A Project Report On

"Understanding and implementing Technical and Fundamental analysis On capital market"

STUDY CONDUCTED AT

Submitted In Partial Fulfillment For

MASTER OF BUSINESS ADMIMISTRATION

Programme Of

N.R.Institute Management

of

Business

SUBMITTED TO : PROF.NISHTHA ASRANI PROF.NEHA PATEL

Prepared By: Amit parekh Jatin Patel ACKNOWLEDGEMENT

Preservation, inspiration and motivation have always played a key role in the success of any venture. In the present world of competition and success, training is like a bridge between theoretical and practical working; willingly we prepared this particular Project. First of all we would like to thank the supreme power, the almighty God, who is the one who has always guided me to work on the right path of my life. We would like to thank Mr. Sunil Saluja ( Branch Manager-Ahmedabad), Mr.Kunal Jogadiya (Branch ManagerBhavnagar) for granting us permission to undertake the training in their esteemed organization. We would like to thank to Prof.Neha patel and Prof.Nishtha Asrani, our faculty guides and mentors, N.R.Institute of business management,Ahmedabad, who have sincerely supported us throughout with their valuable insights leading to completion of project. We also thanks to Mr.Uttam (Sales Manager), Mr.Tejas Trivedi (Sales Manager) for their time-to-time guidance and support in completing the project. We also thank

the other staff of India Infoline who devoted their valuable time by helping us to complete our project.

we are also thankful to Mr.Sagar patel and Mr.Kunal Sanghavi, who gave us good training for how to make clients and how to deal with them.

Last but not least, our sincere thanks to our parents and friends who directly or indirectly helped us to bring this project into the final shape.

Thank You, Amit parekh Jatin patel

DECLARATION

We(Amit parekh and Jatin Patel), student of N.R.Institute Of Business Mnagement, here by declare that the project entitled "Understanding and implementing Technical and fundamental analysis on capital market " has been done solely by us only. The project report we are submitting is not a part of any publication or any project which has been published before. We had done this project as a part of my curriculum needed for the summer training purpose only.

Amit parekh
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Jatin patel , 20092010

PREFACE

Market forecasting is a challenging part of stock market analysis as market prediction has become the most complex task of an analyst. Market forecasting helps a trader to choose the type of security, the time of buy or sell a security and the amount that they should invest on that security. 4

The type of analysis used by the traders or market analysts falls into two major categories1. Fundamental Analysis 2. Technical Analysis Both of the above methods rely on certain information that comes from various news sources, analytical data or investments charts. Fundamental AnalysisFundamental analysis involves careful study of company's financial operations, economic condition, assets, debts, management, products and completion. Thus fundamental analysis is based on the study of financial and industry information of a company to predict the movement of the price of its stock. Fundamental analysis is usually helpful in long term investment and day traders do not rely much on it. However some believe that the simultaneous study of fundamentals and technical can result better for day trading. Technical analysisTechnical analysis is the method of evacuating securities by analyzing stock charts. It includes the analysis of market data, volume and open interest in order to predict the future trend of a stock. The analysts study the company's past performance and study the charts to analyze if there are any patterns in the price of that security. Information about a stock's price, volume and other important information can be displayed on a graphical chart. There are various soft wares and websites like, www.icharts.in where study of such graph can be done very effectively and easily to study the patterns and trends. These patterns further used to determine when to buy or sell a security.

TABLE OF CONTENTS

CONTENTS

PAGE NO.

1) EXECUTIVE SUMMARY7 2) OBJECTIVE OF THE STUDY..8 3) RESEARCH DESIGN...9 4) COMPANY PROFILE...13 5 )TECHNICAL ANALYSIS.22 I. II. III. IV. V. VI. INTRODUCTION CHART TYPES CHART PATTERNS TYPES OF TRENDS CHART INDICATORS EXAMPLES

6) FUNDAMENTAL ANALYSIS.74 I. II. INTRODUCTION EXAMPLES

7) CONCLUSION....104 8) BIBLIOGRAPHY105 9) ANEXURES.106

EXECUTIVE SUMMARY

This project as a whole can be divided into two parts : 6

The first part gives an insight about the about the company and its various aspects. I got an opportunity to learn what is really meant by technical analysis and fundamental analysis in stock market, how is it implemented in the stock market. It was mainly based on intraday trade and predicting the price movements which require in depth study of live charts changing every minute with the market and fundamentals of company.

The second part consists of preparation of technical reports on a daily/weekly basis in which we try to give a near accurate prediction of support & resistance levels of Spot Nifty after analyzing its previous price movements and also taking in different parameters like the formation of new government, cabinet ministry, FIIs behavior or any such announcement which may affect our market. Apart from the news and actions of our own country we also have to keep an eye on Global mar kets how are they performing.

This report gives a general idea to the company and all those involved with the firm that what may be expected from the market next day or week. It also includes an update on the bullion market and crude rates as they both are a big part of any brokerage firm.

This project has been a great learning experience for me; at the same time it gave me enough scope to implement my analytical ability. During the project, we could fulfill our objective of understanding and implementing both technical analysis and fundamental analysis in the stock market. For this we have taken Banking industry as analysis objective and we have prepared how to implement them for the particular stocks.

OBJECTIVES OF THE PROJECT

The objectives of the study are:

Market.

To study what is technical analysis and fundamental analysis in capital

To know what factor makes market volatile. The theoretical aspect of technical analysis and fundamental analysis and Practical application of both technical and fundamental analysis on a

particular sector ( here Banking).

RESEARCH DESIGN
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Research is basically of two types: 1) Descriptive 2) Exploratory Descriptive research is used in this study because it will ensure the minimization of bias and maximization of reliability of data collected. The researcher had to use fact and information already available through financial statements of earlier years and analyze these to make critical evaluation of the available material. Hence by making the type of the research conducted to be both Descriptive and Analytical in nature. From the study, the type of data to be collected and the procedure to be used for this purpose that were decided previously.

RESEARCH METODOLOGY

Source of data

Internal

External

Primary

Secondary

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DATA COLLECTION
This is the first stage in Research. Before deciding the source to collect the data, one has to make a proper planning of investigation and the purpose of inquiry. The required data for the study are basically secondary in nature and the data are collected from the websites and past performance of the stocks.

SOURCES OF DATA
Secondary data is available from the number of books and records of the company, the annual reports published by the company and other magazines. The secondary data is obtained from the following.
1)

Websites like www.icharts.in www.investopedia.com www.moneycontrol.com

2)

Other books and Journals and magazines 3) Newspapers 4) Software Like.. TTADVANCE TTMANAGER

LIMITATIONS OF SECONDARY DATA

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utilized. One should use the secondary data with care and full precaution and should not accept them at their face value as they may be suffering from the following limitations: They may not have been collected by proper procedure They may be suitable for a required purpose. The information which was collected on They may have been influenced by the biased investigation or personal prejudices. They may be out of data and not suitable to the present period. They may not satisfy a reasonable standard of accuracy. They may not cover the full period of investigation.

a particular base may not be suitable and relevant to an enquiry.

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COMPANY PROFILE
The India Infoline Group comprises the holding company, India Infoline Ltd, which has wholly-owned subsidiaries engaged in distinct yet complementary businesses which together offer a whole bouquet of products and services to make money grow. The company has a network of 596 branches spread across 345 cities and towns. It has more than 500,000 customers. The corporate structure has evolved to comply with oddities of the regulatory framework but still beautifully help attain synergy and allow flexibility to adapt to dynamics of different businesses. The group was originally incorporated on October 18, 1995 as Probity Research and Services Private Limited at Mumbai under the Companies Act, 1956 with Registration No. 11 93797. We commenced our operations as an independent provider of information, analysis and research covering Indian businesses, financial markets and economy, to institutional customers. We became a public limited company on April 28, 2000 and the name of the Company was changed to Probity Research and Services Limited. The name of the Company was changed to India Infoline.com Limited on May 23, 2000 and later to India Infoline Limited on March 23, 2001. In 1999, we identified the potential of the Internet to cater to a mass retail segment and transformed our business model from providing information services to institutional customers to retail customers. Hence we launched our Internet portal, www.indiainfoline.com in May 1999 and started providing news and market information, independent research, interviews with business leaders and other specialized features. In May 2000, the name of the Company was changed to India Infoline.com Limited to reflect the transformation of our business. Over a period of time, we have emerged as one of the leading business and financial information services provider in India. In the year 2000, they leveraged their position as a provider of financial information and analysis by diversifying into transactional services, primarily for online trading in shares and securities and online as well as offline distribution of personal financial products, like mutual funds and RBI Bonds. These activities were carried on by our wholly owned subsidiaries. India Infolines broking services was launched under the brand name of 5paisa.com through their subsidiary, India Infoline Securities Private Limited and www.5paisa.com, the e-broking portal, 13

was launched for online trading in July 2000. It combined competitive brokerage rates and research, supported by Internet technology Besides investment advice from an experienced team of research analysts, we also offer real time stock quotes, market news and price charts with multiple tools for technical analysis. Acquisition of Agri Marketing Services Limited (Agri) In March 2000, we acquired 100% of the equity shares of Agri Marketing Services Limited, from their owners in exchange for the issuance of 508,482 of our equity shares. Agri was a direct selling agent of personal financial products including mutual funds, fixed deposits, corporate bonds and post-office instruments. At the time of our acquisition, Agri operated 32 branches in South and West India serving more than 30,000 customers with a staff of, approximately 180 employees. After the acquisition, we changed the company name to India Infoline.com Distribution Company Limited. The India Infoline group, comprising the holding company, india infoline limited and its wholly-owned subsidiaries, straddle the entire financial services space with offerings ranging from equity research, equities and derivatives trading, commodities trading, portfolio management services, mutual funds, life insurance, fixed deposits, gov. bonds and other small savings instruments to loan products and investment banking. India Infoline also owns and manages the websites www.indiainfoline.com and www.5paisa.com the company has a network of over 2100 business locations (branches and sub-brokers) spread across more than 450 cities and towns. the group caters to approximately a million customers.

