aashish final report a1

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Project Report Submitted

INDIRA COLLEGE OF ENGINEERING & MANAGEMENT, PUNE

In Fulfillment Degree Of

POST GRADUATE PROGRAM.

2009-2011

D E C L A R A T I O N

I, the undersigned, hereby declare that the Project Report entitled “ fundamental analysis of major

private banks in india” written and submitted by me to the University of Pune, Pune in partial

fulfilment of the requirements for the award of degree of Post Graduate Programme Administration

under the guidance of Vipul shah is my original work and the conclusions drawn therein are basedon the material collected by myself.

Place : Pune (Name)

Date: Research Student



GUIDE’S CERTIFICATE

C E R T I F I C A T E

This is to certify that the Project Report entitled “ Fundamental Analysis of major private banks in

india” which is being submitted herewith for the award of the degree of Post Graduate programme

Pune, Pune is the result of the original research work completed by Mr Durga Prasad Mishra under

my supervision and guidance and to the best of my knowledge and belief the work embodied in this

Project Report has not formed earlier the basis for the award of any degree or similar title of this or

any other University or examining body.

Place : Pune (Name of the Guide)

Date: Research Student



Table of CONTENTS

1. CHAPTER - I INTRODUCTION

- Scope of the Study

- Objectives of the Study

- Literature Review

2. CHAPTER - II ORGANISATIONAL PROFILE

- Industry Profile

- Company Profile

3. CHAPTER – III METHODOLOGY AND LIMITATION

- Sources of Data

- Tools and Techniques use

4. CHAPTER – IV ANALYSIS OF DATA

5. CHAPTER – V INTERPRETATIONS AND FINDINGS

6. CHAPTER – VI RECOMMENDATIONS & OBSERVATION

BIBLIOGRAPHY



2. List Of Tables

3. List Of Figure

4. LIST OF TABLES

A PAGE FOR LIST OF TABLES

For Example :

LIST OF TABLES

Table No. Title of the Table Page No.

Table No. 1.1

Table No. 1.2

Table No. 2.1

Table No. 2.2

Table No. 3.1

Table No. 3.2

Table No. 4.1

Table No. 4.2

Table No. 5.1

Table No. 5.2

Tables may be more or less depending upon the tables in each chapter



LIST OF FIGURE

A PAGE FOR LIST OF FIGURES

LIST OF FIGURES

Figure No. Title of the Figure Page No.

Figure No. 1.1

Figure No. 1.2

Figure No. 2.1

Figure No. 2.2

Figure No. 3.1

Figure No. 3.2

Figure No. 4.1

Figure No. 4.2

Figure No. 5.1

Figure No. 5.2

Figure No. 5.3

Figure No. 5.4



Introduction

The Indian money market is classified into: the organised sector (comprising private, public and

foreign owned commercial banks and cooperative banks, together known as scheduled banks);and the unorganised sector (comprising individual or family owned indigenous bankers or money

lenders and non-banking financial companies (NBFCs)). The unorganised sector and microcredit

are still preferred over traditional banks in rural and sub-urban areas, especially for non-

productive purposes, like ceremonies and short duration loans.

Stock Exchange

Stocks (Shares, equity) are traded in stock exchange. India has two big stock exchanges

(Bombay Stock Exchange - BSE and National Stock Exchange - NSE) and few small exchanges

like Jaipur Stock Exchange etc.

Investor can trade stocks in any of the stock exchange in India.

In India, the two major broking indexes are:

BSE –

The BSE Index, SENSEX, is India's first stock market index that enjoys an

iconic stature, and is tracked worldwide. It is an index of 30 stocks

representing 12 major sectors. The SENSEX is constructed on a 'free-float'

methodology, and is sensitive to market sentiments and market realities.

Apart from the SENSEX, BSE offers 21 indices, including 12 sectoral indices.

NSE –

On its recognition as a stock exchange under the Securities Contracts

(Regulation) Act, 1956 in April 1993, NSE commenced operations in the

Wholesale Debt Market (WDM) segment in June 1994. The Capital Market

(Equities) segment commenced operations in November 1994 and

operations in Derivatives segment commenced in June 2000.

http://en.wikipedia.org/wiki/Commercial_bank

http://en.wikipedia.org/wiki/Cooperative

http://en.wikipedia.org/wiki/Moneylending


http://en.wikipedia.org/wiki/Non-banking_financial_company

http://en.wikipedia.org/wiki/Microcredit

http://en.wikipedia.org/wiki/Microcredit

http://en.wikipedia.org/wiki/Non-banking_financial_company



http://en.wikipedia.org/wiki/Cooperative

http://en.wikipedia.org/wiki/Commercial_bank



Stock Broker

Investor requires a Stock Broker to buy and sell shares in stock exchanges (BSE, NSE etc.).

Stock Broker are registered member of stock exchange. A stock broker can register to one or

more stock exchanges.

Only stock brokers can directly buy and sell shares in Stock Market. An investor must contact a

stock broker to trade stocks. Broker charge commissions (brokerages) for their service.

Brokerage is usually a percent of total amount of trade and varies from broker to broker.

Stock Trading

Traditionally stock trading is done through stock brokers, personally or through telephones. As

number of people trading in stock market increase enormously in last few years, some issues like

location constrains, busy phone lines, miss communication etc start growing in stock brokeroffices. Information technology (Stock Market Software) helps stock brokers in solving these

problems with Online Stock Trading.

Online Stock Market Trading is an internet based stock trading facility. Investor can trade shares

through a website without any manual intervention from Stock Broker.

In this case these Online Stock Trading companies are stock broker for the investor . They are

registered with one or more Stock Exchanges. Mostly Online Trading Websites in India trades in

BSE and NSE.



There are 15 broking agencies in india . they are as follow

1:- Sharekhan

2:- ICICI direct

3:- India bulls

4:- 5 paisa

5:- Motilal Oswal Securities.

