fundamental and technical analysis of banking sector in india


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fundamental and technical analysis of banking sector in india

  1. 1. 1.1 INTRODUCTIONFundamental analysis refers to the study of the core underlying elements that influence theeconomy of a particular entity. It is a method of study that attempts to predict price action andmarket trends by analyzing economic indicators, government policy and societal factors (toname just a few elements) within a business cycle framework.Fundamental Analysis: Two ApproachesWhile carrying out fundamental analysis, investors can use either of the followingapproaches:1. Top-down approach: In this approach, an analyst investigates both international andnational economic indicators, such as GDP growth rates, energy prices, inflation and interestrates. The search for the best security then trickles down to the analysis of total sales, pricelevels and foreign competition in a sector in order to identify the best business in the sector.2. Bottom-up approach: In this approach, an analyst starts the search with specificbusinesses, irrespective of their industry/region.Fundamental Analysis: How Does It Work?Fundamental analysis is carried out with the aim of predicting the future performance of acompany. It is based on the theory that the market price of a security tends to move towardsits real value or intrinsic value. Thus, the intrinsic value of a security being higher than thesecurity‘s market value represents a time to buy. If the value of the security is lower than itsmarket price, investors should sell it.The steps involved in fundamental analysis are:1. Macroeconomic analysis, which involves considering currencies, commodities and indices.2. Industry sector analysis, which involves the analysis of companies that are a part of thesector.3. Situational analysis of a company.4. Financial analysis of the company.5. Valuation 1
  2. 2. Fundamental Analysis: BenefitsFundamental analysis helps in:1. Identifying the intrinsic value of a security.2. Identifying long-term investment opportunities, since it involves real-time data.Fundamental Analysis: DrawbacksThe drawbacks of fundamental analysis are:1. Too many economic indicators and extensive macroeconomic data can confuse noviceinvestors.2. The same set of information on macroeconomic indicators can have varied effects on thesame currencies at different times.3. It is beneficial only for long-term investments.STEPS TO FUNDAMENTAL ANALYSIS:1. Economic analysis2. Industry analysis3. Company analysisECONOMIC ANALYSIS:To get an insight into the compexities of the stock market, one need to develop a soundeconomic understanding and be able to interpret the impact of important economic indicatorson stock markets.Important economicanalysis indicators:- inflation,foreignexchange reserves,government policy, interest rates, are some of the important economic indicators.INDUSTRY ANALYSIS:The second face of fundamental analysis consists of a detailed analysis of a specific industry;its characteristics, its past record, its future prospects. The purpose of industry analysis is toidentify those industries which are likely to grow in the future and to invest in equity share ofcompanies seleccted from such industries. 2
  3. 3. COMPANY ANALYSIS:At the company level, fundamental analysis may involve examination of financial data,management, business concept and competition. Financial statements are the medium bywhich a company discloses information concerning its financial performance. Thefundamental analyst use the quantitative information gleaned from financial statements tomake investments decisisons.TECHNICAL ANALYSIS:Technical analysis is concerned with predicting future price trends from historical price andvolume data. The underlying axiom of technical analysis is that all fundamentals (includingexpectations) are factored into the market and are reflected in exchange rates.HOW IS TECHNICAL ANALYSIS DONE?Technical analysis is based on the premise that price discounts every aspect and informationin the market. Technical analysis is also based on the belief that price movements are nevercompletely arbitrary and follow a trend. A technical analyst believes that it is possible toidentify an ongoing trend, trade based on the trend and generate profits as the trend unfolds.The methods used for technical analysis are:1. Moving averages: This method is used to identify various support and resistance levels forthe short and long term. The most commonly used moving averages are the 30-day movingaverage (DMAs) and 200-day moving average (DMAs).2. Charts and patterns: Extensive charts are made based on historical data on pricemovements. These charts are used to identify patterns and shapes, such as double top, doublebottom, head and shoulders and triple bottom.BENEFITS OF TECHNICAL ANALYSISThe benefits of technical analysis are:1. Helps to identify a trend, allowing investors to make predictions on future trends.2. Allows investors to judge the direction of the current trend and enables them to gauge thebest time to takea position in the market. 3
  4. 4. 3. When it is used in conjunction with fundamental analysis and company and industryrelated news, it minimizes the chances of an investor incurring losses.DRAWBACKS OF TECHNICAL ANALYSISThe drawbacks of technical analysis are:1. It draws heavily on a person‘s opinion or interpretation.2. It is more a study of probabilities than of actual value.3. Useful only for short-term investments.TECHNICAL INDICATORS:There is a vast number of elaborated technical indicators: MOVING AVERAGE –MA RELATIVE STRENGTH INDEX — RSI : The Relative Strength Index Technical Indicator (RSI) is a price-following oscillator that ranges between 0 and 100. When Wilder introduced the Relative Strength Index, he recommended using a 14-day RSI.. Since then, the 9-day and 25-day Relative Strength Index indicators have also gained popularity. ADVANCE/DECLINE LINE: The ―advance/decline line‖ shows, for some period, the cumulative difference between advancing and declining issues. CLOSING TICK: ―Closing tick‖ is the difference between the number of shares that closed on an uptick and those that closed on a downtick. CLOSING ARMS: ―Closing arms‖ or ―trin‖ (trading index) is the ratio of average trading volume in declining issues to average trading volume in advancing issues. Z-BLOCK TRADES: ―zBlock trades‖ are trades in excess of 10,000 shares. HI-LO-CLOSE CHART: A hi-lo-close chart is a bar chart showing, for each day, the high price, low price, and closing price. CANDLESTICK CHART: A candlestick chart is an extended version of the hi-lo- close chart. It plots the high, low, open, and closing prices, and also shows whether the closing price was above or below the opening price. POINT AND FIGURE CHARTS: Point-and-figure charts are a way of showing only major price moves and their direction. A ―major‖ up move is marked with an 4
  5. 5. ―X,‖ while a ―major‖ down move is marked with an ―O.‖ A new column startsevery time there is a change in directionHEAD AND SHOULDERS FORMATION: Once a chart is drawn, analystsexamine it for various formations or pattern types in an attempt to predict stockprice or market direction in the case of head-and-shoulders formation. When thestock price ―pierces the neckline‖ after the right shoulder is finished, it‘s time tosell.ODD-LOT: The ―odd-lot‖ indicator looks at whether odd-lot purchases are up ordown. HEMLINE: Followers of the ―hemline‖ indicator claim that hemlinestend to rise in good times.SUPER BOWL: The Super Bowl indicator forecasts the direction of the marketbased on whether the National Football Conference or the American FootballConference wins. A win by the National Football Conference is bullish.BETA: Beta is a risk measure comparing the volatility of a stocks pricemovement to the general market.MOMENTUM: Momentum measures the speed of price change and provides aleading indicator of changes in trend. 5
  6. 6. 1.2 INDUSTRY PROFILEBanking in India originated in the last decades of the 18th century. The first banks were TheGeneral Bank of India, which started in 1786, and Bank of Hindustan, which started in 1790;both are now defunct. The oldest bank in existence in India is the State Bank of India, whichoriginated in the Bank of Calcutta in June 1806, which almost immediately became the Bankof Bengal. This was one of the three presidency banks, the other two being the Bank ofBombay and the Bank of Madras, all three of which were established under charters from theBritish East India Company. For many years the Presidency banks acted as quasi-centralbanks, as did their successors. The three banks merged in 1921 to form the Imperial Bank ofIndia, which, upon Indias independence, became the State Bank of India in 1955.STRUCTURE OF BANKING INDUSTRY:Banking system plays an important role in a country‘s economy. It promotes growth anddevelopment of the country. Indian money market comprises organized and the unorganizedinstitutions. The organized and unorganized institutions in the Indian banking system serve asource of short term credit to agriculture, industry, trade and commerce.In the Indian banking structure the Reserve Bank of India is the central bank. It regulates,direct and controls the banking and financial institutions in the country. There are three highbanking institutions, namely, RBI, NABARD and EXIM Bank. There are separate financialinstitutions catering to the needs of different sectors of the economy. Development Banks,Investment Banks, Co-operative Banks, Land Development Banks, Commercial Banks inpublic and private sectors, NABARD, RRBs, EXIM Bank, etc. The indigenous bankers andmoneylenders dominate unorganized sector. 6