India Infoline Group subsidiaries

India Infoline Media and Research Services Limited India Infoline Commodities Limited India Infoline Marketing & Services India Infoline Investment Services Limited IIFL (Asia) Pte Limited

Global Presence
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USA, Dubai, Singapore

Facilities
Our main offices are located in approximately 4,000 square feet of office space located in Mumbai, India. Our India Infoline Branches collectively occupy an additional 10,000 square feet of office space located throughout India, As on March 31, 2005, we have 73 branches across 36 locations in India.

COMPANY STRUCTURE
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India Infoline Limited is listed on both the leading stock exchanges in India, viz. the Stock Exchange, Mumbai (BSE) and the National Stock Exchange (NSE) and is also a member of both the exchanges. It is engaged in the businesses of Equities broking, Wealth Advisory Services and Portfolio Management Services. It offers broking services in the Cash and Derivatives segments of the NSE as well as the Cash segment of the BSE. It is registered with NSDL as well as CDSL as a depository participant, providing a one-stop solution for clients trading in the equities market. It has recently launched its Investment banking and Institutional Broking business.

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. A SEBI authorized Portfolio Manager; it offers Portfolio Management Services to clients. These services are offered to clients as different schemes, which are based on differing investment strategies made to reflect the varied risk-return preferences of clients.

India Infoline Media and Research Services Limited

The content services represent a strong support that drives the broking, commodities, mutual fund and portfolio management services businesses. Revenue generation is through the sale of content to financial and media houses, Indian as well as global. It undertakes equities research which is acknowledged by none other than Forbes as 'Best of the Web' and 'a must read for investors in Asia'. India Infoline's research is available not just over the internet but also on international wire services like Bloomberg (Code: IILL), Thomson First Call and Internet Securities where India Infoline is amongst the most read Indian brokers.

India Infoline Commodities Limited

India Infoline Commodities Pvt Limited is engaged in the business of commodities broking. Our experience in securities broking empowered us with the requisite skills and technologies to allow us offer commodities broking as a contra-cyclical alternative to equities broking. We enjoy memberships with the MCX and NCDEX, two leading Indian commodities exchanges, and recently acquired membership of DGCX. We have a multi-channel delivery model, making it among the select few to offer online as well as offline trading facilities.

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India Infoline Marketing & Services

India Infoline Marketing and Services Limited is the holding company of India Infoline Insurance Services Limited and India Infoline Insurance Brokers Limited. (a) India Infoline Insurance Services Limited is a registered Corporate Agent with the Insurance Regulatory and Development Authority (IRDA). It is the largest Corporate Agent for ICICI Prudential Life Insurance Co Limited, which is India's largest private Life Insurance Company. India Infoline was the first corporate agent to get licensed by IRDA in early 2001. (b) India Infoline Insurance Brokers Limited is a newly formed subsidiary which will carry out the business of Insurance broking. We have applied to IRDA for the insurance broking licence and the clearance for the same is awaited. Post the grant of license, we propose to also commence the general insurance distribution business.

India Infoline Investment Services Limited

Consolidated shareholdings of all the subsidiary companies engaged in loans and financing activities under one subsidiary. Recently, Orient Global, a Singapore-based investment institution invested USD 76.7 million for a 22.5% stake in India Infoline Investment Services. This will help focused expansion and capital raising in the said subsidiaries for various lending businesses like loans against securities, SME financing, distribution of retail loan products, consumer finance business and housing finance business. India Infoline Investment Services Private Limited consists of the following step-down subsidiaries. (a) India Infoline Distribution Company Limited (distribution of retail loan products) (b) Moneyline Credit Limited (consumer finance) (c) India Infoline Housing Finance Limited (housing finance) IIFL (Asia) Pte Limited

IIFL (Asia) Pte Limited is wholly owned subsidiary which has been incorporated in Singapore to pursue financial sector activities in other Asian markets. Further to obtaining the necessary regulatory approvals, the company has been initially capitalized at 1 million Singapore dollars. 19

3.2 Products and Services INDIA INFOLINE LTD is a one-stop financial services shop, most respected for quality of its advice, personalized service and cutting-edge technology.

Equities India Infoline provided the prospect of researched investing to its clients, which was hitherto restricted only to the institutions. Research for the retail investor did not exist prior to India Infoline. India Infoline leveraged technology to bring the convenience of trading to the investors location of preference (residence or office) through computerized access. India Infoline made it possible for clients to view transaction costs and ledger updates in real time. PMS Our Portfolio Management Service is a product wherein an equity investment portfolio is created to suit the investment objectives of a client. We at India Infoline invest your resources into stocks from different sectors, depending on your risk-return profile. This service is particularly advisable for investors who cannot afford to give time or don't have that expertise for day-to-day management of their equity portfolio.

Research Sound investment decisions depend upon reliable fundamental data and stock selection techniques. India Infoline Equity Research is proud of its reputation for, and we want you to find the facts that you need. Equity investment professionals routinely use our research and models as integral tools in their work.

Commodities

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India Infolines extension into commodities trading reconciles its strategic intent to emerge as a one-stop solutions financial intermediary. Its experience in securities broking has empowered it with requisite skills and technologies. The Companys commodities business provides a contra-cyclical alternative to equities broking. The Company was among the first to offer the facility of commodities trading in Indias young commodities market (the MCX commenced operations only in 2003). The commodities market has several products with different and noncorrelated cycles. On the whole, the business is fairly insulated against cyclical gyrations in the business.

Mortgages During the year under review, India Infoline acquired a 75% stake in Moneytree Consultancy Services to mark its foray into the business of mortgages and other loan products distribution. The business is still in the investing phase and at the time of the acquisition was present only in the cities of Mumbai and Pune. The Company brings on board expertise in the loans business coupled with existing relationships across a number of principals in the mortgage and personal loans businesses. India Infoline now has plans to roll the business out across its pan-Indian network to provide it with a truly national scale in operations.

Home Loans Loan against residential and commercial property Expert recommendations Easy documentation Quick processing and disbursal.

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TECHNICAL ANALYSIS

What Is Technical Analysis?

Technical analysis is a security analysis technique that claims the ability to forecast the future 22

direction of prices through the study of past market data, primarily price and future direction of prices through the study of past market data, primarily price and volume. In its purest form, technical analysis considers only the actual price and volume behavior of the market or instrument. Technical analysts, sometimes called "chartists", may employ models and trading rules based on price and volume transformations, such as the relative strength index, moving averages, regressions, inter-market and intra-market price correlations, cycles or, classically, through recognition of chart patterns. Technical analysis stands in distinction to fundamental analysis. Technical analysis "ignores" the actual nature of the company, market, currency or commodity and is based solely on "the charts," that is to say price and volume information, whereas fundamental solely on "the charts," that is to say price and volume information, whereas fundamental analysis does look at the actual facts of the company, market, currency or commodity. For example, any large brokerage, trading group, or financial institution will typically have both a technical analysis and fundamental analysis team. Just as there are many investment styles on the fundamental side, there are also many different types of technical traders. Some rely on chart patterns; others use technical indicators and oscillators, and most use some combination of the two. In any case, technical analysts' exclusive use of historical price and volume data is what separates them from their fundamental counterparts. Unlike fundamental analysts, technical analysts don't care whether a stock is undervalued - the only thing that matters is a security's past trading data and what information this data can provide about where the security might move in the future.

ASSUMPTIONS:
1. The Market Discounts Everything A major criticism of technical analysis is that it only considers price movement, ignoring the fundamental factors of the company. However, technical analysis assumes that, at 23

any given time, a stock's price reflects everything that has or could affect the company - including fundamental factors. Technical analysts believe that the company's fundamentals, along with broader economic factors and market psychology, are all priced into the stock, removing the need to actually consider these factors separately. This only leaves the analysis of price movement, which technical theory views as a product of the supply and demand for a particular stock in the market.

2. Price Moves in Trends In technical analysis, price movements are believed to follow trends. This means that after a trend has been established, the future price movement is more likely to be in the same direction as the trend than to be against it. Most technical tr ading strategies are based on this assumption. 3. History Tends To Repeat Itself Another important idea in technical analysis is that history tends to repeat itself, mainly in terms of price movement. The repetitive nature of price movements is attributed to market psychology; in other words, market participants tend to provide a consistent reaction to similar market stimuli over time. Technical analysis uses chart patterns to analyze market movements and understand trends. Although many of these charts have been used for more than 100 years, they are still believed to be relevant because they illustrate patterns in price movements that often repeat themselves.

Technical analysis is not just for Stocks

Technical analysis can be used on any security with historical trading data. This includes stocks, futures and commodities, fixed-income securities, forex, etc. In this tutorial, we'll usually analyze stocks in our examples, but keep in mind that these concepts can be applied to any type of security. In fact, technical analysis is more frequently associated with commodities 24

and forex, where the participants are predominantly traders.

Now that you understand the philosophy behind technical analysis, we'll get into explaining how it really works. One of the best ways to understand what technical analysis is (and is not) is to compare it to fundamental analysis.

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What is Chart? In technical analysis, charts are similar to the charts that you see in any business setting. A chart is simply a graphical representation of a series of prices over a set time frame. For example, a chart may show a stock's price movement over a one-year period, where each point on the graph represents the closing price for each day the stock is traded Figure 1 provides an example of a basic chart. It is a representation of the price movements of a stock over a 1.5 year period. The bottom of the graph, running horizontally (x-axis), is the date or time scale. On the right hand side, running vertically (y-axis), the price of the security is shown. By looking at the graph we see that in October 2004 (Point 1), the price of this stock was around INR 245, whereas in June 2005 (Point 2), the stock's price is around INR 265. This tells us that the stock has risen between October 2004 and June 2005. Chart Properties There are several things that you should be aware of when looking at a chart, as these factors can affect the information that is provided. They include the time scale, the price scale and the price point properties used. Chart Properties There are several things that you should be aware of when looking at a chart, as these factors can affect the information that is provided. They include the time scale, the price scale and the price point properties used.