6:- HDFC Security.

7:- Reliance Money.

8:- IDBI Paisabuilder.

9:- Religare.

10:- Geojit.

11:- Networth Stock broking.

12:- Kotak Securities.

13:- Standerd charted-STCI Capital market ltd.

14:- Angel trade.

15:- HSBC Investdirect.



EXECUTIVE SUMMERY

Fundamental analysis is very helpful to the investor, which is reflected in the investment

purpose. Fundamental analysis consist of three parts, they are economic, industry and company.

Any investors who go to systematic investment, he/she would like to know, the complete

scenario of the industry. It is interesting to know the how the fundamental analysis helps to

forecast the price of equity.

The fundamental analysis consists of three parts; they are economic, industry and company. All

the factors are involved in this analysis were identified and studied carefully to identify the

factors in the existing environment. The data or information collected was based on the personal

interaction with the guide of the company.

Economic analysis was a task to be studied as it affected the company tax, and it will effect on

the revenue of the industry. Also other factors are considered in the economic analysis. And it

will interpret for the fundamental analysis.

Industry analysis was a challenging factor for the research of the fundamental analysis. All the

sub-factors of the industry analysis were taken up from the secondary source to analyses the each

factor with the industry. And was related those factors with the company. It also analyses the

competitiveness of the each company strength, like. Quality, services, cost of R/m, etc.

Company analysis is last factors of the fundamental analysis and it is one of the most important

parts of the company. An approach was made to understand the existing company and its impact

on company market share an its performance.



OBJECTIVE OF STUDY

Analysis of fundamental to acquire a deep knowledge of the private

banking Sector which I am studying. To find out how the judgment is taken by the analyst on the basis of

fundamental analysis of the company.

To establish link between expected share price with the projected

companyFinancial performance.

To calculate a company's credit risk. To make projection on its business performance and in the bad

condition to improve the performance of company. To evaluate its management and make internal business decisions,

To make the company's stock valuation and predict its probable price

evolution. Investors may use fundamental analysis to determine future growth

rates for buying high priced growth stock. To study and analyze the growth trend of Banking sector over the

period of April 2008 to April 2010.

To examine the major reasons of fluctuations in share prices in thestock market of banks.

Attempt to provide a direction to a investor to analyze and forecast the

stock market so as to make the best possible lucrative deal byinvesting in stocks.



Literature Review

By utilizing the secondary data available for the analysis, this

report attempts to analyze the growth trends of some equity

sectors over the period of Apr 2008 to mar 2010, in order toprovide with the past information the growth trends of the share

market in the past, thereby giving a direction to forecast the

future in a logical manner.



Research Methodology

Research methodology is a way to systematically solve the research problem. The research

methodology using for find out the solution of the research problem is analytical

research methodology and some extend descriptive research methodology.

SOURCE OF DATA

Primary Data To solve the problems on fundamental analysis on banking sector:-Primary data collect by discussing with my guide and other staff member of thecompanyObservation

Secondary Data The sources of secondary data for solve the problems are:-Company Annual Report.Company Internal Data.Internet-Website.

Tools and Techniques

1) Research Design: Descriptive Design 2) Data Analysis: M.S. Excel with the help of Line Graphs, & bar charts.

Data Processing and Analysis

For a complete analysis on equities, there are basically two parts in which the total analysis is

done.

The parameters on which a investor can judge and make its investment decisions are:



Return on Equity (ROE) : The ROE examines profitability form theperspective of the equity investors by relating profits available for the equity shareholderswith the book value of the equity investments.

The ROE indicates as to how well the fund of the owner has been used by the firm. It also

examines whether the firm has been able to earn satisfactory return for the owners or not.

Earnings Per Share (EPS) : The ROE measures the profitability in terms of total funds and explains the return as a percentage of funds. The profitability of the firm canalso be measured in terms of number of equity shares. Therefore EPS is derived by dividingPAT by the number of equity shares.

Earnings Per Share= PAT- Preference Dividend /Number of

Equity Shares*100

Price Earnings Ratio (PE Ratio) : This is the ratio which establishes arelationship between the EPS and the market price of a share.

PE Ratio= Market Price Per Share/Earnings Per Share

The PE ratio indicated the expectations of the equity investors about the earnings of the firm.

The investor expectations are reflected in the market price of the share and therefore the PE ratio

gives an idea of investors’ perception of EPS. The PE ratio is one of the most widely used

measure of financial analysis in practice.

PAT - Preference dividendReturn On Equity= X100

Equity shareholder funds



A high PE ratio may indicate that the share has low risk and therefore the investors are content

with low prospective return or the investors expect high dividend growth and are ready to pay a

higher price for the share at present.

4) Dividend per share: DPS is the dividends paid to the equity shareholders on a

per share basis. In other words, DPS is the net distributed profit belonging to the ordinary

shareholders divided by the number of ordinary shares outstanding.

Objective

The DPS would be a better indicator than EPS as the former shows what exactly is received by

the owners. Like the EPS , the DPS also should not be taken at its face value as the increased

DPS may not be a reliable measure of profitability as the equity base may have increased due to

increased retention without any change in the number of outstanding shares.

Formula

DPS = dividend paid to ordinary shareholders /number of

ordinary shares outstanding

5) Dividend Yield Ratio: Dividend Yield ratio is closely to the EPS and DPS.

While the EPS and DPS are based on the book value per share, the yield expressed in terms of

the market value per share. The earnings yield may be defined as the ratio of earnings per shareto the market value per ordinary share. Similarly, the dividend yield is computed by dividing the

cash dividends per share by the market value per share.

Formula

Dividend Yield Ratio= dividend per share/ market value

per share *100

6) Dividend Payout Ratio: Dividend pay-out ratio is also known as pay-

out ratio. It measures the relationship between the earnings belongings to the

ordinary shareholders and the dividend paid to them. In other words, the D/P ratio

shows what percentage share of the net profits after taxes and preference dividend

is paid out as dividend to the equity-holders.



