investment in equities
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A PROJECT REPORT
ON
INVESTMENT
IN
EQUITIES
CONDUCTED AT
CD EQUI SERCH LIMITED
BY
S.PAVANI
ROLL.NO: 2122-10-672-095
In partial fulfillment of award of Degree of
MASTER OF BUSINESS ADMINISTRATION
AURORAS MANAGEMENT AND RESEARCH INSTITUTE,
MOOSARAMBAGH,HYDERABAD.
2010-2012.
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CERTIFICATE
This is to certify that the project entitled INVESTMENT IN EQUITIESIN CD
EQUISEARCH LTD submitted to the OU in partial fulfillment for the award of degree of
Master of Business Administration has been carried out by MR.S.RAMPRASAD, Hall-
Ticket Number2122-10-672-095 who is a bonafide student ofAURORAS
MANAGEMENT AND RESEARCH INSTITUTE, HYDERABAD .for the academic year
2010-2012.
HEAD OF THE
DEPARTMENT PRINCIPAL
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CERTIFICATE
This is to certify that the project report titled INVESTMENT IN EQUITIES IN CD
EQUISEARCH LTD submitted in partial fulfillment for the award of MBA Programme of
Department of Business Management,OU, Hyderabad, was carried out by
MR.S.RAMPRASAD,under my guidance. This has not been submitted to any other
university or institution for the award of any degree / diploma / certificate.
Name and Address of the Guide Signature of the Guide
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DECLARATION
I hereby declare that this project report titled INVESTMENT IN EQUITIES
IN CD EQUISEARCH LTD submitted by me to the Department of Business
Management, Hyderabad, is a bonafide work undertaken by me and it is not
submitted to any other university or institution for the award of any degree /
diploma / certificate or published any time before.
Place:
Date:
(S.RAMPRASAD)
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ACKNOWLEDGEMENT
I express my gratitude to Mr. Shiva Kumar for giving me this opportunity to carry
out the project work on INVESTMENT IN EQUITIES in CD EQUISEARCH LIMITED.
I also express my sincere thanks to the StaffOfCD EQUISEARCH LIMITED. who
were of ready help in answering my various quires related to the project work.
It is with great pleasure that I Express my gratitude to Mr.Shiva Kumar, under
whose inspiring guidance and advice this study has been carried out.
S.RAMPRASAD
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CONTENTS
Chapter no Name of the concept Page no
I Introduction to study 7-9
Objectives 10
Need of the study 10
Scope of the study 10
Research Methodology 11
Limitations 12
II Review of literature 17- 41
III Industry profile 42-47
Roles and responsibilities 48
Key learnings 49
IV Data analysis and interpretation 50-67
V Summary 68-70
VI Suggestions 71-72
VII Conclusion 73-75
Bibliography 76-77
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Introduction
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INTRODUCTION
Investment management once seemed a simple process. Well-heeled investors would
hold portfolios composed of stocks and bonds of blue chip industrial companies, treasury
bonds, notes and bills. The choices available to less well-off investors were much more
limited, confirmed primarily to passbook savings accounts. If the investment environment
can be thought of as an ice cream parlor, then the customers of past decades were offered
only chocolate and vanilla.
Mirroring the diversity of modern society, the investment ice cream parlor now makes
available a myriad of flavors to the investing public. Investors face a dizzying array of
choices. The ability to purchase different securities has become both less expensive and more
convenient with the advent of advanced communications and computer networks, along with
the proliferating market for mutual funds that has developed to serve large or small investors.
Investment environment encompasses the kinds of marketable securities that exist and
where and how they are bought and sold. Investment process is concerned with how an
investor should proceed in making decisions about what marketable securities to invest in,
how extensive the investments should be and when the investments should made.
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Investment means the sacrifice of current rupees for future rupees. Two different
attributes are involved time and risk. The sacrifice takes place in the present and is
certain. The reward comes later and the magnitude is uncertain. In some cases, risk is the
dominant attribute. These are two types of investments. They are:
1) Real Investments
2) Financial Investments
Real investments involve some kind of tangible assets such as land, machinery, factories.
Financial investments involve contracts written on pieces of paper such as common
stocks and bonds.
Investment in securities such as shares, debentures and bonds is profitable as well as
exciting, but it involves great deal of risk. Investing in financial securities is considered to
be one of the best avenues for investing ones savings while it is acknowledged to be one
of the most risky avenues of investment. Even Indian government wants to encourage
people in rural areas to invest in equities. This will help the markets to stabilize by
tapping the rural areas and decreases the dependency on foreign institutional investors.
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NEED FOR THE STUDY
The purpose of the study is to know about stock markets in India, how they work,
fundamental requirements before entering the stock market, how to enter the stock market,
market design, stock selection, when to buy or sell a stock, how to invest and knowing about
market intermediaries.
OBJECTIVES OF THE STUDY
The objective of the study is to look into the scientific approach for selecting a stock
where Fundamental Analysis and Technical Analysis are looked into.
For that purpose the most happening banking sector was taken for study and from that
sector, two stocks were picked up and analyzed.
The study deals with analysis of performance of the company, share price fluctuations
and comparing it with another company from same sector.
The purpose of the study is to locate a stock which gives good returns with minimum
risk.
SCOPE OF THE STUDY
For the purpose of study, banking sector is selected. ICICI-(Industrial Credit and
Investment Corporation of India) and SBI-(STATE BANK OF INDIA) are the two
companies that are taken for analysis.
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RESEARCH METHODLOGY
The following are the steps involved in the study:
1. SELECTION OF THE SCRIP:
The scrip selection is done on random and the scrip selected is ICICI bank and (SBI)-
State bank of india.
2. DATA COLLECTION :
The data of the ICICI bank and SBI have been collected from Business line and the
internet. The data consist of the November 1st to MAY 31th.