  7. 7. The Indian banking structure can be seen from the chart shown under:Banking System in IndiaReserve bank of India (Controlling Authority)Development Financial institutions BanksIFCI IDBI ICICI NABARD NHB IRBI EXIM Bank ISIDBI Commercial Regional Rural Land Development Co-operative Banks Banks Banks Banks Public Sector Banks Private Sector Banks SBI Groups Nationalized Banks Indian Banks Foreign BanksThe chart reveals that there are several apex banking institutions working at the nationallevel. RBI is the highest banking authority regulating, directing and controlling all thebanking and financial institutions in the country. There are development banks, namely IDBI,SIDBI, ICICI at the national level and State Financial Corporations and State IndustrialDevelopment Corporations which have been set-up.There are 29 public sector banks. Co-operative banks have three tier system. At the villagelevel there is Primary Agriculture Co-operative Society(PACs), at the district level there isCentral Co-operative Bank and at the state level there is State Co-operative Bank. Co-operative banks provide short term and medium loans to the agriculture sector. LandDevelopment Banks provide long term agriculture credit. It comprises Primary LandDevelopment Bank(PLDB) at ht district level and State Land Development Bank(SLDB) at 7
  8. 8. the state level. RRBs provide loans and advances to the rural poor and NABARD is an apexbody regulating, directing and controlling the financial and banking institutions providingfinance for the agriculture and rural development.TYPES OF BANKSModern age is the age of specialization with the changing situation worldwide, bankfunctions have also undergone a major change. Economic conditions and financial needs of acountry are different than those of other countries throughout the world. Some financialinstitutions deal in accepting deposits and making loans and advances to different sectors ofthe economy. Some institution makes loans and advances for medium and short term, whileothers are meant for long term advances. Some are financing industrial sector and foreigntrade while others are advancing loans to agriculture sector.In broader sense of the term banks may be classified into following categories: Central Bank Commercial Banks Development Banks Investment Banks Co-operative Banks Foreign Exchange Banks Savings Banks Export-Import Bank Specialized National Banks Indigenous Bankers International Financial InstitutionsIndian Banking Sector: current statusThe Rs 64 trillion (US$ 1.22 trillion) Indian banking industry has made exceptional progressin last few years, even during the times when the rest of the world was struggling withfinancial meltdown. Even today, financial institutions across the world are facing therepercussions of the turmoil but the Indian ones are standing stiff under the regulatorswatchful eye and hence, have emerged stronger. 8
  9. 9. Ratings agency Moodys believe that strong deposit base of Indian lenders and Governmentspersistent support to public sector and private banks would act as positive factors for theentire system amidst the negative global scenario.The sector has undergone significant developments and investments in the recent past. Someof them are discussed hereafter along with the key statistics and Government initiativespertaining to the same.Indian Banking Sector: Key StatisticsAccording to the Reserve Bank of India (RBI)s Quarterly Statistics on Deposits and Credit ofScheduled Commercial Banks, March 2011, Nationalised Banks, as a group, accounted for53.0 per cent of the aggregate deposits, while State Bank of India (SBI) and its associatesaccounted for 21.6 per cent. The share of New private sector banks, Old private sector banks,Foreign banks and Regional Rural banks in aggregate deposits was 13.4 per cent, 4.6 percent, 4.4 per cent and 3 per cent respectively.With respect to gross bank credit also, nationalised banks hold the highest share of 52.8 percent in the total bank credit, with SBI and its associates at 22.1 per cent and New Privatesector banks at 13.2 per cent. Foreign banks, Old private sector banks and Regional Ruralbanks held relatively lower shares in the total bank credit with 4.9 per cent, 4.6 per cent and2.4 per cent respectively.Another statement from RBI has revealed that bank advances grew 17.08 per cent annually ason December 16 while bank deposits rose 18.03 per cent.RBI data shows that India raised US$ 1.6 billion through external commercial borrowings(ECBs) in November 2011 for new projects, capital outlay et al. 78 companies raised US$ 1.3billion under automatic route and US$ 253 million was raised under the approval route (itrequires case-by-case approval by the regulator).Indias foreign exchange reserves stood at US$ 297 billion as on December 30, 2011.In recent years, deposits under non-resident Indians (NRI) schemes have witnessed anupsurge. There was an inflow Rs 14,763 crore (US$ 2.83 billion) under NRI deposits in2010-11, which was 6.5 per cent higher from 2009-10. In 2011, the total of NRI deposits wasRs 2,30,812 crore (US$ 44.2 billion), compared to Rs 2,27,078 crore (US$ 43.5 billion) in2010. 9
  10. 10. Indian Banking Sector: Recent DevelopmentsThe US Export-Import Bank, with a commitment of US$ 7 billion, is on a way to diversify itsportfolio in India by financing projects in education, healthcare and agriculture. AfterMexico, India is the second biggest investment destination for the bank as the entityanticipates the country to become the largest market in next 12-18 months.India Infrastructure Finance Company Ltd (IIFCL) and IDBI Bank have inked a five-yearmemorandum of understanding (MoU) to launch infrastructure debt fund (IDF) schemes. TheIDF, for which IDBI Bank and IIFCL would play strategic investors, is expected to getlaunched by the end of February 2012.With green power projects getting highly popular in India, especially in the states of Gujaratand Rajasthan, banks are increasingly opening up to projects from non-conventional (solarand wind) energy space. After receiving project proposals that were meant for a particularindustry/consumer or group of industries/consumers for their own use, banks are now gettingprojects that entail commercial viability (25-100 mega watt).With an intension to strengthen its hold in Southern India, the Uco Bank is planning to add 11more branches in Andhra Pradesh to its 66-branch-strong network in the state. The bank hasmade exemplary progress in recent past with 2,004 branches in the country and four abroad.Government Initiatives on banking sector:Agreeing to Khandelwal Committees recommendation, the Government has said that state-run banks will get two Chief Executives and the large banks would get three ExecutiveDirectors (EDs) in their management panel. Banks with a business of more than Rs 300,000crore (US$ 57.44 billion) are considered to be large entities. The third ED, however, wouldbe responsible for human resource development (HRD) and technology in the bank."Non-resident Indians (NRIs) are crucial investors for banks as they form 10 per cent of totalpersonal segment deposits," said Samir Kumar Bhattacharya, General anager (NRI), StateBank of India (SBI). In order to encourage them, the RBI had deregulated interest rates onNon-Resident (External) Rupee Deposits and Ordinary Non-Resident Accounts (onDecember 16, 2011) due to which banks are able to offer competitive rates to NRIs. Thismove has further made India an attractive investment destination for them.Further, the Government of India has decided to infuse Rs 6,000 crore (US$ 1.15 billion) inpublic sector banks during the remaining 2011-12 to ensure that the entities meet regulatory 10
  11. 11. requirements. In 2010-11, the Government had provided Rs 20,157 crore (US$ 3.86 billion)as its capital support to public sector banks.In order to prepare public sector banks for neck-to-neck competition ahead and improve theirperformance in future, the Ministry of Finance has set new benchmarks for them to achieve.The new benchmarks, that would calculate their functional and financial capability to qualifyfor capital infusion, entail three performance indicators - savings and current deposit ratio,employee-branch ratio and profit per employee. 11
  12. 12. 1.3 COMPANY PROFILESharekhan Ltd. is one of the leading retail stock broking house of SSKI Group which isrunning successfully since 1922 in the country. It is the retail broking arm of the Mumbai-based SSKI Group, which has over eight decades of experience in the stock brokingbusiness. Sharekhan offers its customers a wide range of equity related services includingtrade execution on BSE, NSE, Derivatives, depository services, online trading, investmentadvice etc. The firm‘s online trading and investment site - –was launched on Feb 8, 2000. The site gives access to superior content and transactionfacility to retail customers across the country. Known for its jargon-free, investor friendlylanguage and high quality research, the site has a registered base of over one lakh customers.The content-rich and research oriented portal has stood out among its contemporariesbecause of its steadfast dedication to offering customers best-of-breed technology andsuperior market information. The objective has been to let customers make informeddecisions and to simplify the process of investing in stocks.On April 17, 2002 Sharekhan launched Speed Trade, a net-based executableapplication that emulates the broker terminals along with host of other information relevantto the Day Traders. This was for the first time that a net based trading station of this caliberwas offered to the traders. In the last six months Speed Trade has become a de facto standardfor the Day Trading community over the net.Sharekhan‘s ground network includes over 331 centers in 137 cities in India which provide ahost of trading related services.Sharekhan has always believed in investing in technology tobuild its business. The company has used some of the best-known names in the ITindustry, like Sun Microsystems, Oracle, Microsoft, Cambridge Technologies,Nexgenix, Vignette, Verisign Financial Technologies India Ltd, Spider Software Pvt Ltd.To build its trading engine and content. The Morakhiya family holds a majority stake inthe company. HSBC, Intel & Carlyle are the other investors. With a legacy of more than 80years in the stock markets, the SSKI group ventured into institutional broking and corporatefinance 18 years ago. Presently SSKI is one of the leading players in institutional brokingand corporate finance activities. SSKI holds a sizeable portion of the market in each of thesesegments. SSKI‘s institutional broking arm accounts for 7% of the market for Foreign 12