Objective

If the D/P ratio is subtracted from 100, retention ratio is obtained. The ratio indicates what

percentage share of net profits are retained in the business. The D/P ratio is an important and

widely-used ratio. The pay-out ratio can be compared with the trend over the years or an inter-

firm and intra-industry comparison would throw light on its adequacy.

Formula

Dividend Pay-out Ratio= total dividend to equity-holders/

total net profit belonging to equity-holders*100

Dividend Pay-out = dividend per ordinary share / Earning

per share *100

7) Book value per share

It is represents the equity / claim of the equity shareholder on a per share basis. It is computed

dividing net worth (equity share capital + reserves and surplus- accumulated losses) by the

number of equity shares outstanding (at balance sheet date),

Objective

This ratio is sometimes used as a benchmark for comparisons with the market price per share.

However, the book value per share has a serious limitation as a valuation tool as it is based on

the historical costs of the assets of a firm. There may be a significant difference between the

market value of assets from the book value of assets (as per balance sheet). Besides, there may

be hidden assets or other intangible assets of uncertain value.

Formula

Book value per share= net worth /number of equity share

outstanding.



Sector Profile

Non-Banking Financial Company (NBFC)

A Non-Banking financial company (NBFC) is a company registered under the Companies Act,

1956 and is engaged in the business of loans and advances, acquisition of

shares/stock/bonds/debentures/securities issued by government or local authority or other

securities of like marketable nature, leasing, hire-purchase, insurance business, chit business, but

does not include any institution whose principal business is that of agriculture activity, industrial

activity, sale/purchase/construction of immovable property.

A non-banking institution which is a company and which has its principal business of receivingdeposits under any scheme or arrangement or any other manner, or lending in any manner is also

a non-banking financial company (residuary non-banking company).

Major difference between Banks & NBFCs

NBFCs are doing functions akin to that of banks; however there are a few differences:

A NBFC cannot accept demand deposits (demand deposits are funds deposited at adepository institution that are payable on demand immediately or within a very shortperiod like your current or savings accounts).

It is not a part of the payment and settlement system and as such cannot issue cheque toits customers.

Deposit insurance facility of DICGC is not available for NBFC depositors unlike in caseof banks.

There are different types of NBFCs registered with the RBI:



Equipment leasing company Hire-purchase Company Loan Company Investment Company

The important regulations relating to acceptance of deposits by NBFCs are as follows:

The NBFCs are allowed to accept/renew public deposits for a minimum period of 12months and maximum period of 60 months. They cannot accept deposits repayable ondemand.

NBFCs cannot offer interest rates higher than the ceiling rate prescribed by RBI fromtime to time. The present ceiling is 11 per cent per annum. The interest may be paid or

compounded at rests not shorter than monthly rests. NBFCs cannot offer gifts/incentives or any other additional benefit to the depositors. NBFCs (except certain AFCs) should have minimum investment grade credit rating. The deposits with NBFCs are not insured. The repayment of deposits by NBFCs is not guaranteed by RBI. There are certain mandatory disclosures about the company in the Application Form

issued by the company soliciting deposits.Non-banking financial companies (NBFCs) have seen considerable business model shiftover last decade because of regulatory environment and market dynamics.

In the early 2000s, the NBFC sector in our country was facing following problems:

High cost of funds. Slow industrial growth. Stiff competition with NBFCs as well as with banking sector. Small balance sheet size resulting in high cost of fund and low asset profile. Non performing assets

A majority of NBFCs were not able to face the pressure created on and were wiped out.

However, since FY2001-2002, there has been significant improvement in the business model of

existing NBFCs with improvement in overall business environment. NBFCs have been able to

expand their resource profile by diversifying the funding avenues. Further a strict control onasset quality and overheads, coupled with use of innovative borrowing tools such as

securitization has resulted in improved profitability of NBFCs.



NBFC sector reports robust growth

The RBI increased the increased the capital adequacy requirement of non-deposit taking non-

banking finance companies from 10 per cent to 12 per cent by 31 March 2009 and to 15 per cent

by 31 March 2010.

For the quarter ended 30 June 2008, the NBFC sector reported a robust top line growth of 45.4

per cent and well converted it into a robust bottom line growth of 43.2 per cent. Net profit

margin expanded by 110 basis points to 12.8 per cent.

August 2008, the sector yielded a minimal 0.4 per cent returns during July 2008, but witnessed a

surge in volumes from 14.4 million shares in June to 20.1 million shares in July.

Non-banking financial companies (NBFCs) have seen considerable business model shift over

last decade because of regulatory environment and market dynamics.



In the early 2000s, the NBFC sector in India was facing following problems:

1. High cost of funds

2. Slow industrial growth3. Stiff competition with NBFCs as well as with banking sector

4. Small balance sheet size resulting in high cost of fund and low asset profile

5. Non performing assets

Majority of NBFCs were not able to face the pressure created on and were wiped out. However,

since FY2001-2002, there has been significant improvement in the business model of existing

NBFCs with improvement in overall business environment. NBFCs have been able to expand

their resource profile by diversifying the funding avenues. Further a strict control on asset quality

and overheads, coupled with use of innovative borrowing tools such as securitization has resulted

in improved profitability of NBFCs.

Key Insights about NBFC Sector as of Today (CRISIL Industry outlook: NBFC sector - Risk perspectives)

As per CRISIL's NBFC sector report, Net profitability margin of NBFCs has more than doubledfrom FY2007-08 to FY2009-10 as growing interest spread is key to profitability.