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The Time Scale The time scale refers to the range of dates at the bottom of the chart, which can vary from 27

decades to seconds. The most frequently used time scales are intraday, daily, weekly, monthly, quarterly and annually. The shorter the time frame, the more detailed the chart. Each data point can represent the closing price of the period or show the open, the high, the low and the close depending on the chart used. Intraday charts plot price movement within the period of one day. This means that thetime scale could be as short as five minutes or could cover the whole trading day from the opening bell to the closing bell. Daily charts are comprised of a series of price movements in which each price point on the chart is a full days trading condensed into one point. Again, each point on the graph can be simply the closing price or can entail the open, high, low and close for the stock over the day. These data points are spread out over weekly, monthly and even yearly time scales to monitor both short-term and intermediate trends in price movement. Weekly, monthly, quarterly and yearly charts are used to analyze longer term trends in the movement of a stock's price. Each data point in these graphs will be a condensed version of what happened over the specified period. So for a weekly chart, each data point will be a representation of the price movement of the week. For example, if you are looking at a chart of weekly data spread over a five-year period and each data point is the closing price for the week, the price that is plotted will be the closing price on the lasttrading day of the week, which is usually a Friday. The Price Scale and Price Point Properties The price scale is on the right-hand side of the chart. It shows a stock's current price and compares it to past data points. This may seem like a simple concept in that the price scale goes from lower prices to higher prices as you move along the scale from the bottom to the top. The problem, however, is in the structure of the scale itself. A scale can either be constructed in a linear (arithmetic) or logarithmic way, and both of these options are available on most charting services. If a price scale is constructed using a linear scale, the space between each price point (10, 20, 30, 40) is separated by an equal amount. A price move from 10 to 20 on a linear scale is the same distance on the chart as a move from 40 to 50. In other words, the price scale measures moves in absolute terms and does not show the effects of percent change. 28

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If a price scale is in logarithmic terms, then the distance between points will be equal in terms of percent change. A price change from 10 to 20 is a 100% increase in the price while a move from 40 to 50 is only a 25% change, even though they are represented by the same distance on a linear scale. On a logarithmic scale, the distance of the 100% price change from 10 to 20 will not be the same as the 25% change from 40 to 50. In this case, the move from 10 to 20 is represented by a larger space one the chart, while the move from 40 to 50, is represented by a smaller space because, percentage-wise, it indicates a smaller move. In Figure 2, the logarithmic price scale on the right leaves the same amount of space between 10 and 20 as it does between 20 and 40 because these both represent 100% increases.

TYPES OF CHARTS There are four main types of charts that are used by investor s and traders depending on the information that they are seeking and their individual skill levels. The chart types are: the line chart, the bar chart, the candlestick chart and the point and figure (not used in Microsec as such) chart. 1 )Line Chart : The most basic of the four charts is the line chart because it represents only the closing prices over a set period of time. The line is formed by connecting the closing prices over the time frame. Line charts do not provide visual information of the trading range for the individual points such as the high, low and opening prices. However, the closing price is often considered to be the most important price in stock data compared to the high and low for the day and this is why it is the only value used in line charts.

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2 ) Bar Charts : The bar chart expands on the line chart by adding several more key pieces of information to each data point. The chart is made up of a series of vertical lines that represent each data point. This vertical line represents the high and low for the trading period, along with the closing price. The close and open are represented on the vertical line by a horizontal dash. The opening price on a bar chart is illustrated by the dash that is located on the left side of the ver tical bar. Conversely, the close is represented by the dash on the right. Generally, if the left dash (open) is lower than the right dash (close) then the bar will be shaded black, representing an up period for the stock, which means it has gained value. A bar that is colored red signals that the stock has gone down in value over that period. When this is the case, the dash on the right (close) is lower than the dash on the left (open).

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3 ) Candlestick Charts : The candlestick chart is similar to a bar chart, but it differs in the way that it is visually constructed. Similar to the bar chart, the candlestick also has a thin vertical line showing the period's trading range. The difference comes in the formation of a wide bar on the vertical line, which illustrates the difference between the open and close. And, like bar charts, candlesticks also rely heavily on the use of colors to explain what has happened during the trading period. A major problem with the candlestick color configuration, however, is that different sites use different standards; therefore, it is important to understand the candlestick configuration used at the chart site you are working with. There are two color constructs for days up and one for days that the price falls. When the price of the stock is up and closes above the opening trade, the candlestick will usually be white or clear. If the stock has traded down for the period, then the candlestick will usually be red or black, depending on the site. If the stock's price has closed above the previous days close but below the day's open, the candlestick will be black or filled with the color that is used to indicate an up day.

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Charts are one of the most fundamental aspects of technical analysis. It is important that you clearly understand what is being shown on a chart and the information that it provides. Now that we have an idea of how charts are constructed, we can move on to the different types of chart patterns.

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Chart Pattern : A chart pattern is a distinct formation on a stock chart that creates a trading signal, or a sign of future price movements. Chartists use these patterns to identify current trends and trend reversals and to trigger buy and sell signals. In the first section, we talked about the three assumptions of technical analysis, the third of which was that in technical analysis, history repeats itself. The theory behind chart patters is based on this assumption. The idea is that certain patterns are seen many times, and that these patterns signal a certain high probability move in a stock. Based on the historic trend of a chart pattern setting up a certain price movement, chartists look for these patterns to identify trading opportunities. While there are general ideas and components to every chart pattern, there is no chart pattern that will tell you with 100% certainty where a security is headed. This creates some leeway and debate as to what a good pattern looks like, and is a major reason why charting is often seen as more of an art than a science. There are two types of patterns within this area of technical analysis, reversal and continuation. A reversal pattern signals that a prior trend will reverse upon completion of the pattern. A continuation pattern, on the other hand, signals that a trend will continue once the pattern is complete. These patterns can be found over charts of any timeframe. 1. Head and Shoulders This is one of the most popular and reliable chart patterns in technical analysis. Head and shoulders is a reversal chart pattern that when formed, signals that the security is likely to move against the previous trend. As you can see in Figure, there are two versions of the head and shoulders chart pattern. Head and shoulders top (shown on the left) is a chart pattern that is formed at the high of an upward movement and signals that the upward trend is about to end. Head and shoulders bottom, also known as inverse head and shoulders (shown on the right) is the lesser known of the two, but is used to signal a reversal in a downtrend.

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Figure: Head and shoulders top is shown on the left. Head and shoulders bottom, or inverse head and shoulders, is on the right. Both of these head and shoulders patterns are similar in that there are four main parts: two shoulders, a head and a neckline. Also, each individual head and shoulder is comprised of a high and a low. For example, in the head and shoulders top image shown on the left side in Figure 1, the left shoulder is made up of a high followed by a low. In this pattern, the neckline is a level of support or resistance. Remember that an upward trend is a period of successive rising highs and rising lows. The head and shoulders chart pattern, therefore, illustrates a weakening in a trend by showing the deterioration in the successive movements of the highs and lows.

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2. Cup and Handle: A cup and handle chart is a bullish continuation pattern in which the upward trend has paused but will continue in an upward direction once the pattern is confirmed.

As you can see in Figure, this price pattern forms what looks like a cup, which is preceded by an upward trend. The handle follows the cup formation and is formed by a generally downward/sideways movement in the security's price. Once the price movement pushes above the resistance lines formed in the handle, the upward trend can continue. There is a wide ranging time frame for this type of pattern, with the span ranging from several months to more than a year. 3. Double Tops and Bottoms This chart pattern is another well-known pattern that signal s a trend reversal - it is

considered to be one of the most reliable and is commonly used. These patterns are formed 36

after a sustained trend and signal to chartists that the trend is about to reverse. The pattern is created when a price movement tests support or resistance levels twice and is unable to break through. This pattern is often used to signal intermediate and long-term trend reversals.

Figure: A double top pattern is shown on the left, while a double bottom pattern is shown on the right. In the case of the double top pattern in Figure 3, the price movement has twice tried to move above a certain price level. After two unsuccessful attempts at pushing the price higher, the trend reverses and the price heads lower. In the case of a double bottom (shown on the right), the price movement has tried to go lower twice, but has found support each time. After the second bounce off of the support, the security enters a new trend and heads upward.

4. Triangles Triangles are some of the most well- known chart patterns used in technical analysis. The three types of triangles, which vary in construct and implication, are the symmetrical, ascending and descending triangle. These chart patterns are considered to last anywhere from a couple of weeks to several months. 37

The symmetrical triangle in Figure 4 is a pattern in which two trendline converge toward each other. This pattern is neutral in that a breakout to the upside or downside is a confirmation of a trend in that direction. In an ascending triangle, the upper trendline is flat, while the bottom trendline is upward sloping. This is generally thought of as a bullish pattern in which chartists look for an upside breakout. In a descending triangle, the lower trendline is flat and the upper trendline is descending. This is generally seen as a bearish pattern where chartists look for a downside breakout.

5. Flag and Pennant These two short-term chart patterns are continuation patterns that are formed when there is a sharp movement followed by a generally sideways price movement. This pattern is then completed 38

upon another sharp price movement in the same direction as the move that started the trend. The patterns are generally thought to last from one to three weeks.

As you can see, there is little difference between a pennant and a flag. The main difference between these price movements can be seen in the middle section of the chart pattern. In a pennant, the middle section is characterized by converging trendline, much like what is seen in a symmetrical triangle. The middle section on the flag pattern, on the other hand, shows a channel pattern, with no convergence between the trendline. In both cases, the trend is expected to continue when the price moves above the upper trendline.

6 ) Wedge The wedge chart pattern can be either a continuation or reversal pattern. It is similar to a 39

symmetrical triangle except that the wedge pattern slants in an upward or downward direction, while the symmetrical triangle generally shows a sideways movement. The other differ ence is that wedges tend to form over longer periods, usually between three and six months.

The fact that wedges are classified as both continuation and reversal patterns can make reading signals confusing. However, at the most basic level, a falling wedge is bullish and a rising wedge is bearish. In the above figure, we have a falling wedge in which two trend lines are converging in a downward direction. If the price was to rise above the upper trendline, it would form a continuation pattern, while a move below the lower trendline would signal a reversal pattern.

GAPS:40

We witnessed very recently when the trade was halted due to upper freeze at 10%. A gap in a chart is an empty space between a trading period and the following trading period. This occurs when there is a large difference in prices between two sequential trading periods. For example, if the trading range in one period is between INR 25 and INR 30 and the next trading period opens at INR 40, there will be a large gap on the chart between these two periods. Gap price movements can be found on bar charts and candlestick charts but will not be found on point and figure or basic line charts. Gaps generally show that something of significance has happened in the security, such as a better-than-expected earnings announcement. There are three main types of gaps, breakaway, runaway (measuring) and exhaustion. A breakaway gap forms at the start of a trend, a runaway gap forms during the middle of a trend and an exhaustion gap forms near the end of a trend.