  13. 13. Institutional portfolio investment and 5% of all Domestic Institutional portfolioinvestment in the country. It has 60 institutional clients spread over India, Far East, UKand US. Foreign Institutional Investors generate about 65% of the organization‘srevenue, with a daily turnover of over US$ 2 million. The Corporate Finance sectionhas a list of very prestigious clients and has many ‗firsts‘ to its credit, in terms of the size ofdeal, sector tapped etc. The group has placed over US$ 1 billion in private equity deals.Some of the clients include BPL Cellular Holding, Gujarat Pipavav, Essar, Hutchison,Planetasia, and Shopper‘s Stop.PROFILE OF THE COMPANYName of the company : Sharekhan ltd.Year of Establishment : 1925Headquarter : Sharekhan SSKI A-206 Phoenix House Phoenix Mills Compound Lower Parel Mumbai- aharashtra, INDIA- 400013.Nature of Business : Service ProviderServices : Depository Services, Online Services and Technical Research.Number of Employees : Over 3500Website : www.sharekhan.comSlogan : Your Guide to The Financial Jungle. (VISION MISSION)Future Plans: 2, 00,000 plus retail customers being serviced through centralized call centers/ web solutions. Branches / Semi branches servicing affluent / aggressive traders through high skill financial advisor. 13
  14. 14.  250 independent investment managers/ franchisee servicing 50,000 highly valuedclients. New initiatives Portfolio management Services and commodities trading. PRODUCTS AND SERVICES OF SHAREKHAN LIMITED:The different types of products and services offered by Sharekhan Ltd. are as follows:• Equity and derivatives trading• Depository services • Online services • Commodities trading• Dial-n-trade• Portfolio management 14
  15. 15. FINANCIAL PRODUTS AVAILABLE AT SHAREKHAN:SERVICES: Always wanted help on what the stock market is all about? Been wondering abouthow all this works? Well, you dont need to fret any more - the Sharekhan FirstStep is abrand new program designed especially for those who are new to investing in shares. Allyou have to do is open a Sharekhan FirstStep account and well guide you through theinvesting process. 15
  16. 16. 1.4 NEED FOR THE STUDYThe investors who trade doesn‘t make much analysis before investing in a particular stock,when comapared to other nations Indian investors make 90% loss, only 10% make profitbecause they lack in analysing a stock. This study mainly helps the investors to analyse thestocks fundamentally and technically, which provides an opportunity to know about theposition of the stocks for both longer and shorter duration of time. Thus analysing the stockfundamentally and technically provides an opportunity to make profit when compared toothers who doesn‘t analyse it 16
  17. 17. 1.5 SCOPE OF THE STUDYThe project entitled ―Fundamental and technical analysis of banking sector in India‖ willenable from the investors point of view to refer the performance of the Banks, their relativegrowth and thereby decide on to buy or sell the particular stock. The project is limited tofundamental and technicall analysis of selected banks for a particular period other analysisand banks which are not in this list are not taken in to consideration 17
  18. 18. 1.6 OBJECTIVES OF THE STUDYPrimary Objective:  To analyze the banking stocks fundamentally and technically.  To find the intrinsic value of the banking stocks  To analyze whether the shares of banking stocks are overpriced or underpriced in the secondary market.  To provide investment decisions.Secondary-Objectives:  To study the various theories of technical analysis and fundamental analysis for banking stocks that are chosen  To understand the movement and performance of stocks to take decision to invest.  Understanding and analyzing the factors that affect the movement of stock prices in the Indian Stock Markets 18
  19. 19. 1.7 LIMITATIONS OF THE STUDYThe scope of study was limited due to some constraints given below:-1. Analysis is only a means not an end. The analysis has been done on the basis of my owninterpretations and up to my best knowledge but every analyst have his or her owninterpretations and suggestions.2. It does not take into consideration the time taken for the completion of the jobs.3. The non-monetary factors are not taken into consideration for the analysis4. No personal contacts with stakeholders of companies also a limitation for analyzing theproject.5. Error due to some oversight or misinterpretation. 19
  20. 20. LITERATURE REVIEW “Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years” -Warren Buffet Investment Guru “Prevailing wisdom is that markets are always right, I assume they are always wrong” - George Soros, Chairman, Soros Fund ManagementAccording to Michal Parness, Founder & CEOInvestors don‘t Make Money in the Stock Market. One reason the institutions make somuch money is that they are trading. They make money every time you buy or sell.They make money whether you win or lose. That means that when you‘re investing, you‘rebasically just sitting there. You‘re not going anywhere. You‘re not making money as aninvestor.Trading the Trend: The Only Way to Make Money in theMarketIf you don‘t know this already, ―Trend Trading‖ means trading trends based onhuman emotions. Not lagging indicators. Not complex statistical analysis and not Ph.D.level mathematical equations. With trend trading, you look for market movement. Thatcould mean stocks that are going to move up or down during the course of a day(intraday). You‘ll play the gaps up and down, often several days a week.The ―Trend trading‖ means being aware and taking advantage of trends like the run-upsthat happen around earning sessions. These are trends that have worked time and time againin the market. They consistently yield results 20
  21. 21. Australian National University Stephen Sault Australian National University - Faculty of Economics & Commerce March 28, 2006 While the fundamental and technical analysis literatures invest considerable effort in assessing their respective ability to explain share prices, they invariably do so without reference to each other. In this context, we propose an equity valuation model integrating both fundamental and technical analysis and, in doing so, recognize their potential as complements rather than as substitutes. Testing confirms the complementary nature of fundamental and technical analysis by showing that, while each performs well in isolation, models integrating both have superior explanatory power. While our findings relate to the valuation of shares, they also have implications for other valuation exercises. Keywords: Equity valuation models, Fundamental information, Technical information JEL Classifications: G12, G14, M41 Although the fundamental and technical analysis literatures invest considerable effort in assessing their respective ability to explain share prices, they invariably do so without reference to each other. In this context, we propose an equity valuation model integrating both fundamental and technical analysis and, in doing so, recognize their potential as complements rather than as substitutes. Testing confirms the complementary nature of fundamental and technical analysis by showing that, although each performs well in isolation, models integrating both have superior explanatory power. While our findings relate to the valuation of shares, they also have implications for other valuation exercises. Accepted Paper SeriesAccounting & Finance, Vol. 49, No. 1, pp. 21-36, March 2009ISSN 1822-6515 ISSN 1822-6515 EKONOMIKA IR VADYBA: 2009. 14 ECONOMICS& MANAGEMENT: 21