1. Higher Interest yield than banks. 2. Marginal increase in fee based income aided profitability.3. Strict control on overheads help maintain core profitability 4. Enhanced investor base and funding avenues bolster resources profile.55. S & P, CRISIL



COMPANY PROFILE



Sharekhan is online stock trading company of SSKI Group, provider of India-based

investment banking and corporate finance service. Sharekhan is one of the largest stock broking

houses in the country. ShriShantilal Kantilal Ishwarlal Securities Limited (SSKI) has been

among India’s leading broking houses for more than a century.

Sharekhan Ltd is India's leading online retail broking house with its presence through 1288'Share

Shops' in 398 cities. It has a client base of 1.5 Corers. Launched on 8th February, 2000 as an

online trading portal, Sharekhan 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 Sharekhan provides market related news, stock quotes

fundamental and statistical information across equity, mutual funds, IPOs and much more.

Sharekhan is also about focus. Sharekhan does not claim expertise in too many things.

Sharekhan’s expertise lies in stocks and that's what he talks about with authority. To sum up,

Sharekhan brings to you a user- friendly online trading facility, coupled with a wealth of content

that will help you stalk the right shares.



The followinngs features are in the Sharekhan LTD

Experience

SSKI has more than eight decades of trust and credibility in the Indian stock market. In the Asia

Money broker's poll held recently, SSKI won the 'India's best broking house for 2004' award.

Ever since it launched Sharekhan as its retail broking division in February 2000, it has been

providing institutional-level research and broking services to individual investors.

Technology

With their online trading account one can buy and sell shares in an instant from any PC with an

internet connection. Customers get access to the powerful online trading tools that will help them

to take complete control over their investment in shares.

Accessibility

Sharekhan provides services for investors. These services are accessible through many centres

across the country (Over 650 locations in 150 cities), over the Internet (through the website

www.sharekhan.com) as well as over the Voice Tool.



Knowledge

In a business where the right information at the right time can translate into direct profits,

investors get access to a wide range of information on the content-rich portal,

www.sharekhan.com. Investors will also get a useful set of knowledge-based tools that will

empower them to take informed decisions.

Convenience

One can call Sharekhan’s Dial-N-Trade number to get investment advice and execute his/her

transactions. They have a dedicated call-centre to provide this service via a Toll Free Number

1800-22-7500 & 39707500 from anywhere in India.

Customer Service

Its customer service team assist their customer for any help that they need relating to

transactions, billing, dmat and other queries. Their customer service can be contacted via a toll-

free number, email or live chat on www.sharekhan.com.

Investment Advice

Sharekhan has dedicated research teams of more than 30 people for fundamental and technical

research. Their analysts constantly track the pulse of the market and provide timely investment

advice to customer in the form of daily research emails, online chat, printed reports etc.



Future Plans

200000+ retail customers being serviced through centralized call centre / web solution.

60 branches/semi branches servicing affluent/aggressive traders through highly skilledfinancial advisors.

250 independent investment managers/franchisees servicing 50000 highly valued clients.

Strong advisory role through Fundamental & technical research.

New initiatives - Portfolio Management Services & Commodities trading.



Fundamental analysis

Meaning :-

Fundamental analysis is the examination of the underlying forces that affect the well being

of the economy, industry groups, and companies. As with most analysis, the goal is to derive a

forecast and profit from future price movements.

At the company level, fundamental analysis may involve examination of financialdata, management, business concept and competition.At the industry level, there might be an examination of supply and demand forces forthe products offered. For the national economy, fundamental analysis might focus on economic data to

assess the present and future growth of the economy.

To forecast future stock prices, fundamental analysis combines economic, industry, and company

analysis to derive a stock's current fair value and forecast future value. If fair value is not equal

to the current stock price, fundamental analysts believe that the stock is either over or under

valued and the market price will ultimately gravitate towards fair value. Fundamentalists do not

heed the advice of the random walkers and believe that markets are weak-form efficient. By

believing that prices do not accurately reflect all available information, fundamental analysts

look to capitalize on perceived price discrepancies.

Overview:-

“Fundamental analysis is the study of economic, industry, and company conditions in an effort todetermine the value of a company's stock. Fundamental analysis typically focuses on keystatistics in a company's financial statements to determine if the stock price is correctly valued.” The main principle of fundamental analysis is to find profitable companies to invest in bycomparing revenues, sales, management, etc. Fundamentals include earnings report, dividends,sales, inventories, profit margins, P/E ratio, market share , etc.Those looking to invest in acompany will be the most likely to use fundamental analysis.This is because the research is used to not just look at the value of the company, but to look atthe company itself. This includes the results of its finances and its potential to grow. Thefundamentals can give a better picture the entire company, not just a snapshot. This means thatanalysis is used to look at the long term of a company not just the short term.



The basic idea is if you put a rupee into the business (in the form of buying the stock) how much

of a return can you expect. How much yield you will likely see and / or how much growth you

will experience based on the operation, markets, competitors and costs of the business.

Obviously, not all aspects of these fundamentals can be quantified. Fundamentals are associated

with the economic health of a company, measured in terms of revenues, earnings, assets,

liabilities, Return on Equity (ROE), Return on Assets (ROA), Return on Investments (ROI),

growth prospects and cash flows, etc. The fundamentals tell you about a company. You can say a

company is having robust fundamentals if it is growing at a nice pace, generating a profit, has

limited debts and abundant cash.

The analysis of a company's fundamentals involves getting deep into its financials, ratherthan day-to-day movement in its share price. Equity researchers normally do fundamental

analysis in order to calculate the intrinsic value of a company's stock. If a company's stock is

trading above the intrinsic value or fair value, then the stock is overvalued. If a company's stock

is trading below the intrinsic value, then the stock is undervalued. However, if you watch the

stock markets very closely, the share price of most companies never matches the fair value.

Often, day traders and investors who would prefer short term investment options invest in those

stocks, regardless of the companies' long term growth prospects. However, long term investors

generally prefer to invest in companies with robust fundamentals and ignore near-term share

price movements.