The use of Trend One of the most important concepts in technical analysis is that of trend. The meaning in finance isn't all that different from the general definition of the term - a trend is really nothing more than the general direction in which a security or market is headed. Take a look at the chart below:

41

There are lots of ups and downs in this chart, but whichdirection this security is headed. A More Formal Definition

there isn't a clear indication of

Unfortunately, trends are not always easy to see. In other words, defining a trend goes well beyond the obvious. In any given chart, you will probably notice that prices do not tend to move in a straight line in any direction, but rather in a series of highs and lows. In technical analysis, it is the movement of the highs and lows that constitutes a trend. For example, an uptrend is classified as a series of higher highs and higher lows, while a downtrend is one of lower lows and lower highs.

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Above figure is an example of an uptrend. Point 2 in the chart is the first high, which is determined after the price falls from this point. Point 3 is the low that is established as the price falls from the high. For this to remain an uptrend each successive low must not fall below the previous lowest point or the trend is deemed a reversal.

Types of Trend There are three types of trend: Uptrends Downtrends Sideways/Horizontal Trends

As the names imply, when each successive peak and trough is higher, it's referred to as an upward trend. If the peaks and troughs are getting lower, it's a downtrend. When there is little movement up or down in the peaks and troughs, it's a sideways or horizontal trend. If you want to get really technical, you might even say that a sideways trend is actually not a trend on its own, but a lack of a well-defined trend in either direction. In any case, the market can really only trend in these three ways: up, down or nowhere.

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Trend Lengths Along with these three trend directions, there are three trend classifications. A trend of any direction can be classified as a

Long-term trend Intermediate trend Short- term trend

In terms of the stock market, a major trend is generally categorized as one lasting longer than a year. An intermediate trend is considered to last between one and three months and a near-term trend is anything less than a month. A long-term trend is composed of several intermediate trends, which often move against the direction of the major trend. If the major trend is upward and there is a downward correction in price movement followed by a continuation of the uptrend, the correction is considered to be an intermediate trend. The short-term trends are components of both major and intermediate trends. Take a look a Figure 4 to get a sense of how these three trend lengths might look.

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When analyzing trends, it is important that the chart is constructed to best reflect the type of trend being analyzed. To help identify long-term trends, weekly charts or daily charts spanning a five-year period are used by chartists to get a better idea of the long-term trend. Daily data charts are best used when analyzing both intermediate and short-term trends. It is also important to remember that the longer the trend, the more important it is; for example, a one-month trend is not as significant as a five-year trend.

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Trend line A trendline is a simple charting technique that adds a line to a chart to represent the trend in the market or a stock. Drawing a trendline is as simple as drawing a straight line that follows a general trend. These lines are used to clearly show the trend and are also used in the identification of trend reversals. As you can see in below figure, an upward trendline is drawn at the lows of an upward trend. This line represents the support the stock has every time it moves from a high to a low. Notice how the price is propped up by this support. This type of trendline helps traders to anticipate the point at which a stock's price will begin moving upwar ds again. Similarly, a downward trendline is drawn at the highs of the downward trend. This line represents the resistance level that a stock faces every time the price moves from a low to a high.

The Importance of Trend

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It is important to be able to understand and identify trends so that you can trade with them rather than against them. Two important sayings in technical analysis are "the trend is your friend" and "don't buck the trend," illustrating how important trend analysis is for technical traders.

Resistance and Support Once you understand the concept of a trend, the next major concept is that of support and resistance. You'll often hear technical analysts talk about the ongoing battle between the bulls and the bears, or the struggle between buyers (demand) and sellers (supply). This is revealed by the prices a security seldom moves above (resistance) or below (support).

As you can see in this Figure, support is the price level through which a stock or market seldom falls (illustrated by the blue arrows). Resistance, on the other hand, is the price level that a stock or market seldom surpasses (illustrated by the red arrows)

Why does it happen?

47

These support and resistance levels are seen as important in terms of market psychology and supply and demand. Support and resistance levels are the levels at which a lot of traders are willing to buy the stock (in the case of a support) or sell it (in the case of resistance). When these trendlines are broken, the supply and demand and the psychology behind likely be established. Role Reversal Once a resistance or support level is broken, its role is reversed. If the price falls below a support level, that level will become resistance. If the price rises above a resistance level, it will often become support. As the price moves past a level of support or resistance, it is thought that supply and demand has shifted, causing the breached level to reverse its role. For a true reversal to occur, however, it is important that the price make a strong move through either the support or resistance. the stock's movements is thought to have shifted, in which case new levels of support and resistance will

For example, as you can see in above, the dotted line is shown as a level of resistance that has prevented the price from heading higher on two previous occasions (Points 1 and 2). However, once the resistance is broken, it becomes a level of support (shown by Points 3 and 4) by propping up the price and preventing it from heading lower again. Many traders who begin using technical analysis find this concept hard to believe and don't realize that this phenomenon occurs rather frequently, even with some of the most well-known companies. In almost every case, a stock will have both a level of support and a level of resistance and will trade in this range as it bounces between these levels. This is most often seen when a stock is 48

trading in a generally sideways manner as the price moves through successive peaks and troughs, testing resistance and support. The Importance of Support and Resistance

Support and resistance analysis is an important part of trends because it can be used to make trading decisions and identify when a trend is reversing. For example, if a trader identifies an important level of resistance that has been tested several times but never broken, he or she may decide to take profits as the security moves toward this point because it is unlikely that it will move past this level. Support and resistance levels both test and confirm trends and need to be monitored by anyone who uses technical analysis. As long as the price of the share remains between these levels of support and resistance, the trend is likely to continue. It is important to note, however, that a break beyond a level of support or resistance does not always have to be a reversal. For example, if prices moved above the resistance level of an up trending channel, the trend have accelerated and not reversed. This means that the price appreciation is expected to be faster than it was in the channel. Being aware of these important support and resistance points should affect the way that you trade a stock. Traders should avoid placing orders at these major points, as the area around them is usually marked by a lot of volatility. If you feel confident about making a trade near a support or resistance level, it is important that you follow this simple rule: do not place orders directly at the support or resistance level. This is because in many cases, the price never actually reaches the whole number, but flirts with it instead. So if you're bullish on a stock that is moving toward an important support level, do not place the trade at the support level. Instead, place it above the support level, but within a few points. On the other hand, if you are placing stops or short selling, set up your trade price at or below the level of support.

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What is Volume? Volume is simply the number of shares or contracts that trade over a given period of time, usually a day. Higher volume means the security has been more active. To determine the movement of the volume (up or down), chartists look at the volume bars that can usually be found at the bottom of any chart. Volume bars illustrate how many shares have traded per period and show trends in the same way that prices do.

Why Volume is important ? Volume is an important aspect of technical analysis because it is used to confirm trendsand chart patterns. Any price movement up or down with relatively high volume is seen as a stronger, more relevant move than a similar move with weak volume. Therefore, if you ar e looking at a large price movement, you should also examine the volume to see whether it tells the same story. Say, for example, that a stock jumps 5% in one trading day after being in a long downtrend. Is this a sign of a trend reversal? This is where volume helps traders. If volume is high during the day relative to the average daily volume, it is a sign that the reversal is probably for real. On the other hand, if the volume is below average, there may not be enough conviction to support a true trend reversal.

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Volume should move with the trend. If prices are moving in an upward trend, volume should increase (and vice versa). If the previous relationship between volume and price movements starts to deteriorate, it is usually a sign of weakness in the trend. For example, if the stock is in an uptrend but the up trading days are marked with lower volume, it is a sign that the trend is starting to lose its legs and may soon end. When volume tells a different story, it is a case of divergence, which refers to a contradiction between two different indicators. The simplest example of divergence is a clear upward trend on declining volume. Volume and Chart Patterns The other use of volume is to confirm chart patterns. Patterns such as head and shoulders, triangles, flags and other price patterns can be confirmed with volume. In most chart patterns, there are several pivotal points that are vital to what the chart is able to convey to chartists. Basically, if the volume is not there to confirm the pivotal moments of a chart pattern, the quality of the signal formed by the pattern is weakened. Volume Precedes Price

Another important idea in technical analysis is that price is preceded by volume. Volume is closely monitored by technicians and chartists to form ideas on upcoming trend reversals. If volume is starting to decrease in an uptrend, it is usually a sign that the upward run is about to end. Now that we have a better understanding of some of the important factors of technical analysis, we can move on to charts, which help to identify trading opportunities in prices movements. Indicators Indicators are calculations based on the price and the volume of a security that measure such things as money flow, trends, volatility and momentum. Indicators are used as a secondary measure to the actual price movements and add additional information to the analysis of securities. Indicators are used in two main ways: to confirm price movement and the quality of chart patterns, and to form buy and sell signals. There ar e two main types of indicators: leading and lagging. A leading indicator precedes price movements, giving them a predictive quality, while a lagging indicator is a confirmation tool because it follows price movement. A leading indicator is thought to be the strongest during periods of sideways or non-trending trading ranges, while the lagging indicators are still useful during trending periods. There ar e also two types of indicator constructions: 51

those that fall in a bounded range and those that do not. The ones that are bound within a range are called oscillators - these are the most common type of indicators. Oscillator indicators have a range, for example between zero and 100, and signal periods where the security is overbought (near 100) or oversold (near zero). Non-bounded indicators still form buy and sell signals along with displaying strength or weakness, but they vary in the way they do this. The two main ways that indicators are used to form buy and sell signals in technical analysis is through crossover s and divergence. Cr ossovers are the most popular and are reflected when either the price moves through the moving average, or when two different moving averages cross over each other. The second way indicators are used is through divergence, which happens when the direction of the price trend and the direction of the indicator trend are moving in the opposite direction. This signals to indicator users that the direction of the price trend is weakening. Indicators that are used in technical analysis provide an extremely useful source of additional information. These indicators help identify momentum, trends, volatility and various other aspects in a security to aid in the technical analysis of trends. It is important to note that while some traders use a single indicator solely for buy and sell signals, they are best used in conjunction with price movement, chart patterns and other indicators. MACD The moving average convergence divergence (MACD) is one of the most well known and used indicators in technical analysis. This indicator is comprised of two exponential moving averages, which help to measure momentum in the security. The MACD is simply the difference between these two moving averages plotted against a centerline. The centerline is the point at which the two moving averages are equal. Along with the MACD and the centerline, an exponential moving average of the MACD itself is plotted on the chart. The idea behind this momentum indicator is to measure short-term momentum compared to longer term momentum to help signal the current direction of momentum. MACD= Shorter term moving average - Longer term moving average