  22. 22. RELEVANCE OF FUNDAMENTAL ANALYSIS ON THE BALTIC EQUITYMARKETJulia Bistrova, Natalja LaceRiga Technical University, Latvia,The main target of the present research was to discover the importance offundamental analysis on the Baltic equity markets. The hypothesis that fundamentalanalysis is not able to generate substantial additional value to the performance of theportfolio comprised of Baltic enterprises stocks was proved.The relevance and need of fundamental analysis was checked by analyzing theperformances of portfolios, which were created on the basis of key fundamental ratios:ROE, equity ratio, ROIC, net debt to assets as well as PE and PB. Naturally,the companies with better than average ratios were selected to form stock portfolios. Thefindings of the conducted study demonstrate that neither of the mentioned ratios helpedin the creating portfolio, performance of which would beat market‘s performance. Theonly exception was price to earnings ratio, which proved that cheap companies seem tobe attractive to the investors.It was decided to look closer at the major performers and to find out whether there areany common patterns among the winners and the losers of the Baltic equity markets.Basically, equity investors ignored financial situation of the companies(profitability, stability of balance sheets) and focused mainly on assessing their growthopportunities and attractiveness of business model. So, investors were mainlyf o r w a r d -looking when making company selection. As a result, major sufferersperformance-wise were the companies with limited growth potential or total businessmodel erosion.The authors of the research have also checked whether the trading volumes of the stockhave any impact on the performance. The study results show that in the phase of themajor capital inflows (2001-2006), indeed, most liquid companies tended to rewardinvestors with higher performances. However, the shareholders of these companiessuffered the most in financial years 2007 and 2008, when there was a major sellingacross stock market all over the world. 22
  23. 23. By Sandy Jadeja 9- Oct -2004Should you use Technical or Fundamental analysis to make yourdecisions?Volumes have been written about the different ways to forecast or predict marketmovement. Traditionally, there are two distinct schools of thought that an individualmay choose from, and that being Fundamental analysis or Technical analysis.By choosing fundamental analysis, your decisions are based upon underlyingeconomic factors, cash flows, and price earnings. This information will aim to tell youwhy a stock will move.Technical analysis aims to show you how and when a stock will move. Thismethod discounts all news and information regarding the value of the stock. In otherwords, you only pay attention to a chart. The saying ―a picture is worth a thousandwords‖ truly summarizes this concept nicely.You can of course choose to use a combination of both if you prefer. This would implythat when the stock you are looking at becomes undervalued fundamentally, you wouldwait for a technical setup to get you in to the market.Deciding on which method is appropriate and gives bigger returns is truly amatter of opinion. Respectively, both methods have the same goal; to determinedmarket direction. I know of a number of individuals who only use one or the other and isequally successful with phenomenal returns.It becomes interesting when one speaks to traders from each school. The fundamentaltraders believe that charts are a waste of time and provide no real sense as to why onewould make trading decisions based on indicators and repetitive patterns. This groupare essentially bargain hunters. They want to buy stocks which they feel are under pricedand will return to a normal value at a later stage. Fundamental traders often hold stocksfor longer periods of time compared to technical traders.On the other hand, the technical traders believe that numbers do not lie and thatinformation based on value, supply and demand are already factored into the price.They also argue that people can be predictable and that these behaviors‘ occur in theform of price patterns.These patterns repeat with a degree of predictability and therefore can be used toforecast future price movements. Technical traders generally hold positions for shorterperiods of time compared to fundamental traders. 23
  24. 24. Clearly both avenues are important, and one must make careful decisions before jumping into trading without having an objective. I have always said that finding a method, style or strategy depends on ones personality. If you are thinking of long term investing then the fundamental approach may suit your needs whereas if you are looking for short term market moves, then technical analysis can provide a myriad of systems to accommodate your personal style. Some of which we shall take a look at further into the course.WHERE TO FINDTHE NUMBERSRichard Seddon, head of Online Share Trading at the StandardOnline Share Trading is operated by Standard Financial Markets (Pty)LtdIT‘S CLEAR THAT analysis – whether fundamental or technical – requires a suite oftools. And though those tools are specialized, the good news is that most are readilyavailable to the novice investor. Richard Seddon, head of Online Share Trading at theStandard, says that the discount broking website provides many ofthose tools to its broking customers as part of its product offering. On the fundamentalanalysis side the website carries top-down insights from Standard Bank‘s economicresearch division, plus notes on individual companies from its rated research team. Forbottom-up fundamental analysis the website contains the financial statements for the past10 years of every single company listed on the JSE. Over and above that raw data it alsoprovides key ratios, such as price: earnings (p:e) multiples, beta, return on equity (ROE)and many others. We‘ll deal with those more fully in two weeks‘ time when we workwith bottom-up fundamental analysis. But the website isn‘t the only place where investorscan find some of those key ratios: the share price pages of the daily and weekly press(including Fin week) publish information in addition to share prices, including p:eratios, dividend yields, market capitalization and share price changes over specifictime periods. The website can also provide more complex bottom-up analysis tools byfiltering shares that meet certain criteria. Those could include searching for shares that fallwithin a prescribed p:e ratio or dividend yield range. In addition, it provides a databaseof share movements for specified time periods, such as the past month, past threemonths, past year and past 10 years. The website also provides forecast data. That‘sprovided by I-Net Bridge, a company that collates analysts‘ forecasts and 24
  25. 25. recommendations to determine the average (or consensus) projected earnings per share andmarket view of the share: whether analysts recommend it as a buy, sell or hold. On thetechnical analysis side, the Online Share Trading website provides full interactivecharting tools with 10 years‘ worth of data. In addition, customers receive a discountwhen downloading third-party technical analysis data, paying as little as R90/month. Overand above all that, the website provides other interesting information, such asdirectors‘ dealings, 52-week highs and lows, exchange rates, international indices,news from both Reuters and the JSE, key shareholders of each company, dividendsthat are payable, as well as the biggest gainers and losers and the most active shares onthe JSE in any one trading day. It‘s everything that a full-service broker would provide– plus more 25
  26. 26. RESEARCH METHODOLOGYResearch methodology is the systematic way to solve the research problem. It is a system ofmodels, procedures and techniques used to find the result of research problems. So theresearch methodologies not only take about research methods but also consider the logicbehind the method we use in the context of our research study.3.1 Research design: Analytical research has been used for this study.3.2 Nature of data: Secondary data has been used for this study.3.3 Sources of data: Data are collected from the websites, the following websiteare used to get thebalance sheet details, ratios, historical prices, close price and to get the company information.The websites are www.investopaedia.com3.4 Tools for the analysis:FUNDAMENTAL ANALYSIS: Economic analysis:  GDP  Inflation Rate  FDI Industry analysis:  SWOT Analysis of the industry  Porters five force Analysis  PEST AnalysisCompany analysis: 26
  27. 27.  Comparative balance sheet  Comparative income statement  Ratio analysisForecasting analysis:  Trend analysisTECHNICAL ANALYSIS:  Moving average  Relative Strength Index  Relative Momentum Index  MACD 27
  28. 28. DATA ANALYSIS AND INTERPREITATION4.1 FUNDAMENTAL ANALYSIS:4.1.1 ECONOMIC ANALYSIS: GROSS DOMESTIC PRODUCT (GDP): The total market value of all final goods and services produced in a country in agiven year, equal to total consumer, investment and government spending, plus the value ofexports, minus the value of imports. The change in GDP is shown in percentage and itimplies the GDP growth rate.Table- Analysis of GDP Year March 08 March 09 March 10 March 11 GDP 9.7 6.1 6.5 8.4 Percentage - -3.6 0.4 1.9 changeChart- 12 10 8 6 4 2 0 2008 2009 2010 2011INFERENCE: It is clear from the above that the percentage of GDP was decreased from 9.7% to6.1% from 2008 to 2009 & the same level has been increased from 6.1% to 6.5% from 2009to 2010 respectively and again it steadly incresed to 8.4% in the year 2011.The increase &decrease in the GDP was due to the change in the industrial production and services. 28
  29. 29. INFLATION RATE: Inflation is a rise in the general level of prices of goods and services in aneconomy over a period of time. When the price level rises, each unit of currency buys fewergoods and services. Inflation is erosion in the purchasing of power of money, a loss of realvalue in the internal medium of exchange and unit of account in the economy. A measure ofprice inflation is the inflation rate and it is annualized from the price index. Inflation effectson an economy with both positive and negative rates.Table- Analysis of inflation rate Year March08 March09 March10 March11 Rate 7.8 8 14.8 8.87 %change 1.1 0.2 6.8 5.93Chart- 16 14 12 10 8 6 4 2 0 2008 2009 2010 2011INFERENCE: It is clear from the above that the percentage of inflation rate was continuouslyincreasing from 7.8% & 8% from 2006 to 2007 & in the following years too, but due to theeffective control measures inflation rate has reduced to 8.87% in the year 2011. Thecontinuous growth of inflation rate is because of the decrease in the purchasing power of thecurrency. 29