Fundamental Analysis: Benefits

Fundamental analysis helps in:

1. Identifying the intrinsic value of a security.

2. Identifying long-term investment opportunities, since it involves real-time data.

http://www.economywatch.com/trading/fundamental-analysis.html






CNX Bank Index

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 health of the 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 banking system. Spurt in treasury income and improvement in loan

recoveries has helped 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.

CNX Bank Index is an index comprised of the most liquid and large capitalised

Indian Banking stocks. It about 79% provides investors and market intermediaries

with a benchmark that captures the capital market performance of Indian Banks.

The index will have 12 stocks from the banking sector which trade on the National

Stock Exchange.



Steps to fundamental Analysis:

The most common way that fundamental analysis is done in is in three steps:

1. Economic Analysis:-

Indian Economy India, an emerging economy, has witnessed unprecedented levels of economic

expansion, along with countries like China, Russia, Mexico and Brazil. India, being acost effective and labor intensive economy, has benefited immensely from outsourcing of work from developed countries, and a strong manufacturing and export orientedindustrial framework. With the economic pace picking up, global commodity prices havestaged a comeback from their lows and global trade has also seen healthy growth over thelast two years.

Economic Prospects for 2010

The global economy seems to be recovering after the recent economic shock. The Indianeconomy, however, was hit in the latter part of the global recession and the real economicgrowth witnessed a sharp fall, followed by lower exports, lower capital outflow andcorporate restructuring. It is expected that the global economies will continue to sustainin the short-term, as the effect of stimulus programs is yet to bear fruit and tax cuts areworking their way through the system in 2010. Due to the strong position of liquidity inthe market, large corporations now have access to capital in the corporate credit markets.

India’s Economic Outlook Projection

2007 2008 2009 2010

GDPgrowth 9.40% 7.30% 5.40% 7.20%

CPI6.40% 9.30% 5.50% 4.90%



cannot be sustained for long, so we believe that the term deposit rates are likely to see an uptrend

in due course.

The first step to this type of analysis includes looking at the macroeconomic situation. Thisincludes GDP, growth rates, inflation, interest rates, exchange rates, productivity and energy

prices.



2. Industry Analysis: -

The Banking & Financial Industry

The Banking Industry was once a simple and reliable business that took deposits frominvestors at a lower interest rate and loaned it out to borrowers at a higher rate. However deregulation and technology led to a revolution in the Banking Industry that saw ittransformed. Banks have become global industrial powerhouses that have created ever morecomplex products that use risk and securitisation in models that only PhD students canunderstand. Through technology development, banking services have become available 24 hoursa day, 365 days a week, through ATMs, at online bankings, and in electronically enabledexchanges where everything from stocks to currency futures contracts can be traded .

The Banking Industry at its core provides access to credit. In the lenders case, this includesaccess to their own savings and investments, and interest payments on those amounts. In the caseof borrowers, it includes access to loans for the creditworthy, at a competitive interest rate. Banking services include transactional services, such as verification of account details, accountbalance details and the transfer of funds, as well as advisory services, that help individuals andinstitutions to properly plan and manage their finances. Online banking channels have becomekey in the last 10 years. The collapse of the Banking Industry in the Financial Crisis, however, means that some of themore extreme risk-taking and complex securitisation activities that banks increasingly engaged

in since 2000 will be limited and carefully watched, to ensure that there is not another bankingsystem meltdown in the future.

The last decade witnessed the maturity of India's financial markets. Since 1991, everygovernments of India took major steps in reforming the financial sector of the country. Theimportant achievements in the following fields is discussed under serparate heads:

Financial markets Regulators The banking system

Non-banking finance companies The capital market Mutual funds Overall approach to reforms Deregulation of banking system Capital market developments Consolidation imperative



Now let us discuss each segment seperately.

Financial Markets

In the last decade, Private Sector Institutions played an important role. They grew rapidly in

commercial banking and asset management business. With the openings in the insurance sector

for these institutions, they started making debt in the market.

Competition among financial intermediaries gradually helped the interest rates to decline.

Deregulation added to it. The real interest rate was maintained. The borrowers did not pay high

price while depositors had incentives to save. It was something between the nominal rate of

interest and the expected rate of inflation.

Regulators

The Finance Ministry continuously formulated major policies in the field of financial sector of

the country. The Government accepted the important role of regulators. The Reserve Bank of

India (RBI) has become more independant. Securities and Exchange Board of India (SEBI) and

the Insurance Regulatory and Development Authority (IRDA) became important institutions.

Opinions are also there that there should be a super-regulator for the financial services sector

instead of multiplicity of regulators.

The banking system

Almost 80% of the business are still controlled by Public Sector Banks (PSBs). PSBs are stilldominating the commercial banking system. Shares of the leading PSBs are already listed on the

stock exchanges.

The RBI has given licences to new private sector banks as part of the liberalisation process. The

RBI has also been granting licences to industrial houses. Many banks are successfully running in

the retail and consumer segments but are yet to deliver services to industrial finance, retail trade,

small business and agricultural finance.

The PSBs will play an important role in the industry due to its number of branches and foreign

banks facing the constrait of limited number of branches. Hence, in order to achieve an efficient

banking system, the onus is on the Government to encourage the PSBs to be run on professional

lines.

Non-banking finance companies

In the case of new NBFCs seeking registration with the RBI, the requirement of minimum net



owned funds, has been raised to Rs.2 crores.

Until recently, the money market in India was narrow and circumscribed by tight regulations

over interest rates and participants. The secondary market was underdeveloped and lacked

liquidity. Several measures have been initiated and include new money market instruments,

strengthening of existing instruments and setting up of the Discount and Finance House of India

(DFHI).