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When the MACD is positive, it signals that the shorter term moving average is above the longer term moving average and suggests upward momentum. The opposite holds true when the MACD is negative - this signals that the shorter term is below the longer and suggest downward momentum. When the MACD line crosses over the centerline, it signals a crossing in the moving averages. The most common moving average values used in the calculation are the 26-day and 12-day exponential moving averages. The signal line is commonly created by using a nine-day exponential moving average of the MACD values. These values can be adjusted to meet the needs of the technician and the security. For more volatile securities, shorter term averages are used while less volatile securities should have longer averages. Another aspect to the MACD indicator that is often found on charts is the MACD histogram. The histogram is plotted on the centerline and represented by bars. Each bar is the difference between the MACD and the signal line or, in most cases, the nine-day exponential moving average. The higher the bars are in either direction, the more momentum behind the 53

direction in which the bars point. As you can see in below figure, one of the most common buy signals is generated when the MACD crosses above the signal line (blue dotted line), while sell signals often occur when the MACD crosses below the signal. RSI ( Relative Strength Index) It is another one of the most used and well-known momentum indicators in technical analysis. RSI helps to signal overbought and oversold conditions in a security. The indicator is plotted in a range between zero and 100. A reading above 70 is used to suggest that a security is overbought, while a reading below 30 is used to suggest that it is oversold. This indicator helps traders to identify whether a securitys price has been unreasonably pushed to current levels and whether a reversal may be on the way.

The standard calculation for RSI uses 14 trading days as the basis, which can be adjusted to meet the needs of the user. If the trading period is adjusted to use fewer days, the RSI will 54

be more volatile and will be used for shorter term trades. Stochastic Oscillator The stochastic oscillator is one of the most recognized momentum indicators used in technical analysis. The idea behind this indicator is that in an uptrend, the price should be closing near the highs of the trading range, signaling upward momentum in the security. In downtrends, the price should be closing near the lows of the trading range, signaling downward momentum.

The stochastic oscillator is plotted within a range of zero and 100 and signals overbought conditions above 80 and oversold conditions below 20. The stochastic oscillator contains two lines. The first line is the %K, which is essentially the raw measure used to formulate the idea of momentum behind the oscillator. The second line is the %D, which is simply a moving average of the %K. The %D line is considered to be the more important of the two lines as it is seen to produce better signals. The stochastic oscillator generally uses the past 14 trading periods in its calculation but can be adjusted to meet the needs of the user.

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STATE BANK OFINDIA TECHNICAL CHART

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The chrat shown above is for State bank of India for previous 3 years. The chart shown above is from Jan 1st , 2007 to June 31st , 2010. The above chart shows that SBI has made its all time high of almost 2600 in the month of Jan 2010. The stock price has increased to double the price of 2007. The stock price had moved dramatically in the year 2007 with the indices namely Sensex and Nifty. The charts shows that in the global down trend of 200809, stock prices had been fallen sharply and the prices have corrected substantially almost to the level of 2007. The stock price had come to the level of almost 900 at that time. But then from march 2009, the sentiment had been changed to great extent and the SBIs market price had reached to its 52 week high 2477. But as the RSI shows the stock was really in the overbought zone at that time and that is why it has shown a correction. It is currently trading at 2262 and now the chart suggest that the stock is fairly valued and ready go up. The MACD chart shows that recently it has turned in to positive this means the short term moving average has crossed the longer term moving average which is a bullish signal. In 2009, stock has witnessed the hike in the volume and hence the stock has realized the trend reversal. And the 50day moving average (2269) has 200 day moving average which is 2103. Both these levels would act as a strong support. As long as the stock price remains above, the levels the stock can be considered as in a bull trend in short term. So the stock should move up if the market sentiment remains bullish and it will give handsome return to the investors.

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PUNJAB NATIONAL BANK

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The chrat shown above is for State bank of India for previous 3 years. The chart shown above is from Jan 1st , 2007 to June 31st , 2010 for Punjab national bank.

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The stock had fallen a lot in the recession of 2008 from around 700 level to sub 300 level. The stock had witnessed the great hike in the volume in march-april 2009. The chart shows that the stock is currently trading at its all time high level. In mid 2009, there is a big spike had been measured in the volume of the stock. This had helped the stock to move higher and cross its all time high level. However the volume has been reduced now but the strength in the stock remains same. Which is a bullish sign for the stock. The 50 day moving average has crossed its 200 day moving average since then the stock has come in a longer term bull range. It has rallied from sub 300 to 1000+ level in just one and a half year. The MACD is in the positive zone which is a good sign for its bullish pattern. However, The RSI suggest that it is somewhere in the overbought zone. So some correction is expected. But, it would not be a big correction. It can be considered as just a retracement as it has rallied a lot. Any dip in the stock would be a great opportunity for the long term investors to get in the stock.

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HDFC BANK

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The chrat shown above is for State bank of India for previous 3 years. The chart shown above is from Jan 1st , 2007 to June 31st , 2010 for HDFC bank (housing development finance corporation bank ltd). HDFC bank was trading at 1200 in the early 2007.The stock has rallied from 900 to almost 1800 level in 2008. In just a single year the stock was almost double. But then the stock was hit badly by the global recession in 2008. The stock reached to the level of sub 800 in the year 2009. But then the sentiment has been improved and the stock had then seen a good run up for last one year. The stock has seen a great surge in the price after march 2009. The stock price has moved to almost double from the bottom it had made in 2009. The bank has seen an increase in the volume during that time. The price had attracted a lot of institution s and long term investors to get in the stock. This allowed the stock to see the reversal in the trend. The MACD is positive and it shows the bullish trend and the 200 day moving average had been crossed the 50 day moving average, which shows the long term bull range. The stock is showing the strength in near term. However the RSI indicates that the stock is fairly bought. The stock price may consolidate around this level for some time but at some point of time, with indices the stock would move higher as the global sentiments gives support. The bank is also fundamentally a strong company but valuations seems to be stretched and so some correction is expected. However the stock is very good for long term investors to get in the stock. The stock is making higher top and higher bottom pattern and this gives the stock more strength. This stock is looking good for the longer term perspective if it comes to an level of 1750 to 1800 level. The 1750-1800 which is 200 moving average level and 50 day moving average would act as a strong support level for the stock for long term. However 1565 is great support level for long term investors. And on the up side 2100-2150 level would act as a resistance zone for the stock.

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ICICI BANK

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The chart shown above is for the period 3.5 years from Jan 1st , 2007 to June 31st , 2010 for ICICI bank. The stock has corrected a lot from its 2008 high of 1450 to the level of 250 in the year 2009. The reason was the global turn around which took the nifty to turn down with the stocks. The stock has seen the highest volume at that time of time. The volume pattern then has helped the stock to reverse the trend in the stock price. The stock has moved a lot then since march 2009. The stock has rallied and moved to a level which is almost 4 times the bottom it had made in march 2009. The stock has seen such a great move because it was the stock which had corrected to almost 80% from its peak of 2008 against the 65% fall in the nifty. That is the reason why it had outperform the indices in past one and a half year. The chart shows that trend is upward for the long term. However the MACD is negative which suggest a intermediate down trend in the stock. The stock has made a bottom of 712 on June 07,2010 recently. 200 day moving average had been crossed by the 50 day moving average in 2009. But now it has reached to a level where both of them are almost equal level. The 1000 level acted as a strong psychological resistance level for the stock. It had tried to breach that level but it failed to do so. It had formed a intermediate top at 1010 level and corrected from there. Now the stock is consolidating in the range of 800 to 950 level. The RSI suggest that it is fairy bought and it will consolidate for some more time as indices are consolidating in a range. The stock will move with the indices now as it shows the same trend as the indices. As Nifty and Sensex moves higher it should move up. The 50 and 200 day moving average would act as a good support level. 710 should act as a good support level for the long term.

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FUNDAMENTAL ANALYSIS

Fundamental analysis of a business involves analyzing its financial statements and health, its management and competitive advantages, and its competitors and markets. When applied to futures and forex, it focuses on the overall state of the economy, interest rates, production, earnings, and management. When analyzing a stock, futures contract, or currency using fundamental analysis there are two basic approaches one can use; bottom up analysis and top down analysis.[1] The term is used to distinguish such analysis from other types of investment analysis, such as quantitative analysis and technical analysis. Fundamental analysis is performed on historical and present data, but with the goal of making financial forecasts. Here there are four stocks of the same industry have been evaluated and compared on the basis of fundamentals.

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BANKING INDUSTRY
Currently, India has 96 scheduled commercial banks (SCBs) - 27 public sector banks (that is with the Government of India holding a stake), 31 private banks (these do not have government stake; they may be publicly listed and traded on stock exchanges) and 38 foreign banks. They have a combined network of over 53,000 branches and 49,000 ATMs. According to a report by ICRA Limited, a rating agency, the public sector banks hold over 75 percent of total assets of the banking industry, with the private and foreign banks holding 18.2% and 6.5% respectively

EARLY HISTORY

In 1948, the Reserve Bank of India, India's central banking authority, was

nationalized, and it became an institution owned by the Government of India. In 1949, the Banking Regulation Act was enacted which empowered the

Reserve Bank of India (RBI) "to regulate, control, and inspect the banks in India." The Banking Regulation Act also provided that no new bank or branch of an

existing bank could be opened without a license from the RBI, and no two banks could have common directors. However, despite these provisions, control and regulations, banks in India except the State Bank of India, continued to be owned and operated by private persons. This changed with the nationalisation of major banks in India on 19 July 1969.