  30. 30. 4.1.2 INDUSTRY ANALYSIS: SWOT ANALYSIS FOR THE INDUSTRY STRENGTH  Indian banks have compared favourably on growth, asset quality and profitability with other regional banks over the last few years. The banking index has growth at a compounded annual rate of over 51% since April 2001 as compared to a 27% growth in the market index for the same period.  Policy makers have made some notable changes in policy and regulation to help strengthen the sector. These changes include strengthening prudential norms, enhancing the payments system and integrating regulations between commercial and co-operative banks.  Bank lending has been a significant driver of GDP growth and employment.  Extensive reach: The vast networking & growing number of branches & ATMs, Indian banking system has reached even to the remote corners of the country.  The government‘s regular policy for Indian bank since 1969 has paid rich dividends with the nationalization of 14 major private banks of India.  In terms of quality of assets and capital adequacy, Indian banks are considered to have clean, strong and transparent balance sheets relative to other banks in comparable economies in its region.  India has 88 scheduled commercial banks (SCBS)-27 public sector banks (that is with the Government of India holding a stake) after merger a NEW BANK of India in Punjab National Bank in 1933, 29 private banks (these do not have government stake; they may be publically listed and traded on stock exchanges) and 31 foreign banks. They have a combined network of over 53,000 branches and 17,000 ATMs. According to a report by ICRA Limited, a rating agency, the public sector banks hold over 75% of total assets of the banking industry, with the private and foreign banks holding 18.2% and 6.5% respectively.  Foreign banks will have the opportunity to own up to 74% of India private sector banks and 20% of government bonds. 30
  31. 31. WEAKNESS  PSBs need to fundamentally strengthen institutions skill levels especially in sale and marketing, service operations, risk management and overall organizational performance ethic & strengthen human capital.  Old private sector banks also have the need to fundamentally strengthen skill levels.  The cost of intermediation remains high and bank penetration is limited to only a few customer segment and demographics.  Structural weakness such a fragmented industry structure, restrictions on capital availability and deployment, lack of institutional support infrastructure, restrictive labour laws, weak corporate governance and ineffective regulations beyond Scheduled Commercial Banks (SCBs),unless industry utilities and service bureaus.  Refusal to dilute stake in PSU banks: The government has refused to dilute its stake in PSU banks below 51% thus choking the headroom available to these banks for raining equity capital.  Impediments in sectoral reforms: Opposition form left and resultant cautious approach from the North Block in terms of approving merger of PSU banks may hamper their growth prospects in the medium term. OPPORTUNITY The market is seeing discontinuous growth driven by new products and services that include opportunities in credit cards, consumer finance and wealth management on the retail side, and in fee-base income and investment banking on the whole sale banking side. These require new skills in sales & marketing, credit and operations. Banks will no longer enjoy windfall treasury gains that the decade –long secular decline in interest rates provided. This will expose the weaker banks. With increased interest in India, competition from foreign banks wills only intensity. Given the demographic shifts, resulting from changes in age profile and household income, consumers will increasingly demand enhanced institutional capabilities and service levels from banks. New private banks could reach the next level of their growth in the Indian banking sector by continuing to innovate and develop differentiated business models to profitability 31
  32. 32.  Serve segments like the rural/low income and affluent/HNI segment; actively adopting acquisitions as a means to grow and reaching the next level of performance in their service platforms. Attracting, developing and reaching and retaining more leadership capacity. Foreign banks committed to making a play in India will need to adopt alternative approaches to win the ―race for the customer‖ and build a value-creating customer franchise in advance of regulations potentially opening up post 2009. At the same time, they should stay in the game for potential acquisition opportunities as and when they appear in the near term. Maintaining a fundamentally long-term value creation mindset. Reach in rural India for the private sector and foreign banks. With the growth in the Indian economy expected to be strong for quite some time especially in its services sector the demand for banking services, especially retail banking, mortgages and investment services are expected to be strong. The Reserve Bank of India (RBI) has approached a proposal from the government to amend the Banking Regulation Act to permit banks to trade in commodities and commodity derivatives. Liberalization of ECB norms: The government also liberalized the ECB norms to permit financial sector entities engaged in infrastructure funding to raise ECBs. This enables banks and financial institutions, which were earlier not permitted to raise such funds, explore this route for raising cheaper funds in the overseas markets. Hybrid capital: In an attempt to relieve banks of their capital crunch, the RBI has allowed them to raise perpetual bonds and other hybrid capital securities to shore up, their capital. If the new instruments find takers, it would help PSU banks, left with little headroom for raising equity. Significantly, FII and NRI investment limits in these securities have been fixed at 49%, compared to 20% foreign equity holdings allowed in PSU banks THREATS  Threat of stability of the system failure of some weak banks often threatened the stability of the system.  Rise in inflation figures which would lead to increase in interest in interest rates.  Increase in the number of foreign players would pas well as those a threat to the PSB as well as the private players. 32
  33. 33. PORTER FIVE FORCE ANALYSIS: Bargaining power of suppliers is very low Nature of suppliers Few alternatives RBI rules and regulations Suppliers are not concentrated forward integration Threat of competitorsBarriers to entry Large no of banks Threat of High market growth substitute rate Low switching costs Product Undifferentiated differentiation very services Non banking difficult High fixed cost financial sector Licensing High exit barriers increasing rapidly requirement Deposits in posts Stock Market Bargaining power of consumer very high Large no. of alternatives Low switching costs Undifferentiated services Full information about the market 33
  34. 34. RIVALRY AMONG COMPETING FIRMSRivalry among competitors is very fierce in Indian Banking Industry.The services banks offer is more of homogeneous which makes the Company to offer thesame service at a lower rate and eat their competitor market‘s share. Market Players use allsorts of aggressive selling strategies and activities from intensive advertisement campaigns topromotional stuff. Even consumer switch from one bank to another, if there is a wide spreadin the interest. Hence the intensity of rivalry is very high. The no of factors has contributed toincrease rivalry those are.1. A large no of banksThere is so many banks and non financial institution fighting for same pie , which hasintensified competition?2. High market growth rateIndia is seen as one of the biggest market place and growth rate in Indian banking industry isalso very high. This has ignited the competition.3. Homogegeous product and servicesThe services banks offer is more of homogeneous which makes the company to offer thesame service at a lower rate and eat their competitor market‘s share.4. Low switching costCostumers switching cost is very low, they can easily switch from one bank to another bankand very little loyalty exist .5. Undifferanciated servicesAlmost every bank provides similar services. Every bank tries to copy each other servicesand technology which increase level of competition.6. High fixed cost Fixed cost is very high7. High exit barriersHigh exit barriers humiliate banks to earn profit and retain customers by providingworld class services. 34
  35. 35. 8. Low government regulationsThere are low regulations exist to start a new business due lpg policy adopted by India.BARGAINING POWER OF SUPPLIERSBanking industry is governed by Reserve Bank of India. Reserve Bank of India is theauthority to take monetary action which leads to direct impact on circulation of money in theEconomy. The rules and regulation lay down by RBI.Suppliers of banks are depositors .these are those people who have excess money and preferregular income and safety. In banking industry suppliers have low bargaining power.1. Nature of suppliersSuppliers of banks are those people who prefer low risk and those who need regular incomeand safety as well. Banks best place for them to deposits theirs surplus money.2. Few alternativesVery few alternatives are available so the bargaining power is less3. Rbi rules and regulationsBanks are subject to RBI rules and regulations bank has to behave in a way that RBI wants.So rbi takes all decisions related to interest rates. This reduces bargaining power of suppliers.4. Suppliers not concentratedBanking industry suppliers sure not concentrated. There are numerous with negligible portionof offer .so this reduce their bargaining power.BARGAINING POWER OF CONSUMERSIn today world, Customer is the King. Banks offers different services According to clientsneed and requirement. They offer loans at Prime Lending Rate (PLR) to their trust worthyclients and higher rate to others clients.Customers of banks are those who take loans and uses services of banks. Customers havehigh bargaining power. These are 35