The RBI conducts its sales of dated securities and treasury bills through its open market

operations (OMO) window. Primary dealers bid for these securities and also trade in them. The

DFHI is the principal agency for developing a secondary market for money market instruments

and Government of India treasury bills. The RBI has introduced a liquidity adjustment facility

(LAF) in which liquidity is injected through reverse repo auctions and liquidity is sucked out

through repo auctions.

On account of the substantial issue of government debt, the gilt- edged market occupies an

important position in the financial set- up. The Securities Trading Corporation of India (STCI),

which started operations in June 1994 has a mandate to develop the secondary market in

government securities.

Long-term debt market: The development of a long-term debt market is crucial to the financing

of infrastructure. After bringing some order to the equity market, the SEBI has now decided to

concentrate on the development of the debt market. Stamp duty is being withdrawn at the time of

dematerialisation of debt instruments in order to encourage paperless trading.

Development finance institutions

FIs's access to SLR funds reduced. Now they have to approach the capital market for debt and

equity funds.

Convertibility clause no longer obligatory for assistance to corporates sanctioned by term-

lending institutions.

Capital adequacy norms extended to financial institutions.

DFIs such as IDBI and ICICI have entered other segments of financial services such as

commercial banking, asset management and insurance through separate ventures. The move to

universal banking has started.



The capital market

The number of shareholders in India is estimated at 25 million. However, only an estimated two

lakh persons actively trade in stocks. There has been a dramatic improvement in the country's

stock market trading infrastructure during the last few years. Expectations are that India will be

an attractive emerging market with tremendous potential. Unfortunately, during recent times the

stock markets have been constrained by some unsavoury developments, which has led to retail

investors deserting the stock markets.

Mutual funds

The mutual funds industry is now regulated under the SEBI (Mutual Funds) Regulations, 1996

and amendments thereto. With the issuance of SEBI guidelines, the industry had a framework for

the establishment of many more players, both Indian and foreign players.

The Unit Trust of India remains easily the biggest mutual fund controlling a corpus of nearly

Rs.70,000 crores, but its share is going down. The biggest shock to the mutual fund industry

during recent times was the insecurity generated in the minds of investors regarding the US 64

scheme. With the growth in the securities markets and tax advantages granted for investment in

mutual fund units, mutual funds started becoming popular.

The foreign owned AMCs are the ones which are now setting the pace for the industry. They are

introducing new products, setting new standards of customer service, improving disclosure

standards and experimenting with new types of distribution.

The insurance industry is the latest to be thrown open to competition from the private sector

including foreign players. Foreign companies can only enter joint ventures with Indian

companies, with participation restricted to 26 per cent of equity. It is too early to conclude

whether the erstwhile public sector monopolies will successfully be able to face up to the

competition posed by the new players, but it can be expected that the customer will gain from

improved service.

Overall approach to reforms

The last ten years have seen major improvements in the working of various financial market

participants. The government and the regulatory authorities have followed a step-by-step

approach, not a big bang one. The entry of foreign players has assisted in the introduction of

international practices and systems. Technology developments have improved customer service.



Some gaps however remain (for example: lack of an inter-bank interest rate benchmark, an

active corporate debt market and a developed derivatives market). On the whole, the cumulative

effect of the developments since 1991 has been quite encouraging. An indication of the strength

of the reformed Indian financial system can be seen from the way India was not affected by the

Southeast Asian crisis.

However, financial liberalisation alone will not ensure stable economic growth. Some tough

decisions still need to be taken. Without fiscal control, financial stability cannot be ensured. The

fate of the Fiscal Responsibility Bill remains unknown and high fiscal deficits continue. In the

case of financial institutions, the political and legal structures hve to ensure that borrowers repay

on time the loans they have taken. The phenomenon of rich industrialists and bankrupt

companies continues. Further, frauds cannot be totally prevented, even with the best of

regulation. However, punishment has to follow crime, which is often not the case in India.

Deregulation of banking system

Prudential norms were introduced for income recognition, asset classification, provisioning for

delinquent loans and for capital adequacy. In order to reach the stipulated capital adequacy

norms, substantial capital were provided by the Government to PSBs.

Government pre-emption of banks' resources through statutory liquidity ratio (SLR) and cash

reserve ratio (CRR) brought down in steps. Interest rates on the deposits and lending sides almost

entirely were deregulated.

New private sector banks allowed to promote and encourage competition. PSBs were encouragedto approach the public for raising resources. Recovery of debts due to banks and the Financial

Institutions Act, 1993 was passed, and special recovery tribunals set up to facilitate quicker

recovery of loan arrears.

Bank lending norms liberalised and a loan system to ensure better control over credit introduced.

Banks asked to set up asset liability management (ALM) systems. RBI guidelines issued for risk

management systems in banks encompassing credit, market and operational risks.

A credit information bureau being established to identify bad risks. Derivative products such as

forward rate agreements (FRAs) and interest rate swaps (IRSs) introduced.

Capital market developments

The Capital Issues (Control) Act, 1947, repealed, office of the Controller of Capital Issues were

abolished and the initial share pricing were decontrolled. SEBI, the capital market regulator was



established in 1992.

Foreign institutional investors (FIIs) were allowed to invest in Indian capital markets after

registration with the SEBI. Indian companies were permitted to access international capital

markets through euro issues.

The National Stock Exchange (NSE), with nationwide stock trading and electronic display,

clearing and settlement facilities was established. Several local stock exchanges changed over

from floor based trading to screen based trading.

Buy back of shares allowed

The SEBI started insisting on greater corporate disclosures. Steps were taken to improve

corporate governance based on the report of a committee.

SEBI issued detailed employee stock option scheme and employee stock purchase scheme for

listed companies.

Standard denomination for equity shares of Rs. 10 and Rs. 100 were abolished. Companies given

the freedom to issue dematerialised shares in any denomination.

Derivatives trading starts with index options and futures. A system of rolling settlements

introduced. SEBI empowered to register and regulate venture capital funds.