Nationalisation The RBI was nationalized on January 1, 1949 in terms of the Reserve Bank of India (Transfer to Public Ownership) Act, 1948 (RBI, 2005b).

By the 1960s, the Indian banking industry had become an important tool to facilitate the development of the Indian economy. At the same time, it had emerged as a large employer, and a debate had ensued about the possibility to nationalise the banking industry. Indira Gandhi, the-then Prime Minister of India expressed the intention of the GOI in the annual conference of the All India 67

Congress Meeting in a paper entitled "Stray thoughts on Bank Nationalisation." The paper was received with positive enthusiasm. Thereafter, her move was swift and sudden, and the GOI issued an ordinance and nationalised the 14 largest commercial banks with effect from the midnight of July 19, 1969. Jayaprakash Narayan, a national leader of India, described the step as a "masterstroke of political sagacity." Within two weeks of the issue of the ordinance, the Parliament passed the Banking Companies (Acquisition and Transfer of Undertaking) Bill, and it received the presidential approval on 9 August 1969. A second dose of nationalization of 6 more commercial banks followed in 1980. The stated reason for the nationalization was to give the government more control of credit delivery. With the second dose of nationalization, the GOI controlled around 91% of the banking business of India. Later on, in the year 1993, the government merged New Bank of India with Punjab National Bank. It was the only merger between nationalized banks and resulted in the reduction of the number of nationalised banks from 20 to 19. After this, until the 1990s, the nationalised banks grew at a pace of around 4%, closer to the average growth rate of the Indian economy.

Liberalisation

In the early 1990s, the then Narsimha Rao government embarked on a policy of liberalization, licensing a small number of private banks. These came to be known as New Generation tech-savvy banks, and included Global Trust Bank (the first of such new generation banks to be set up), which later amalgamated with Oriental Bank of Commerce, Axis Bank(earlier as UTI Bank), ICICI Bank and HDFC Bank. This move, along with the rapid growth in the economy of India, revitalized the banking sector in India, which has seen rapid growth with strong contribution from all the three sectors of banks, namely, government banks, private banks and foreign banks. The next stage for the Indian banking has been setup with the proposed relaxation in the norms for Foreign Direct Investment, where all Foreign Investors in banks may be given voting rights which could exceed the present cap of 10%,at present it has gone up to 74% with some restrictions. The new policy shook the Banking sector in India completely. Bankers, till this time, were used to the 4-6-4 method (Borrow at 4%;Lend at 6%;Go home at 4) of functioning. The new wave ushered in a modern outlook and tech-savvy methods of working for traditional banks.All this led to the retail boom in India. People not just demanded more from their banks but also received more. Currently (2007), banking in India is generally fairly mature in terms of supply, product range 68

and reach-even though reach in rural India still remains a challenge for the private sector and foreign banks. 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. The Reserve Bank of India is an autonomous body, with minimal pressure from the government. The stated policy of the Bank on the Indian Rupee is to manage volatility but without any fixed exchange rate-and this has mostly been true. 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. One may also expect M&As, takeovers, and asset sales. In March 2006, the Reserve Bank of India allowed Warburg Pincus to increase its stake in Kotak Mahindra Bank (a private sector bank) to 10%. This is the first time an investor has been allowed to hold more than 5% in a private sector bank since the RBI announced norms in 2005 that any stake exceeding 5% in the private sector banks would need to be vetted by them. In recent years critics have charged that the non-government owned banks are too aggressive in their loan recovery efforts in connection with housing, vehicle and personal loans. There are press reports that the banks' loan recovery efforts have driven defaulting borrowers to suicide The Indian banking system is financially stable and resilient to the shocks that may arise due to higher non-performing assets (NPAs) and the global economic crisis, according to a stress test done by the Reserve Bank of India (RBI). Significantly, the RBI has the tenth largest gold reserves in the world after spending US$ 6.7 billion towards the purchase of 200 metric tonnes of gold from the International Monetary Fund (IMF) in November 2009. The purchase has increased the country's share of gold holdings in its foreign exchange reserves from approximately 4 per cent to about 6 per cent. In the annual international ranking conducted by UK-based Brand Finance Plc, 20 Indian banks have been included in the Brand Finance Global Banking 500. In fact, the State Bank of India (SBI) has become the first Indian bank to be ranked among the Top 50 banks in the world, capturing the 36th rank, as per the Brand Finance study. The brand value of SBI increased from US$ 1.5 billion in 2009 to US$ 4.6 billion in 2010. ICICI Bank also made it to the Top 100 list with a brand value of US$ 2.2 billion. The total brand value of the 20 Indian banks featured in the list stood at US$ 13 billion. Meanwhile, loan disbursement from scheduled commercial banks which included regional rural banks as well posted a growth of 16.04 per cent by March 12, 2010, on a year-on-year basis, as per the latest data released by RBI. The RBI had earlier predicted that the credit growth during 200969

10 would be around 16 per cent. Following the financial crisis, new deposits have gravitated towards public sector banks. According to RBI's 'Quarterly Statistics on Deposits and Credit of Scheduled Commercial Banks: September 2009', nationalised banks, as a group, accounted for 50.5 per cent of the aggregate deposits, while State Bank of India (SBI) and its associates accounted for 23.8 per cent. The share of other scheduled commercial banks, foreign banks and regional rural banks in aggregate deposits were 17.8 per cent, 5.6 per cent and 3.0 per cent, respectively. With respect to gross bank credit also, nationalised banks hold the highest share of 50.5 per cent in the total bank credit, with SBI and its associates at 23.7 per cent and other scheduled commercial banks at 17.8 per cent. Foreign banks and regional rural banks had a share of 5.5 per cent and 2.5 per cent respectively in the total bank credit. The report also found that scheduled commercial banks served 34,709 banked centres. Of these centres, 28,095 were single office centres and 64 centres had 100 or more bank offices. The confidence of non-resident Indians (NRIs) in the Indian economy is reviving again. NRI fund inflows increased since April 2009 and touched US$ 47.8 billion on March 2010, as per the RBI's June 2010 bulletin. Most of this has come through Foreign Currency Non-resident (FCNR) accounts and Non-resident External Rupee Accounts. Foreign exchange reserves were up by US$ 1.69 billion to US$ 272.783 billion, for the week ending June 11, on account of revaluation gains. June 21, 2010. Major Developments The Monetary Authority of Singapore (MAS) has provided qualified full banking (QFB) privileges to ICICI Bank for its branch operations in Singapore. Currently, only SBI had QFB privileges in country. The Indian operations of Standard Chartered reported a profit of above US$ 1 billion for the first time. The bank posted a profit before tax (PAT) of US$ 1.06 billion in the calendar year 2009, as compared to US$ 891 million in 2008. Punjab National Bank (PNB) plans to expand its international operations by foraying into Indonesia and South Africa. The bank is also planning to increase its share in the international business operations to 7 per cent in the next three years. The State Bank of India (SBI) has posted a net profit of Rs9,166.05 cr for the Year 2010 vs Rs9121 crof 2009 and Rs6729 cr of 2008. Amongst the private banks, Axis Bank's net profit surged by 32 per cent to US$ 115.4 million on 21.2 per cent rise in total income to US$ 852.16 million in the second quarter of 2009-10, over the 70

corresponding period last year. HDFC Bank has posted a 32 per cent rise in its net profit at US$ 175.4 million for the quarter ended December 31, 2009 over the figure of US$ 128.05 million for the same quarter in the previous year. Government Initiatives The government plans to invest US$ 3.63 billion into public sector banks to aid them for maintaining their capital adequacy ration (CAR), as per the Union Budget presented by the Union Finance Minister in February 2010. Out of the total allocation, US$ 2.1 billion would be used for recapitalisation of the public sector banks during April-June 2010 and US$ 1.5 billion will be invested during the rest of 2010-11. The RBI has allowed banks to make changes in the repayment schedules or drawdown without prior approval from the central bank. However, such a change could be made on the condition that the average maturity of the loan should remain the same. The move is expected to make external commercial borrowing (ECB) transactions easier. Transactions both through automatic and approval routes can take advantage of this change. Now, without the prior approval of RBI, Indian companies may borrow up to US$ 500 million in a year. Further, RBI also allowed domestic scheduled commercial banks to open up their branches in Tier III to Tier VI regions that have population of up to 49,999 without the prior permission of the central bank. Banks such as PNB and UCO Bank are planning to take advantage of this initiative and would open around 440 and 89 branches, respectively, in such regions. In its platinum jubilee year, the RBI, the central bank of the country, in a notification issued on June 25, 2009, said that banks should link more branches to the National Electronic Clearing Service (NECS). Ideally, all core-banking-enabled branches should be part of NECS. NECS was introduced in September 2008 for centralised processing of repetitive and bulk payment instructions. Currently, a little over 26,000 branches of 114 banks are enabled to participate in NECS.

71

RECENT MONETORY POLICIES:

March - 2010

The repo rate and the reverse repo rate were increased by 25 basis points each in mid-March 2010.

April - 2010

The Monetary Policy Statement 2010-11, dated April 20, 2010, specifies the following monetary measures: The repo rate has been raised by 25 basis points from 5.0 per cent to 5.25 per cent with immediate effect. The reverse repo rate has been raised by 25 basis points from 3.5 per cent to 3.75 per cent with immediate effect. The cash reserve ratio (CRR) of scheduled banks has been raised by 25 basis points from 5.75 per cent to 6.0 per cent of their net demand and time liabilities (NDTL) effective the fortnight beginning April 24, 2010.

July 2010 In its policy of July 02,2010, the RBI once again hiked the key rates namely repo and reverse repo rate by 25 basis point. The Reserve Bank of India raised its main lending rate, or repo rate, to 5.50 percent from 5.25 percent. and the reverse repo rate, at which it absorbs excess cash from the banking system, to 4 percent, from 3.75 percent.