  36. 36. 1. Large no of alternativesCustomers have large no of alternatives, there are so many banks, which fight for same pie.There are many non financial institutions like icici, hdfc, and ifci, etc. which has also jumpinto these business .there are foreign banks , privet banks, co-operative banks anddevelopment banks together with specialized financial companies that provides finance tocustomers .these all increase preference for customers.2. Low switching costCost of switching from one bank to another is low. Banks are also providing zero balanceaccount and another types of facilities. They are free to select any banks service. Switchingcost are becoming lower with internet banking gaining momentum and a result customersloyalties are harder to retain.3. Undiffenciated serviceBank provide merely similar service there are no much diffracted in service provides bydifferent banks so, bargaining power of customers increase. They can not be charged fordifferentiation.4. Full information about the marketCustomers have full information about the market due to globalization and digitalizationConsumers have become advance and sophisticated .they are aware with each marketcondition so banks have to be more competive and customer friendly to serve them.For good creditworthy borrowers bargaining power is high due to the availability of largenumber of banksPOTENTIAL ENTRY OF NEW COMPETITORSReserve Bank of India has laid out a stagnant rules and regulation for new entrant in BankingIndustry. We expect merger and acquisition in the banking industry in near future. Hence, theindustry is less porn of new competitor.Barriers to an entry in banking industry no longer exist. So lots of privet and foreign banksare entering in the market. Competitors can come from an industry to ‗disinter mediate‗bankproduct differentiation is very difficult for banks and exit is difficult. So every bank strives tosurvive in highly competitive market so we see intense competitive can mergers andacquisitions. Government policies are supportive to start new bank. There is less statutory 36
  37. 37. requirement needed to start a new venture? Every bank to tries to achieve economics of scalethrough use of technology and selecting and training manpower .There are public sector banks, private sector and foreign banks along with non bankingfinance companies competing in similar business segments.POTENTIAL DEVELOPMENT OF SUBSTITUTE PRODUCTSEvery day there is one or the other new product in financial sector.Banks are not limited to tradition banking which just offers deposit and lending. In addition,today banks offers loans for all products, derivatives, ForEx, Insurance, Mutual Fund,Demit account to name a few. The wide range of choices and needs give a sufficient roomfor new product development and product enhancement.Substitute products or services are those, which are different but satisfy the same set ofcustomers. In private banking industry following are the substitutes: NBFC: Non-banking financial Institutions play an important role in giving financial assistance. Mobilization of financial resources outside the traditional banking system has witnessed a tremendous growth in recent years in the India. NBFC is a close substitute of banking in respect of raising funds. Borrower can easily raise funds from NBFC because it requires less formal procedure for getting funds compare to private banks. Post Office Products: Post office is also providing some service like fixed deposit facility, saving account, recurring account etc. The interest rate of saving account is higher than private banks. It is fully secured by the government so people who do not want to take risk for them post office saving is good substitute. Government Bond: Govt. Bond also attracts savings from the general public. It is less risky and more secured as compare to savings in private banks. Mutual Funds: Mutual funds are also now proving as good substitutes for banks. They assure for providing high return with less time in comparison of banks. The administrative expenses are also very low as compared to banks. Investment in Mutual funds is more flexible than investment in banks. Stock Market: People who are ready to bear risk and wants a high return on their investment, stock market is a good substitute for them. Day by day investors are moving towards stock market as interest rate in banks are decreasing. So now stock market has proved as a big competitor for baking sector. 37
  38. 38.  Debentures: Debentures is also proved as a good substitute of bank‘s fixed deposit as return on debenture is fixed and high. There are different types of debentures, which attract various classes of investors. Other Investment Alternatives: Now common people‘s attraction is shifting from banks to other various alternatives such as gold, precious metals, land, small savings etc. As we can see the growing trend in these alternatives in comparison of decreasing interest rates in banks. PEST ANALYSIS:PEST Analysis for Banking ServicesPolitical/ LegalInfluences which have an impact on banking services and consumer confidence include thefollowing:  State provision of pensions  Government encouragement of savings and investment (for e.g. via tax benefits)  Regulatory control and protection (to prevent the collapse of financial institutions and  protect investors money)Economic Economic factors are key variables which have an impact on the activity in thebanking services sector. The level of consumer activity is governed by income levels andpersonal wealth. As income levels grow, more discretionary income is available to spend onbanking services. Consumer confidence in the economy and in job security also has a majorimpact; if lean times are foreseen ahead, savings will take priority over loans and other formsof expenditure. Consumers may also seek easy access savings and be willing to tie up theirmoney for longer periods with potentially more attractive investments.The main economic factors that should be monitored with regard to banking servicesmarketing are as follows:  Personal and household disposable income  Discretionary income levels  Employment levels 38
  39. 39.  The rate of inflation  Income tax levels and taxation structures  Savings and investment levels and trends  Stock market performance  Consumer spending & Consumer creditSocio-culturalMany demographic factors have an important bearing on banking services markets.  Changing attitude towards consumer credit and debt  Changing employment patterns  Numbers of working women  The ageing population  Marriage/divorce/birth rates  Consumption trendsTechnologicalTechnology has a major impact on many industries including financial services and bankingin particular. ATM services which not only provide cash but also allow for bill payments,deposits and instant statements are widely used. From the customers‘ viewpoint, technologyhas played a major role in the development of the process whereby the service is delivered.Automated queuing systems have made visits to the bank easier and more convenient.Telephone Banking and insurance services are now being used in place of the traditionalbranch-based service process. Technology has also played a major role within organizations,bringing about far greater efficiency through computerized records and transaction systemsand also in business development, through the setting up of detailed customer databases foreffective segmentation and targeting.The main technological developments fall within these categories;  Process developments  Information storage and handling  Database system 39
  40. 40. 4.1.3 COMPANY ANALYSISCOMPARATIVE BALANCE SHEET4.1.3.1 COMPARATIVE BALANCE SHEET OF ICICI BANK AS ON 31ST MARCH 2008 AND 2009PARTICULARS ICICI(2008) ICICI(2009) INCREASE OR DECREASE IN 2008 OVER 2009Liabilities AMT(crores) AMT(crores) AMT(crores) %Share Capital 1,462.68 1,463.29 0.61 0.041704269Reserves & 45,357.53 48,419.73 3,062.20 6.751249462SurplusNet Worth 46,820.21 49,883.02 3,062.81 6.541640885Secured Loans 65,648.43 67,323.69 1,675.26 2.551866054Unsecured Loans 2,44,431.05 2,18,347.82 -26,083.23 -10.67099699TOTAL 3,56,899.69 3,35,554.53 -21,345.16 -5.980716879LIABILITIESASSETSGross Block 7,036.00 7,443.71 407.71 5.794627629(-) Acc. 2,927.11 3,642.09 714.98 24.42614046DepreciationNet Block 4,108.90 3,801.62 -307.28 -7.478400545Capital Work in 0 0 0.00 0Progress.Investments. 1,11,454.34 1,03,058.31 -8,396.03 -7.533156627Inventories 0 0 0.00 0Sundry Debtors 0 0 0.00 0Cash And Bank 38,041.13 29,966.56 -8,074.57 -21.22589418Loans And 2,46,190.71 2,42,474.47 -3,716.24 -1.509496439AdvancesTotal Current 2,84,231.84 2,72,441.03 -11,790.81 -4.148307241AssetsCurrent 40,067.37 40,934.58 867.21 2.164379644 40