The SEBI (Credit Rating Agencies) Regulations, 1999 issued for regulating new credit rating

agencies as well as introducing a code of conduct for all credit rating agencies operating in India.



3. Company Analysis:-

Last in this process of studying the fundamentals includes looking at the company

individually. This includes looking at unit sales, prices, new products, earnings and any chance

of debt or equity occurring.

Company Analysis

The third element to EIC approach to fundamental analysis is the company

analysis. The basic objective of the company analysis is to identify specificcompanies or specific shares which are expected to perform well in future. The

company analysis presupposes that the economic analysis and the industry analysis

has already been made.

Therefore the basic objective of company analysis is to:

1. To find out the intrinsic value of the share.

2. To find out the expected earnings of the company.

The sources of information required for estimating the future earnings of a firm is

primarily available in the annual financial statements. Such as:

1. Balance Sheet2. Income Statement3. Cash Flow Statement4. Notes to Financial Statement

To analyze the companies earnings, in the annual reports, the company usually

provide financial information for the last several years. This information is useful

to analyze the

1. Profitability of the company



2. Liquidity of the company3. Solvency of the company4. Activity level of the company

The followings are some important factors which should be considered in

Fundamental Analysis .

• Growth: A growing industry gives room for profitability.

• Profitability: Average profitability of the industry should be attractive.

• Demand-Supply: the wider demand supply gap, the better is the industry’s

fortune in the future • Entry barrier. • Competition and Market share: • Technology trends. • Government Policy. • Capacity Utilization. • Bargaining power of buyers.



Products or Types of Services of the Company

Bank Services.

Accounts.

Insurances.

Deposits.

Treasury.

Loans.

Capital market.

Payment transfer.

Government business.

Cards.

- Debit cards

- Credit cards

Vision 2015 and Core Values

VISION 2015:

To be the preferred financial solutions provider excelling in customer

delivery through insight, empowered employees and smart use of

technology

Core Values

Customer Centricity

Ethics

Transparency

Teamwork

Ownership

The Bank has strengths in both retail and corporate banking and is

committed to adopting the best industry practices internationally in order

to achieve excellence.



ICICI Bank

Establishment Year & History of the Company of ICICI Bank

ICICI Bank is a commercial bank promoted by ICICI Ltd, an Indian Financial

Institution.

It was incorporated in Jan.1994 and received its banking license from

Reserve Bank of India in May 1994.

It is the 2nd largest bank in India.

ICICI Bank is India's second-largest bank with total assets of Rs. 3,634.00

billion (US$ 81 billion) at March 31, 2010.

The bank has 14 subsidiaries across India and other countries like UK,

Canada and Russia. To maintain the leadership status bank foray intointernet banking by web- enable its existing products and services.

The Bank has a network of 2,016 branches in 18 countries.


Domestic and International Banking Services to facilitate trade.

Accounts.

Loans.

Insurances. Deposits.

Investment banking ,

Venture Capital

Asset management,

Cross border business & treasury

Foreign exchange services.



Financial Details

Particulars FY2005-

06

FY2006-

07

FY2007-

08

FY2008-

09

FY2009-

10

Revenues (in

cr)

19289.27 28923.46 39599.11 38696.27 33184.58

Revenue

(growth in %)

- 49.94 36.91 -2.28 -14.24

Net profit 2540.07 3110.22 4157.72 3757.13 3981.63

Net profit

(growth)

- 22.45 33.68 -9.64 5.98

EPS 32.15 34.64 39.15 33.70 35.99

EPS (growth in

%)- 7.74 13.04 -13.92 6.79

P/E ratio 24.86 29.64 19.32 10.36 25.60

Return on

equity 14.33 13.17 8.94 9.2 9.6

Dividend per

share

8.5 10 11 11 12

Dividend Pay-

out ratio34.08 33.89 33.12 36.60 37.31

Book value 249.55 270.37 417.64 444.94 463.01



HDFC Bank

Establishment Year & History of the Company of HDFC Bank

Housing Development Finance Corporation Limited, more popularly

known as HDFC Bank Ltd.

It was established in the year 1994, as a part of the liberalization of theIndian Banking Industry by Reserve Bank of India (RBI).

It started its operations as a Scheduled Commercial Bank.

Today, the bank boasts of as many as 1412 branches across India.

Amalgamations In 2002, HDFC Bank witnessed its merger with Times Bank Limited (a

private sector bank promoted by Bennett, Coleman & Co. / Times Group).

Capital Structure

At present, HDFC Bank boasts of an authorized capital of Rs 550 crore(Rs5.5 billion), of this the paid-up amount is Rs 424.6 crore (Rs.4.2 billion).

In terms of equity share, the HDFC Group holds 19.4%. Foreign InstitutionalInvestors (FIIs) have around 28% of the equity and about 17.6% is held by the ADSDepository (in respect of the bank's American Depository Shares (ADS) Issue).

The bank has about 570,000 shareholders.




Personal Banking

Savings Accounts Salary Accounts Current Accounts Fixed Deposits Demat Account Safe Deposit Lockers Loans Credit Cards Debit Cards Prepaid Cards Investments & Insurance

Forex Services Payment Services NetBanking InstaAlerts MobileBanking InstaQuery ATM PhoneBanking

HDFC Bank business philosophy is based on four core values :-

Customer Focus, Operational Excellence, Product Leadership and People.



Business strategy

Maintain our current high standards for asset quality through disciplined credit risk management.

Develop innovative products and services that attract our targeted customers andaddress inefficiencies in the Indian financial sector.

Continue to develop products and services that reduce our cost of funds.

Focus on high earnings growth with low volatility.

Mission

HDFC mission is to be "a World Class Indian Bank", benchmarking ourselves againstinternational standards and best practices in terms of product offerings, technology,

service levels, risk management and audit & compliance.