STATE BANK OF INDIA

72

State bank of India is the largest public sector bank of the county. The stock is currently trading at PE multiple of 17 for FY10 results. It has a very strong earning visibility in the future as it is being the largest bank of India. It has a future plan of diluting stake within next two years. State Bank of India (Hindi:

) (SBI) is the largest state-owned banking and

financial services company in India, by almost every parameter - revenues, profits, assets, market capitalization, etc. The bank traces its ancestry to British India, through the Imperial Bank of India, to the founding in 1806 of the Bank of Calcutta, making it the oldest commercial bank in the Indian Subcontinent. The Government of India nationalized the Imperial Bank of India in 1955, with the Reserve Bank of India taking a 60% stake, and renamed it the State Bank of India. In 2008, the Government took over the stake held by the Reserve Bank of India. SBI provides a range of banking products through its vast network of branches in India and overseas, including products aimed at NRIs. The State Bank Group, with over 16,000 branches, has the largest banking branch network in India. With an asset base of $260 billion and $195 billion in deposits, it is a regional banking behemoth. It has a market share among Indian commercial banks of about 20% in deposits and advances, and SBI accounts for almost one-fifth of the nation's loans.[2] SBI has tried to reduce over-staffing by computerizing operations and "golden handshake" schemes that led to a flight of its best and brightest managers. These managers took the retirement allowances and then went on to become senior managers in new private sector banks. The State bank of India is the 29th most reputed company in the world according to ForbesState Bank offers you the convenience of over 5000 ATMs in India, already the largest network in the country and continuing to expand fast! This means that you can transact free of cost at the ATMs of State Bank Group (This includes the ATMs of State Bank of India as well as the Associate Banks namely, State Bank of Bikaner & Jaipur, State Bank of Hyderabad, State Bank of Indore, State Bank of Mysore, State Bank of Patiala, State Bank of Saurashtra, and State Bank of Travancore), using the State Bank Cash Plus card.

AWARDS
BEST BANK 2009:- It has been adjudged THE BEST BANK 2009 by BUSINESS

INDIA (August-2009)

73

NO.1 IN THE 4PS B & M & ICMR SURVEY:- STATE BANK OF INDIA ranked as

No.1 in the 4Ps B & M & ICMR Survey on INDIA'S BEST MARKETED BANKS (August-2009).

74

BALANCESHEET OVERVIEW
The overview of balance sheet of STATE BANK OF INDIA for last 3 years has been shown below and the comparison has been made on the basis of that.

PARTICULAR

2009-10

2008-09

2007-08

REVENUE OTHER INCOME TOTAL INCOME EXPENDITURE INTEREST PAT EQUITY RESERVES EPS NPM NET NPA (%)

70993.92 14968.15 85962.07 -20318.68 -47322.48 9166.05 634.88 65314.32 144.37 12.91 1.72

63788.43 12690.79 76479.22 -15648.70 -42915.29 9121.24 634.88 57312.81 143.77 14.30 1.79

48950.31 8694.93 57645.24 -12608.61 -31929.08 6729.12 631.47 48401.19 126.62 13.75

75

MARKETCAP:- 154984.59 BOOK VALUE 1038.76 PRCE/BOOK 2.35 EPS 144.37 P/E;- 17.06 DIV 200% DIV YIELD:- 1.19 INDUSTRY P/E:- 9.81

76

FY 10 Vs FY 09
NII increased by 13.41% in FY10 over FY09, while cumulative NIM, which had

declined from 2.93% in FY09 to 2.30% in June 09 has improved sequentially to 2.43% in Sep 09, 2.56% in Dec 09 and 2.66% in Mar 10. Interest income on advances has increased by 9.11% YOY, despite a fall in yield by 49 bps from 10.15% as on Mar 09 to 9.66% as on Mar 10 owing to reduction in peak PLR by 200 bps and average PLR by 87 bps during FY 10 over FY 09. Income from resource operations increased by 13.40% as yields were low during FY Growth in Interest expenses on deposits was contained at 14.23% during FY 10 10 due to liquidity overhang. against 40.13% growth during FY 09, through strategic shedding of high cost bulk deposits, which are down to just 1.79% of total deposits as compared to 10.74% a year ago and growth of 26.76% YOY in CASA deposits. Fee income is up by 26.57% YOY. Total other income is up by 17.94% despite profit Forex income increased by 34.59%. Other Income (excluding profit on sale of on sale of investments coming down by Rs.451 crores. investments) is up by 26.95%. Operating Expenses up by 29.84% in FY10 over FY09, driven by five key costs, as

the Bank invested heavily in laying the foundation for future growth: During Q4FY09, nearly 27,000 new employees came on board in various categories, the full impact of which on staff expenses was felt during FY10. The Bank has recruited 3,350 employees in FY10.

77

The State bank of India is a government undertaking bank. This is fundamentally good bank. The bank is the no.1 bank in the country. The bank has a good earning visibility in the future. The earning per share is Rs.144.37 in FY 10. This means the stock is trading at almost 17 P/E multiple on the trailing basis. The bank has the book value of 1098.76 and hence it is trading at almost 2.3 times its book value which is called price to book value. This is fair for such a giant and fast growing company. The market cap of the is 154984.59 cr. In the year FY2010 the bank has declared a final dividend of Rs.20 that is 200% dividend. However, the bank had also declared an interim dividend of Rs.10 or 100%. So the total dividend paid by the bank to its shareholders is Rs.30 or 300%. The dividend yield for the bank is 1.19% per year, Which is good. Hence the bank is fundamentally looking good for the longer term.

78

PUNJAB NATIONAL BANK

PARTICULAR

2009-10

2008-09

2007-08

REVENUE

21466.91

19326.16

14265.02

OTHER INCOME

3412.49

2919.69

1997.56

TOTAL INCOME

24879.40

22245.85

16262.58

EXPENDITURE

-13096.84

-4206.20

-3525.48

INTEREST PAT EQUITY RESERVES EPS (RS) NPM (%)

-12944.02 3905.35 315.30 15915.62 123.86 18.19

-12295.30 3090.88 315.30 12824.59 98.03 15.99

-8730.86 2048.76 315.03 10467.35 64.98 14.36

79

MARKETCAP:- 33666.42 BOOK VALUE:- 514.77 PRICE/BOOK VALUE:- 2.07 EPS:- 123.86 P/E:- 8.62 INDUSTRY P/E:- 9.81 DIVIDEND:- 220% DIV.YIELD:-2.06%

80

PNB is also a large public sector unit bank. Government owns 57.8% of its equity.It is growing at very rapid speed despite of the many private banks. For the last 3 years, main contents of the balance sheet are shown in the table. That shows that Revenue has grown at the rate of 36% and 11% for FY 09 and FY10. Total income has also grown at a significant rate over the period.

However interest and other expense have also grown rapidly but it has not impacted

on the Net Profit Margin (NPM) of the company.

requirements.

The bank has substantial amount of reserves and liquidity in order to meet customers

It has very stable growth rate over the period of time.

It also has a good dividend history over the period of time and the market value has

also grown significantly.

So the company has very good fundamentals which can encourage the long term

investor to hold the stock.

Continued to expand, adding over 500 branches and 1400

ATMs while improving internet and mobile banking capabilities. Expanding International forays to newer destinations like

Australia and Canada in addition of international presence in 9 countries. 81

The Punjab national bank is a bank with faster growing rate and having great fundamentals.

The Punjab national bank has marketcap of Rs. 33666.42. It has a book value of Rs. 517.77 and the bank hence the bank is trading at a 2.07 times the book value. The banks earning per share in the year FY2010 was Rs.123.86 which means at current market price the bank is trading at 8.62 times its trailing earnings. The dividend declared by the bank is Rs.22 or 220% on the face value. The dividend yield for the share holders is 2.06% which is very good for the investment perspective. The company has strong fundamentals and has good and consistent growth rate. And the valuations are looking attractive. The CMP is looking attractive and the stock has the room to move higher as it has a good growth rate. The stock is trading below the industry P/E multiple. And the price to book value is also just above 2 which looks reasonable. Hence the long term investors can still enter into the stock at current level.

82

HDFC BANK

PARTICULAR

2009-10

2008-09

2007-08

REVENUE OTHER INCOME TOTAL INCOME EXPENDITURE INTEREST PAT EQUITY RESERVES EPS (RS) NPM (%)

16172.91 3807.61 19980.52 -5764.50 -7786.30 2948.69 457.74 21061.85 67.60 18.23

16332.27 3290.61 19622.88 -5532.82 -8911.10 2244.95 425.38 14220.95 52.90 13.75

10115.00 2283.15 12398.15 -3745.62 -4887.12 1590.18 354.43 11142.80 46.20 15.72

83

MARKETCAP:- 93717.14

BOOK VALUE:- 468.24

PRICE/BOOK :-4.35

EPS:- 67.60

P/E:- 28.21

INDUSRY P/E:- 24.66

DIVIDEND:- 100%

DIVIDEND YIELD:- 0.49%

84

HDFC bank is the subsidiary of Housing Development Finance Corporation Ltd. (HDFC). Mr. Jadish Capoor is the chairman of the bank. The company has very strong management and the bank is the fastest growing private bank in the country. The Housing Development Finance Corporation Limited (HDFC) was amongst the first to receive an 'in principle' approval from the Reserve Bank of India (RBI) to set up a bank in the private sector, as part of the RBI's liberalisation of the Indian Banking Industry in 1994. The bank was incorporated in August 1994 in the name of 'HDFC Bank Limited', with its registered office in Mumbai, India. HDFC Bank commenced operations as a Scheduled Commercial Bank in January 1995. HDFC is India's premier housing finance company and enjoys an impeccable track record in India as well as in international markets. Since its inception in 1977, the Corporation has maintained a consistent and healthy growth in its operations to remain the market leader in mortgages. Its outstanding loan portfolio covers well over a million dwelling units. HDFC has developed significant expertise in retail mortgage loans to different market segments and also has a large corporate client base for its housing related credit facilities. With its experience in the financial markets, a strong market reputation, large shareholder base and unique consumer franchise, HDFC was ideally positioned to promote a bank in the Indian environment. HDFC Bank is headquartered in Mumbai. The Bank at present has an enviable network of 1,725 branches spread in 779 cities across India.All branches are linked on an online real-time basis. Customers in over 500 locations are also serviced through Telephone Banking. The Bank's expansion plans take into account the need to have a presence in all major industrial and commercial centres where its corporate customers are located as well as the need to build a strong retail customer base for both deposits and loan products. Being a clearing/settlement bank to various leading stock exchanges, the Bank has branches in the centres where the NSE/BSE have a strong and active member base.