  41. 41. Liabilities Provisions 2,828.02 2,811.85 -16.17 -0.571778135 Total Current 42,895.38 43,746.43 851.05 1.984013197 Liabilities NET CURRENT 2,41,336.45 2,28,694.60 -12,641.85 -5.238267986 ASSETS Misc. Expenses 0 0 0.00 0 TOTAL ASSETS 3,56,899.69 3,35,554.53 -21,345.16 -5.980716879 (A+B+C+D+E)INFERENCE:  The unsecured loans have been reduced by nearly 10.68% when compared to previous year. The total liabilities have reduced by 5.98% for the financial year 08-09.  The investments have been reduced by 7.5331%, when compared to previous year. The cash and bank balance have reduced by 21.22% when compared to previous financial year.  The net current assets have reduced by 5.23% when compared to previous year. COMPARATIVE BALANCE SHEET OF ICICI BANK AS ON 31ST MARCH 2009 AND 2010PARTICULARS ICICI(2009) ICICI(2010) INCREASE OR DECREASE IN 2009OVER 2010Liabilities AMT(crores AMT(crores AMT(crores) % ) )Share Capital 1,463.29 1,114.89 -348.40 -23.8093611Reserves & 48,419.73 50,503.48 2,083.75 4.303514291SurplusNet Worth 49,883.02 51,618.37 1,735.35 3.478839092Secured Loans 67,323.69 94,263.57 26,939.88 40.0154537Unsecured Loans 2,18,347.82 2,02,016.60 -16,331.22 -7.479451821 41
  42. 42. TOTAL 3,35,554.53 3,47,898.53 12,344.00 3.67868674LIABILITIESASSETSGross Block 7,443.71 7,114.12 -329.59 -4.427765187(-) Acc. 3,642.09 3,901.43 259.34 7.120636777DepreciationNet Block 3,801.62 3,212.69 -588.93 -15.4915536Capital Work in 0 0 0.00 0Progress.Investments. 1,03,058.31 1,20,892.80 17,834.49 17.30524205Inventories 0 0 0.00 0Sundry Debtors 0 0 0.00 0Cash And Bank 29,966.56 38,873.69 8,907.13 29.7235652Loans And 2,42,474.47 2,00,420.53 -42,053.94 -17.34365684AdvancesTotal Current 2,72,441.03 2,39,294.22 -33,146.81 -12.16659987AssetsCurrent Liabilities 40,934.58 12,563.22 -28,371.36 -69.30902919Provisions 2,811.85 2,937.96 126.11 4.484947632Total Current 43,746.43 15,501.18 -28,245.25 -64.56584LiabilitiesNET CURRENT 2,28,694.60 2,23,793.04 -4,901.56 -2.143277541ASSETSMisc. Expenses 0 0 0.00TOTAL ASSETS 3,35,554.53 3,47,898.53 12,344.00 3.67868674(A+B+C+D+E)INFERENCE:  Share capital have reduced by nearly 24% when compared to the previous financial year.  Unsecured loan have reduced by 7.48% due to the reduced trust worthiness of the bank of the loan secker, secured loan have increased by 40% this shows that the bank 42
  43. 43. relies more on the collateral securities rather than credit worthiness of the loan seeker, which is exactly shown by reduction in unsecured loan.  Total liabilities have increased due to the non payment of debts by the loan seekers.  Investments have increased by 17% this shows a good sign of business opportunity for the bank.  Loans and advances have reduced by 17.35% due to the rise in interest rate.  Current liablity have reduced by 64.56% this shows a good sign of effective asset management,current assets have reduced by 2.14% this shows that the bank should concentrate in recovering its debts with a year so that the money value doesn‘t get reduced. COMPARATIVE BALANCE SHEET OF ICICI BANK AS ON 31ST MARCH 2010 AND 2011PARTICULARS ICICI(2010) ICICI(2011) INCREASE OR DECREASE IN 2010OVER 2011Liabilities AMT(crores) AMT(crores) AMT(crores) %Share Capital 1,114.89 1,152.11 37.22 3.338445945Reserves & 50,503.48 53,938.82 3,435.34 6.802184721SurplusNet Worth 51,618.37 55,090.94 3,472.57 6.727391818Secured Loans 94,263.57 1,09,554.28 15,290.71 16.22122947Unsecured Loans 2,02,016.60 2,25,602.11 23,585.51 11.67503562TOTAL 3,47,898.53 3,90,247.32 42,348.79 12.17274186LIABILITIESASSETSGross Block 7,114.12 9,107.47 1,993.35 28.01962857(-) Acc. 3,901.43 4,363.21 461.78 11.83617289DepreciationNet Block 3,212.69 4,744.26 1,531.57 47.6725112Capital Work in 0 0 0.00 0Progress.Investments. 1,20,892.80 1,34,685.96 13,793.16 11.40941396 43
  44. 44. Inventories 0 0 0.00 0Sundry Debtors 0 0 0.00 0Cash And Bank 38,873.69 34,090.08 -4,783.61 -12.30552078Loans And 2,00,420.53 2,32,713.37 32,292.84 16.11254097AdvancesTotal Current 2,39,294.22 2,66,803.45 27,509.23 11.49598599AssetsCurrent 12,563.22 12,691.89 128.67 1.024180107LiabilitiesProvisions 2,937.96 3,294.46 356.50 12.13427004Total Current 15,501.18 15,986.35 485.17 3.129890757LiabilitiesNET 2,23,793.04 2,50,817.10 27,024.06 12.07546937CURRENTASSETSMisc. Expenses 0 0 0.00 0TOTAL 3,47,898.53 3,90,247.32 42,348.79 12.17274186ASSETS(A+B+C+D+E)INFERENCE:  Net worth has increased by 6.73% when compared to previous financial year this shows a good sign of asset improvement.  Secured loans have increased by 16.62% this shows a good sign in reling the security of an individual rather than credit worthiness of an individual, but that doesn‘t affect the unsecured loans, which has increased by 11.68%.  Total liability has increased by 12.18% when compared to previous fiscal year.  Investment made by the bank has considerably increased to 11.41% when compared to previous year. cash and bank balance maintained by the bank have reduced by 12.31%.  Current assets have increased by 12% when compared to previous financial year. 44
  45. 45. COMPARATIVE BALANCE SHEET OF HDFC BANK AS ON 31ST MARCH 2008 AND 2009PARTICULARS HDFC(2008) HDFC(2009) INCREASE OR DECREASE IN 2008OVER 2009Liabilities AMT(crores) AMT(crores) AMT(crores) %Share Capital 1,114.89 1,152.11 37.22 3.338445945Reserves & 50,503.48 53,938.82 3,435.34 6.802184721SurplusNet Worth 51,618.37 55,090.94 3,472.57 6.727391818Secured Loans 94,263.57 1,09,554.28 15,290.71 16.22122947Unsecured Loans 2,02,016.60 2,25,602.11 23,585.51 11.67503562TOTAL 3,47,898.53 3,90,247.32 42,348.79 12.17274186LIABILITIESASSETSGross Block 7,114.12 9,107.47 1,993.35 28.01962857(-) Acc. 3,901.43 4,363.21 461.78 11.83617289DepreciationNet Block 3,212.69 4,744.26 1,531.57 47.6725112Capital Work in 0 0 0.00 0Progress.Investments. 1,20,892.80 1,34,685.96 13,793.16 11.40941396Inventories 0 0 0.00 0Sundry Debtors 0 0 0.00 0Cash And Bank 38,873.69 34,090.08 -4,783.61 -12.30552078Loans And 2,00,420.53 2,32,713.37 32,292.84 16.11254097AdvancesTotal Current 2,39,294.22 2,66,803.45 27,509.23 11.49598599AssetsCurrent 12,563.22 12,691.89 128.67 1.024180107Liabilities 45
  46. 46. Provisions 2,937.96 3,294.46 356.50 12.13427004Total Current 15,501.18 15,986.35 485.17 3.129890757LiabilitiesNET CURRENT 2,23,793.04 2,50,817.10 27,024.06 12.07546937ASSETSMisc. Expenses 0 0 0.00 0TOTAL ASSETS 3,47,898.53 3,90,247.32 42,348.79 12.17274186(A+B+C+D+E)INFERENCE:  Secured loans have increased by 16.22%, unsecured loans has increased by 11.67% when compared to previous financial year.  Total liabilities have increased by 12.71% when compared to previous financial year.  Investments made by the bank has 11.41% this shows a good sign of expansion of the banking activity.  Cash and bank balance maintained by the bank has been reduced by 12.31%.  Current assets have increased by 11.50%,total assets have increased by 12.17% when compared to previous year this shown a good sign of asset improvement activity. COMPARATIVE BALANCE SHEET OF HDFC BANK AS ON 31ST MARCH 2009 AND 2010PARTICULARS HDFC(2009) HDFC(2010) INCREASE OR DECREASE IN 2009OVER 2010Liabilities AMT(crores) AMT(crores) AMT(crores) %Share Capital 826.3 457.74 -368.56 -44.60365485Reserves & 14,226.43 21,064.75 6,838.32 48.06771622SurplusNet Worth 15,052.73 21,522.49 6,469.76 42.98064205Secured Loans 2,685.84 12,915.69 10,229.85 380.8808417Unsecured Loans 1,42,811.58 1,67,404.44 24,592.86 17.2204943TOTAL 1,60,550.15 2,01,842.63 41,292.48 25.71936557 46
  47. 47. LIABILITIESASSETSGross Block 3,956.63 4,707.97 751.34 18.98939249(-) Acc. 2,249.90 2,585.16 335.26 14.90110672DepreciationNet Block 1,706.73 2,122.81 416.08 24.37878282Capital Work in 0 0 0.00 0Progress.Investments. 58,817.55 58,607.62 -209.93 -0.356917281Inventories 0 0 0.00 0Sundry Debtors 0 0 0.00 0Cash And Bank 17,506.62 29,942.40 12,435.78 71.03472858Loans And 1,05,239.88 1,31,785.74 26,545.86 25.22414507AdvancesTotal Current 1,22,746.50 1,61,728.14 38,981.64 31.75784238AssetsCurrent 22,222.94 19,975.42 -2,247.52 -10.11351333LiabilitiesProvisions 497.68 640.52 142.84 28.70117344Total Current 22,720.62 20,615.94 -2,104.68 -9.263303554LiabilitiesNET 1,00,025.87 1,41,112.20 41,086.33 41.07570372CURRENTASSETSMisc. Expenses 0 0 0.00 0TOTAL 1,60,550.15 2,01,842.63 41,292.48 25.71936557ASSETS(A+B+C+D+E)I 47
  48. 48. NFERENCE:  Networth have increased by nearly 43% when compared to previous financial year, this shows a good sign that assets is more than liablities.  Secured loans have increased by 380%, due to effective advertisement and increase in trust worthiness of the bank.  Total liabilit have increased by 25% when compared to previous financial year.  Cash and bank balance maintained by the bank has increased by 71%, loans and advances have increased by 25.22% when compared to previous financial year.  Net current assets have increased by 41%, and total assets have increased by 25.71%, this shows a good sign of effective asset quality management. COMPARATIVE BALANCE SHEET OF HDFC BANK AS ON 31ST MARCH 2010 AND 2011PARTICULARS HDFC(2010) HDFC(2011) INCREASE OR DECREASE IN 2010 OVER 2011Liabilities AMT(crores AMT(crores AMT(crores) % ) )Share Capital 457.74 465.23 7.49 1.636300083Reserves & 21,064.75 24,914.04 3,849.29 18.27360875SurplusNet Worth 21,522.49 25,379.27 3,856.78 17.91976672Secured Loans 12,915.69 14,394.06 1,478.37 11.44631065Unsecured Loans 1,67,404.44 2,08,586.41 41,181.97 24.60028539TOTAL 2,01,842.63 2,48,359.73 46,517.10 23.0462217LIABILITIESASSETSGross Block 4,707.97 5,244.21 536.24 11.39004709(-) Acc. 2,585.16 3,073.56 488.40 18.89244766DepreciationNet Block 2,122.81 2,170.65 47.84 2.253616668Capital Work in 0 0 0.00 0Progress. 48
