 29/01/2010 26/02/2010 31/03/2010 30/04/2010 31/05/2010 30/06/2010 30/07/2010 31/08/2010 30/09/2010 29/10/2010 30/11/2010 31/12/2010

Qty 20988050 16028780 21509340 12478830 13361440 15517580 15320060 15057510 20217800 16467110 13318150 17574120

Open 1700 1628 1724 1950 1985 1889.7 1912 2130 2135.6 2492 2298 2288.6

High 1790 1734.8 1990 2010 1995 2010 2137 2239.8 2510.8 2539.9 2419.8 2425

Low 1552.5 1549 1628.9 1890.5 1785 1808.4 1895 2048 2120 2237 2258.5 2150

Close 1631.1 1704.8 1933.5 2000.5 1888.5 1919 2126.9 2134.3 2489.4 2279.9 2285.4 2346.4

97

TABLE 3
Table showing AXIS Jan to Dec 2010 Indices :AXIS Period : JAN 2010 TO DEC 2010

Date 29/01/2010 26/02/2010 31/03/2010 30/04/2010 31/05/2010 30/06/2010 30/07/2010 31/08/2010 30/09/2010 29/10/2010 30/11/2010 31/12/2010

Qty 35859860 37404940 35289340 36922390 40930740 30788870 29388280 23578450 28558810 27915060 28699580 34977430

Open 993.9 1026 1131 1168 1268 1235 1242 1350.1 1330.7 1538 1488.9 1370.1

High 1177.7 1137 1215 1287 1320 1277.7 1396.8 1385.7 1582.6 1608.5 1584 1461

Low 965.15 995.1 1045 1128.2 1147.2 1168.5 1215.1 1150 1330.7 1427 1297 1229.7

Close 1025.7 1124.5 1168.3 1270 1232.4 1242.4 1343.5 1330.7 1536.6 1471.1 1366.9 1350.1

98

TABLE 4
Table showing ICICI Jan to Dec 2010 Indices :ICICI Period : JAN 2010 TO DEC 2010

Date 29/01/2010 26/02/2010 31/03/2010 30/04/2010 31/05/2010 30/06/2010 30/07/2010 31/08/2010 30/09/2010 29/10/2010 30/11/2010 31/12/2010

Qty 92526210 74776260 85621710 84117660 94701960 84532260 63169420 88641460 73668970 75532780 90120340 81019910

Open 877 820.1 885.1 957 946.1 851.65 854.45 912 980.35 1117.1 1186.3 1150

High 907.35 887 970.8 1009.7 957.95 910 932 1024 1148 1177 1279 1202

Low 775 786 856 902.55 802.35 712 833.2 911 980.35 1074 1091.3 1041.1

Close 830.35 872.15 952.5 951.95 868.3 861.7 904.9 977.7 1113 1163 1142.1 1145.1

99

TABLE 5
Table showing PNB Jan to Dec 2010 Indices :PUNJAB NATIONAL BANK Period : JAN 2010 TO DEC 2010

Date 29/01/2010 26/02/2010 31/03/2010 30/04/2010 31/05/2010 30/06/2010 30/07/2010 31/08/2010 30/09/2010 29/10/2010 30/11/2010 31/12/2010

Qty 7138951 5359021 5636740 5879437 6296467 5732917 9877415 5833696 5685223 6941858 8609883 5475113

Open 900 885 906 1014.2 1000 995 1045 1078 1190 1295.6 1303 1220

High 960.35 921.95 1018 1056.6 1145 1068.9 1098 1225.5 1327.5 1360 1399.9 1289

Low 850 845 900 964.05 900 981.35 1005.3 1074.2 1176.3 1265 1126.3 1155.1

Close 898.65 901 1012.8 1039.5 1002.5 1049 1070.5 1180.3 1293.2 1290.8 1218.6 1222

100

BIBLIOGRAPHY

Books: y y Kothari, C.R., Research Methodology, Vikas Publishing House Pvt. Ltd., 1988. Punithavathy Pandian., Security Analysis and Portfolio Management, Vikas Publishing House Pvt. Ltd., 1996. y Gupta, S.P., Statistical Methods, New Delhi, Sultan Chand & Sons, 2005

Web links: www.nseindia.com www.moneycontrol.com www.sharekhan.com www.yahoofinance.com www.statebankofindia.com www.hdfcbank.com

www.axisbank.com

101