The Bank also has 4,232networked ATMs across these cities. Moreover, HDFC Bank's ATM network can be accessed by all domestic and international Visa/MasterCard, Visa Electron/Maestro, Plus/Cirrus and American Express Credit/Charge cardholders.

85

The balance sheet of the company for the last three years shows that Revenue of the bank had increased in the FY09 but it has decreased negligibly for the

FY10 compared to previous year. Total income has increased for all 3 years. However the growth in the year 2009-10 is

just slightly over the previous year.

The PAT has increased at 41% and 31% over the previous year respectively. This

shows its earning visibility in the future.

The bank has substantial amount in the form of reserves. That shows its good liquidity

position to withstand any circumstances.

The EPS has also grown at a decent pace because of the increase in the profit.

The NPM had declined in the year 2008-09 because of the slow down in the world

however the NPM has increased quite substantially in the year 2009-10.

All these shows that the fundamentals of the bank is very much attractive and the bank

also has an eye on the expansion of the bank.

2008-09

HDFC bank has registered Deposits of 16740444cr in 2009-10 against 14281158cr in

The HDFC bank has the market cap of Rs. 93717.14cr. The banks book value is Rs.468.24 in the year 2009-10, which means it is trading at 4.35 times the book value. The bank has registered EPS of Rs.67.60 in the year 2009-10 which shows that it is trading at P/E of 28.21 times which is very expensive for the stock as the industry p/e is only 24.66 times. 86

The bank has declared the dividend of Rs.10 or 100%. And hence the Dividend yield is 0.49%. So the bank is looking expensive at this point in time and the valuations seems to be stretched. So the investors should wait for the correction to improve the valuations of the company.

87

CREDIT RATING:-

The Bank has its deposit programs rated by two rating agencies - Credit Analysis & Research Limited (CARE) and Fitch Ratings India Private Limited. The Bank's Fixed Deposit programme has been rated 'CARE AAA (FD)' [Triple A] by CARE, which represents instruments considered to be "of the best quality, carrying negligible investment risk". CARE has also rated the bank's Certificate of Deposit (CD) programme "PR 1+" which represents "superior capacity for repayment of short term promissory obligations". Fitch Ratings India Pvt. Ltd. (100% subsidiary of Fitch Inc.) has assigned the "AAA ( ind )" rating to the Bank's deposit programme, with the outlook on the rating as "stable". This rating indicates "highest credit quality" where "protection factors are very high" The Bank also has its long term unsecured, subordinated (Tier II) Bonds rated by CARE and Fitch Ratings India Private Limited and its Tier I perpetual Bonds and Upper Tier II Bonds rated by CARE and CRISIL Ltd. CARE has assigned the rating of "CARE AAA" for the subordinated Tier II Bonds while Fitch Ratings India Pvt. Ltd. has assigned the rating "AAA (ind)" with the outlook on the rating as "stable". CARE has also assigned "CARE AAA [Triple A]" for the Banks Perpetual bond and Upper Tier II bond issues. CRISIL has assigned the rating "AAA / Stable" for the Bank's Perpetual Debt programme and Upper Tier II Bond issue. In each of the cases referred to above, the ratings awarded were the highest assigned by the rating agency for those instruments.

CORPORATE GOVERNANCE RATING: The bank was one of the first four companies, which subjected itself to a Corporate Governance and Value Creation (GVC) rating by the rating agency, The Credit Rating Information Services of India Limited (CRISIL). The rating provides an independent assessment of an entity's current performance and an expectation on its "balanced value creation and corporate governance practices" in future. The bank has been assigned a 'CRISIL GVC Level 1' rating which indicates that the bank's capability with respect to wealth creation for all its stakeholders while adopting sound corporate governance practices is the highest. 88

PARTICULAR

2009-10

2008-09

2007-08

REVENUE

25706.93

31092.55

30788.34

OTHER INCOME

7477.65

7603.72

8810.77

TOTAL INCOME

33184.58

38696.27

39599.11

EXPENDITURE

-5859.83

-7045.11

-8154.18

INTEREST

-17592.57

-22725.93

-23484.24

PAT

4024.98

3758.13

4157.73

EQUITY

1114.89

1113.29

1112.68

RESERVES

50503.48

48419.73

48357.53

EPS (RS)

36.14

33.76

39.39

NPM (%)

15.66

12.09

13.50

Icici bank

89

MARKETCAP: - 100609.22 BOOK VALUE:- 463.09 PRICE/BOOK VALUE:- 1.95 EPS:- 36.14 P/E:- 23 INDUSTRY P/E:- 24.66 DIVIDEND:- 120% DIV YIELD:- 1.33% ICICI bank is 2nd largest private sector bank of India. It has grown rapidly over the last 3-4 years. The bank has a great experienced management under the leadership of K. V. Kamath, chairman and Chanda Kochhar, MD and CEO of the bank. The bank has a very good past. ICICI Bank is India's second-largest bank with total assets of Rs. 3,634.00 billion (US$ 81 billion) at March 31, 2010 and profit after tax Rs. 40.25 billion (US$ 896 million) for the year ended March 31, 2010. The Bank has a network of 2,016 branches and about 5,219 ATMs in India and presence in 18 countries. ICICI Bank offers a wide range of banking products and financial services to corporate and retail customers through a variety of delivery channels and through its specialised subsidiaries in the areas of investment banking, life and non-life insurance, venture capital and asset management. The Bank currently has subsidiaries in the United Kingdom, Russia and Canada, branches in United States, Singapore, Bahrain, Hong Kong, Sri Lanka, Qatar and Dubai International Finance Centre and representative offices in United Arab Emirates, China, South Africa, Bangladesh, Thailand, Malaysia and Indonesia. Our UK subsidiary has established branches in Belgium and 90

Germany. ICICI Bank's equity shares are listed in India on Bombay Stock Exchange and the National Stock Exchange of India Limited and its American Depositary Receipts (ADRs) are listed on the New York Stock Exchange (NYSE).

The banks fundamentals are good. The past performance shows that Revenue have been fallen substantially in the last year. Total income has also fallen over the last three year period of time. Which shows

some worry about the company.

However the PAT has increased in the last year i.e. 2009-10. Bank has very good

reserves and hence the liquidity to withstand the bad circumstances.

EPS had been declined in the 2008-09 period by 14%, however It has grown in the

year 2009-10 by 7%.

NPM has also the same pattern as EPS. It has declined because of the revenue decline

in the 2008-09 but then it has increased in the year 2009-10.

It has recently acquired BANK OF RAJASTHAN with the swap ratio of 1 : 4.72.

Bank of Rajasthan has 463 branches and 111 ATMs with total assets of Rs 17,224

crore, deposits of Rs 15,187 crore and advances of Rs 7,781 crore. Bank of Rajasthan had made a net 91

profit of Rs 118 crore in the year ended March 31, 2009 and a net loss of Rs 10 crore in the nine months ended December 31, 2009

This will give the boost to the revenue generation visibility of the bank.

robust.

The bank is thus going to be more bigger and the future visibility would be very

However there are some rumors have been there in the market because of its exposure

in the EUROPE. This limits its investors to have a long term investment in the bank The ICICI bank has a market cap of Rs. 100609.22 The book value of the company is Rs.463.09. So the companys stock is trading at

1.95 times its book value. This is more attractive than HDFC bank.

The bank has reported earnings of Rs. 36.14 in FY 2010 this means the stock is

trading at a P/E multiple of 23 v/s the industry P/E of Rs.24.66]

The bank has declared the dividend of Rs.12 or 120%. And the dividend yield of

1.33% in the year FY10.

All this shows that the company has strong fundamentals with somewhat stretched valuations. But it is better valued than HDFC bank. The future expansion plan is very good and the bank will register a good growth in the future.

92

FY2010 cr) REVENUE PAT EQUITY RESULT EPS 2010 :- P/E NPM (%) DIVIDEND (RS)

SBI

(in cr)

PNB

(in

ICICI BANK (in cr) 25706.93 4024.98 1114.89 36.14 24.65 15.66 12

HDFC BANK (in cr) 16172.91 2948.69 457.7 67.60 30.88 20.64 12

70993.92 9166.05 FY 634.5 144.37 17.06 12.39 30 (RS 10 INTERIM)

21466.91 3905.35 315.3 123.86 8.5 18.19 22

COMPARISON

SHAREHOLDINGPATTERN:SHARE HOLDERS PROMOTER FII DII OTHERS TOTAL SBI (%) 59.41 11.47 17.24 11.88 100 PNB (%) 57.80 19.08 18.18 4.94 100 ICICI BANK (%) 37.7 23.91 38.39 100 HDFC BANK (%) 23.63 27.45 11.25 37.67 100

BONUS HISTORY :-

93

YEAR 2010 2009 2008

SBI 30 29 21.5

PNB BANK 22 20 13

ICICI BANK 12 11 11

HDFC 12 10 8.5

94

CONCLUSION

Technical analysis is a method of evaluating securities by analyzing the statistics generated by market activity. It is based on three assumptions: 1) the market discounts everything, 2) price moves in trends and 3) history tends to repeat itself. Technicians believe that all the information they need about a stock can be found in its charts. Technical traders take a short-term approach to analyzing the market. Many investors use fundamental analysis alone or in combination with other tools to

evaluate stocks for investment purposes. The goal is to determine the current worth and, more importantly, how the market values the stock. Fundamental analysis helps in examine fundamental financial level. This type of

analysis examines key ratios of a business to determine its financial health and gives you an idea of the value its stock.

BIBLIOGRAPHY

95

WWW.NSEINDIA.COM

WWW.BSEINDIA.COM

WWW.INDIAINFOLINE.COM

WWW.MONEYCONTROL.COM

WWW.ICHARTS.IN

WWW.SBI.CO.IN

WWW.PNBINDIA.IN

WWW.HDFCBANK.COM

WWW.ICICIBANK.COM

NEWS PAPERS LIKE

ECONOMIC TIMES FINANCIAL EXPRESS

OTHER PUBLISHINGS LIKE 96

INDIAINFOLINE WEEKLY RAPUP

ANEXURES

sbi bank 97

98

99

Icici bank

100

101

102