  49. 49. Investments. 58,607.62 70,929.37 12,321.75 21.02414328Inventories 0 0 0.00 0Sundry Debtors 0 0 0.00 0Cash And Bank 29,942.40 29,668.83 -273.57 -0.913654216Loans And 1,31,785.74 1,74,583.74 42,798.00 32.47544082AdvancesTotal Current 1,61,728.14 2,04,252.58 42,524.44 26.29377918AssetsCurrent Liabilities 19,975.42 28,100.71 8,125.29 40.67644135Provisions 640.52 892.15 251.63 39.28526822Total Current 20,615.94 28,992.86 8,376.92 40.63321876LiabilitiesNET CURRENT 1,41,112.20 1,75,259.72 34,147.52 24.19884319ASSETSMisc. Expenses 0 0 0.00 0TOTAL ASSETS 2,01,842.63 2,48,359.73 46,517.10 23.0462217(A+B+C+D+E)INFERENCE:  Net worth have increased by 17.92%, when compared to previous financial year.  Secured loans have increased by 11.44%, while unsecured loans have increased by 24.61%, this shows a good sign of lending policy maintained by the bank.  Total liabilities have increased by 23% when compared to previous financial year.  Investments made by the bank have increased by 21% when compared to previous financial year  Current liablities have increased by 41%, this shows that the bank short term lialities are getting higher year by year.  Net current assets have increased by 24% and total assets have increased by 23% when compared to previous financial year. 49
  50. 50. COMPARATIVE BALANCE SHEET OF AXIS BANK AS ON 31ST MARCH 2008 AND 2009PARTICULARS AXIS(2008) AXIS(2009) INCREASE OR DECREASE IN 2008 OVER 2009Liabilities AMT(crores) AMT(crores) AMT(crores) %Share Capital 359.9 360.22 0.32 0.088913587Reserves & 8,410.79 9,854.58 1,443.79 17.16592615SurplusNet Worth 8,770.69 10,214.80 1,444.11 16.46518119Secured Loans 5,624.04 10,185.48 4,561.44 81.10610878Unsecured Loans 87,626.22 1,17,374.11 29,747.89 33.94861721TOTAL 1,02,020.95 1,37,774.38 35,753.43 35.04518435LIABILITIESASSETSGross Block 1,384.70 1,741.86 357.16 25.79331263(-) Acc. 590.33 726.45 136.12 23.05828943DepreciationNet Block 794.37 1,015.40 221.03 27.82456538Capital Work in 128.48 57.48 -71.00 0Progress.Investments. 33,705.10 46,330.35 12,625.25 37.45798114Inventories 0 0 0.00 0Sundry Debtors 0 0 0.00 0Cash And Bank 12,504.24 15,016.90 2,512.66 20.09446396Loans And 62,445.66 85,301.91 22,856.25 36.60182309AdvancesTotal Current 74,949.90 1,00,318.81 25,368.91 33.84782368AssetsCurrent 7,305.80 9,527.65 2,221.85 30.4121383Liabilities 50
  51. 51. Provisions 251.1 420.02 168.92 67.27200319Total Current 7,556.90 9,947.67 2,390.77 31.63691461LiabilitiesNET 67,393.00 90,371.14 22,978.14 34.09573695CURRENTASSETSMisc. Expenses 0 0 0.00 0TOTAL 1,02,020.95 1,37,774.38 35,753.43 35.04518435ASSETS(A+B+C+D+E)INFERENCE:  Reserves and surplus have increased by 17.16% when compared to previous financial year.  Secured loans have increased by 81%, while unsecured loans have increased by 34%, which shows a effective lending policy of the bank.  Total liabilities have increased by 35%.  Investments made by the bank have increased by37.45% when compared to previous financial year.  Loans and advances have increased by 36%.  Total assets have increased by 35%, when compared to previous financial year. COMPARATIVE BALANCE SHEET OF AXIS BANK AS ON 31ST MARCH 2009 AND 2010PARTICULARS AXIS(2009) AXIS(2010) INCREASE OR DECREASE IN 2009 OVER 2010Liabilities AMT(crores) AMT(crores) AMT(crores) %Share Capital 360.22 405.35 45.13 12.52845483Reserves & 9,854.58 15,639.27 5,784.69 58.70052301SurplusNet Worth 10,214.80 16,044.62 5,829.82 57.07228727 51
  52. 52. Secured Loans 10,185.48 17,169.55 6,984.07 68.56888433Unsecured Loans 1,17,374.11 1,41,300.22 23,926.11 20.38448683TOTAL 1,37,774.38 1,74,514.39 36,740.01 26.66679393LIABILITIESASSETSGross Block 1,741.86 2,107.98 366.12 21.01891082(-) Acc. 726.45 942.79 216.34 29.78043912DepreciationNet Block 1,015.40 1,165.18 149.78 14.75083711Capital Work in 57.48 57.24 -0.24 0Progress.Investments. 46,330.35 55,974.82 9,644.47 20.81674324Inventories 0 0 0.00 0Sundry Debtors 0 0 0.00 0Cash And Bank 15,016.90 15,206.44 189.54 1.262177946Loans And 85,301.91 1,08,244.18 22,942.27 26.89537667AdvancesTotal Current 1,00,318.81 1,23,450.62 23,131.81 23.05829784AssetsCurrent 9,527.65 5,566.52 -3,961.13 -41.57509984LiabilitiesProvisions 420.02 566.94 146.92 34.9792867Total Current 9,947.67 6,133.46 -3,814.21 -38.3427476LiabilitiesNET CURRENT 90,371.14 1,17,317.16 26,946.02 29.81706328ASSETSMisc. Expenses 0 0 0.00 0TOTAL ASSETS 1,37,774.38 1,74,514.39 36,740.01 26.66679393(A+B+C+D+E) 52
  53. 53. INFERENCE:  Reserves and surplus have increased by nearly 58%, when compared to previous financil year.  Secured loans have increased by 68%.  Total liablity have increased by 26.67%, when compared to previous financial year.  Investments have increased by 20.81%.  Current liabalities have reduced by 41.57%, this shows a good sign of reduction in current liabilities.  Total assets have increased by 26.67%, due to effective asset management. COMPARATIVE BALANCE SHEET OF AXIS BANK AS ON 31ST MARCH 2010 AND 2011PARTICULARS AXIS(2010) AXIS(2011) INCREASE OR DECREASE IN 2010 OVER 2011Liabilities AMT(crores) AMT(crores) AMT(crores) %Share Capital 405.35 410.55 5.20 1.282841988Reserves & 15,639.27 18,588.28 2,949.01 18.85644279SurplusNet Worth 16,044.62 18,998.83 2,954.21 18.41246474Secured Loans 17,169.55 26,267.88 9,098.33 52.99108014Unsecured Loans 1,41,300.22 1,89,237.80 47,937.58 33.92604767TOTAL 1,74,514.39 2,34,504.51 59,990.12 34.37545752LIABILITIESASSETSGross Block 2,107.98 3,426.49 1,318.51 62.54850615(-) Acc. 942.79 1,176.03 233.24 24.7393375DepreciationNet Block 1,165.18 2,250.46 1,085.28 93.1426904Capital Work in 57.24 22.69 -34.55 0Progress. 53
  54. 54. Investments. 55,974.82 71,991.62 16,016.80 28.61429478Inventories 0 0 0.00 0Sundry Debtors 0 0 0.00 0Cash And Bank 15,206.44 21,408.66 6,202.22 40.78679822Loans And 1,08,244.18 1,47,039.95 38,795.77 35.84097547AdvancesTotal Current 1,23,450.62 1,68,448.61 44,997.99 36.45019361AssetsCurrent 5,566.52 7,540.98 1,974.46 35.47027586LiabilitiesProvisions 566.94 667.88 100.94 17.80435319Total Current 6,133.46 8,208.86 2,075.40 33.83734466LiabilitiesNET CURRENT 1,17,317.16 1,60,239.74 42,922.58 36.58678747ASSETSMisc. Expenses 0 0 0.00 0TOTAL ASSETS 1,74,514.39 2,34,504.51 59,990.12 34.37545752(A+B+C+D+E)INFERENCE:  Secured loans have increased by 53%, while unsecured loans have increased by 34%, when compared to previous financial year.  Total liabilities have increased by 34.57%.  Investments have increased by 28.62% towards expansion activity of the business.  Cash and bank balance have increased by 40.78% when compared to previous financial year.  Current liabilities have increased by 35.47%.  Total assets have increased by 34.37%, when compared to previous financial year. 54
  55. 55. COMPARATIVE BALANCE SHEET OF BANK OF BARODA AS ON 31STMARCH 2008 AND 2009PARTICULAR BARODA(200 BARODA(200 INCREASE OR DECREASE IN S 8) 9) 2008 OVER 2009Liabilities AMT(crores) AMT(crores) AMT(crores) %Share Capital 365.53 365.53 0.00 0Reserves & 10,678.40 12,470.01 1,791.61 16.77788807SurplusNet Worth 11,043.93 12,835.54 1,791.61 16.22257656Secured Loans 3,927.05 5,636.09 1,709.04 43.51969035Unsecured 1,52,034.13 1,92,396.95 40,362.82 26.54852565LoansTOTAL 1,67,005.10 2,10,868.58 43,863.48 26.26475479LIABILITIESASSETSGross Block 3,787.14 3,954.13 166.99 4.409396009(-) Acc. 1,360.14 1,644.41 284.27 20.90005441DepreciationNet Block 2,427.01 2,309.72 -117.29 -4.832695374Capital Work in 0 0 0.00 0Progress.Investments. 43,870.07 52,445.88 8,575.81 19.54820223Inventories 0 0 0.00 0Sundry Debtors 0 0 0.00 0Cash And Bank 22,299.29 24,087.12 1,787.83 8.017430151Loans And 1,11,003.15 1,48,564.01 37,560.86 33.83765235AdvancesTotal Current 1,33,302.44 1,72,651.13 39,348.69 29.5183569AssetsCurrent 12,594.41 16,538.15 3,943.74 31.31341603LiabilitiesProvisions 0 0 0.00 0 55
  56. 56. Total Current 12,594.41 16,538.15 3,943.74 31.31341603LiabilitiesNET 1,20,708.03 1,56,112.98 35,404.95 29.33106439CURRENTASSETSMisc. Expenses 0 0 0.00 0TOTAL 1,67,005.10 2,10,868.58 43,863.48 26.26475479ASSETS(A+B+C+D+E)INFERENCE:  Reserves and surplus have increased by 16.78% when compared to previous financial year.  Secured loans have increased by 43.52%, while unsecured loans have increased by 26.54%, this shows the effective credit policy of the bank.  Total liabilites have increased by 26.26%  Investments made by the bank have increased by 19.54%, when compared to the previous financial year.  Loans and advances have increased by 33.83%  Current liabilities have increased by 31.31%, when compared to previous financial year.  Total assets have increased by 26.26, due to effective assest management activity. COMPARATIVE BALANCE SHEET OF BANK OF BARODA AS ON 31ST MARCH 2009 AND 2010PARTICULAR BARODA(200 BARODA(201 INCREASE OR DECREASE INS 9) 0) 2009 OVER 2010Liabilities AMT(crores) AMT(crores) AMT(crores) %Share Capital 365.53 365.53 0.00 0Reserves & 12,470.01 14,740.86 2,270.85 18.21049061SurplusNet Worth 12,835.54 15,106.38 2,270.84 17.69181507 56
  57. 57. Secured Loans 5,636.09 13,350.08 7,713.99 136.8677576Unsecured 1,92,396.95 2,41,044.26 48,647.31 25.28486548LoansTOTAL 2,10,868.58 2,69,500.73 58,632.15 27.80506702LIABILITIESASSETSGross Block 3,954.13 4,266.60 312.47 7.902370433(-) Acc. 1,644.41 1,981.84 337.43 20.5198217DepreciationNet Block 2,309.72 2,284.76 -24.96 -1.080650468Capital Work in 0 0 0.00 0Progress.Investments. 52,445.88 61,182.38 8,736.50 16.65812453Inventories 0 0 0.00 0Sundry Debtors 0 0 0.00 0Cash And Bank 24,087.12 35,467.06 11,379.94 47.24491762Loans And 1,48,564.01 1,79,382.50 30,818.49 20.74425024AdvancesTotal Current 1,72,651.13 2,14,849.56 42,198.43 24.44144443AssetsCurrent 16,538.15 8,815.97 -7,722.18 -46.69313073LiabilitiesProvisions 0 0 0.00 0Total Current 16,538.15 8,815.97 -7,722.18 -46.69313073LiabilitiesNET 1,56,112.98 2,06,033.59 49,920.61 31.97723213CURRENTASSETSMisc. Expenses 0 0 0.00 0TOTAL 2,10,868.58 2,69,500.73 58,632.15 27.80506702ASSETS(A+B+C+D+E) 57