Financials Details

Particulars FY2005-

06

FY2006-

07

FY2007-

08

FY2008-

09

FY200

10

Revenues

(in Crores)

5599.32 8405.25 12398.15 19622.88 19980.5

Revenue

Growth (%)

- 50.11 47.50 58.27 1.82

Net Profit 870.88 1141.45 1590.18 2244.95 2948.69

Net profit

(growth)

- 31.06 39.3 41.2 31.3

EPS 35.64 43.29 44.87 52.77 67.20

EPS

Growth (%)

- 21.46 3.65 17.60 27.34

P/E Ratio 9.57 14.36 29.15 18.90 28.85

Book

value(in Rs) 145.86 169.24 201.42 324.38 344.44

Return on

equty 17.7 19.5 17.7 16.9 16.1

Dividend

per share 4.5 5.5 7 8.5 10

Dividend

pay-outratio 23.99 22.55 22.91 22.16 22.16



Limitations

In this analysis, for simplicity sake, only S&P BANK Nifty, oneof the two major indices Nifty has been taken for the analysis.

Due to lack of share price data, the analysis could only be donefrom the year 2008 till 2010.

Lack of sectoral index data, restricts this analysis only onesector i.e. Banking .

For simplicity sake not all companies listed in the sectorschosen has been taken. Only the major large cap companies of these sectors have been considered for the analysis.



In this figure we can see that 31 percent of market share of ICICI bank . 29

percent captured by HDFC bank, and market share of AXIS bank is 17 percent till



June 2010. With 77 percent of total market share of AXIS, ICICI, HDFC banks are

major players in the private banking sector.



AXIS BANK

Growth Trend of AXIS BANK since 2008

Industrial Credit and Investment Corporation of India (ICICI BANK)

Growth Trend of ICICI since 2008



Housing Development Finance Corporation Limited (HDFC BANK)

Growth Trend of HDFC BANK since 2008



Data Interpretation

Financial position of Axis ICICI & HDFC Bank for year 2007-08

2007-2008

Particular Axis bank ICICI bank HDFC bank

net profit % changes 62.5 33.68 39.3

EPS 29.94 39.15 44.87

P/E ratio 22.45 19.32 29.15

Dividend per share 6 11 7

return on equity 17.6 8.94 17.7



Interpretation

In this year we can see that Axis bank net profit percentage is higher thanICICI and HDC banks .

The Earnings Per share of HDFC bank is better than Axis & ICICI banks.

The HDFC Bank indicates Price earnings Ratio is higher than Axis & ICICI

Banks.

ICICI Bank’s Dividend Per Share is Higher than Axis & ICICI Banks.

The Return On Equity is Approximately equal of Axis and HDFC Banks.



Financial position of Axis ICICI & HDFC Bank for year 2008-09

2008-09

Particular Axis bank ICICI bank HDFC bank

net profit % changes 69.4 -9.64 41.2

EPS 50.7 33.7 52.77

P/E ratio 27.07 10.36 18.9

Dividend per share 10 11 8.5

return on equity 19.2 9.2 16.9



Interpretation

In year 2008-09 we can see net profit percentage of Axis bank is better than ICICI &

HDFC Bank. So in this year axis bank earning is high .

The EPS of Axis bank & HDFC bank approximately equal .

Price Earnings ratio is high in Axis bank.

Dividend Per Share of ICICI bank is better than high while company having decrease in

net profit .

Return on Equity of axis bank is better than ICICI & HDFC bank.



Interpretation

In year 2009-10 we can see the chart and find out following

Net profit percentage changes of HDFC bank is better than Axis & ICICI bank.

The Earning Per Share of Axis and HDFC bank is approximetaly equal .

Price Earning ratio is HDFC is higher than Axis & ICICI bank.

Dividend Per Share is equal of Axis & ICICI bank .

The Return of Equity of Axis bank is higher than ICICI and HDFC bank.



Comparison of Last three year market price

year Price ofAXIS Price of ICICI Price of HDFC Bank Nifty

01-Apr-08 721.65 756.55 1308.15 4739.5501-Oct-08 734.6 551.45 1293.65 3950.75

01-Apr-09 418.15 349.45 997.15 3060.35

01-Oct-09 1009.3 934.45 1643.05 5083.4

01-Apr-10 1173.55 953.05 1939.05 5290.5

30-Jun-10 1242.4 862 1914.64 5312.5



Observation

The analysis was totally depends up on the market situation.

We can see that the Bank Nifty and Axis ICICI and HDFC bank have shown a

continuous fluctuation trend.

The major company in this sector, i.e. AXIS , ICICI and HDFC bank.

Also, from the above table of yearly growth rate, we can observe that AXIS and HDFC

showed a consistent rise, whereas ICICI showed a more or less mixed trend.



Recommendation

From the Year 2007- 2010 we can see the performance of HDFC bank is continuously

increasing. Because company maintaining performance and management .

The performance of AXIS Bank is also increasing so investors are also getting goodreturns from their investment.

The present condition of HDFC Bank is better than Axis and ICICI bank. So all analysis

and interpretation indicating that in long term it will be more beneficial as per present

condition.

In investors point of view AXIS bank is also reliable and in long term investment it will

increase more earnings.

The ICICI bank is fluctuating year by year so its investors not getting much returns

according to AXIS & ICICI bank.



BIBLIOGRAPHY

Books and Magazines:

1. Portfolio management and investment analysis

Websites:

1. www.shrekhan.com.

2. www.moneycontrol.com

3. www.rediff.com

4. www.axisbank.com

5. www.icicibank.com

6. www.hdfcbank.com

http://www.shrekhan.com/


http://www.moneycontrol.com/


http://www.rediff.com/


http://www.axisbank.com/


http://www.icicibank.com/


http://www.hdfcbank.com/








aashish final report a1

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