3.ANALYSIS:
The analysis consists of the tabulation of the data assessing the profitability positions
of the equity buyer, representing the data with graphs and making the interpretation using
data.
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LIMITATIONS OF THE STUDY
The study is confined to only one sector.
All the limitations of Fundamental Analysis, Technical Analysis are applicable to the
study.
The factors which affect the markets and intangible are not considered.
Risk perception is considered to be moderate which may not be acceptable to all.
The data for the study considered is of past two years, so analysis is restricted to that
period only.
In the application of Dow Theory, only daily price fluctuations were considered due
to time constraint.
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INTRODUCTION TO STOCKS
The first step for you to understand the stock market is to understand stocks.
A share of stock is the smallest unit of ownership in a company. If you own a share of a
companys stock, you are a part owner of the company.
You have the right to vote on members of the board of directors and other important
matters before the company. If the company distributes profits to shareholders, you will
likely receive a proportionate share.
One of the unique features of stock ownership is the notion of limited liability. If the
company loses a lawsuit and must pay a huge judgment, the worse that can happen is your
stockbecomes worthless. The creditors cant come after your personal assets. Thats
necessarily true in private-held companies.
There are two types of stock:
Common stock
Preferred stock
Most of the stock held by individuals is common stock.
Common Stock:
Common stock represents the majority of stock held by the public. It has voting
rights, along with the right to share in dividends.
Preferred Stock:
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Despite its name, preferred stock has fewer rights than common stock, except in one
important are dividends. Companies that issue preferred stocks usually pay consistent
dividends and preferred stock has first call on dividends over common stock.
Investors buy preferred stock for its current income from dividends, so look for
companies that make big profits to use preferred stock to return some of those profits via
dividends.
DEMAT ACCOUNT
What is Demat account and why it is required?
Securities and Exchange Board of India (SEBI) is a board (corporate body) appointed
by the Government of India in 1992 with its head office at Mumbai. Its one of the function is
helping the business in stock exchanges and any other securities markets. Demat (short form
of Dematerialization) is the process by which an investor can get stocks (also called as
physical certificates) converted into electronic form maintained in an account with the
Depository Participant (DP).
DP could be organizations involved in the business of providing financial services
like banks, brokers, financial institutions etc. DPs are like agents of Depository.
Depository is an organization responsible to maintain investor's securities (securities
can be stocks or any other form of investments) in the electronic form. In India there are two
such organizations called NSDL (National Securities Depository Ltd.) and CDSL (Central
Depository Services India Ltd.)
Investors wishing to open Demat account has to go DP and open the account.
Opening the Demat account is as simple as opening the bank account with any bank. As we
need bank account to save our money, make cheque payments etc, likewise we need to open a
demat account if we want to buy or sell stocks. All stocks what we possess will show in our
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demat account. So we don't have to possess any physical certificates. They are all held
electronically in our demat account. As we buy and sell the stocks, accordingly our stocks
will get adjusted in our account.
Is a demat account must?
The market regulator, the Securities and Exchange Board of India (SEBI), has made it
compulsory to open the demat account if you want to buy and sell stocks.
So a demat account is a must for trading and investing.
How to start to open a Demat account?
We have to approach a DP to open a Demat account. Most banks are DP participants
so we may approach them.
A broker and a DP are two different people. A broker is a member of the stock
exchange, who buys and sells stocks on his behalf and also on behalf of his customers.
Following are the documents required to open Demat account .
When we approach any DP, we will be guided through the formalities of opening an
account. The DP will ask to provide some documents as proof of our identity and address.
Below is a list but we may not require all of them.
PAN card, Voter's ID, Passport, Ration card, Drivers license, Photo credit card
Employee ID card, IT returns, Electricity/ Landline phone bill etc.
Do we need any stocks to open a Demat account?
No. We need not need any stocks to open a demat account. A demat account can be
opened with no balance of stocks. And there is no minimum balance to be maintained either.
You can have a zero balance in your account.
How much it cost to open a Demat account?
The charges for account opening, annual account maintenance fees andtransaction
charges vary between various DPs.
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.FinallyAfter successfully opening the demat account, the DP will allot Beneficial Owner
Identification Number, which will be needed to mention for all our future transactions.
If we want to sell our stocks, we need to place an order with our broker and give a
'Delivery Instruction' to your DP. The DP will debit our account with the number of stocks
sold. We will receive the payment from our broker.
If we want to buy stocks, inform our broker about our Depository Account Number,
so that the stocks bought are credited into our account.
Points to remember while opening online account :
a) Make multiple enquiries and try getting low brokerage trading and dematting account.
b) Also discuss about the margin they provide for day trading.
c) Discuss about fund transfer. The fund transfer should be reliable and easy. Fund transfer
from our bank account to trading account and visa versa. Some online share trading account
has integrated savings account which makes easy for us to transfer funds from our saving
account to trading account.
d) Very important is about service they provide, the research calls, intraday or daily trading
tips.
e) Also enquire about their services charges and any other hidden charges if any.
f) And also see how reliable and easy is to contact them in case if any emergency.
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LiteratureReview
Investment process
Fundamental analysis
Technical analysis
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INVESTMENT PROCESS
Investment process describes how an investor should go about making decisions with
regard to what marketable securities to invest in, how extensive the investment should be and
when the investment should be made. An eight-step procedure for making these decisions
forms the basis for the investment process.
1) What is Investment
2) Understanding stocks
3) Finding a broker
4) Evaluation of stocks
5) Research tools
6) Investing strategy
7) Investing technique
8) What moves the market
Step 1: What is investment?
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Investing is making your money work for you without taking any more risks than
necessary for your comfort.
Investing is the proactive use of your money to make more money.
How to calculate Risk Premium?
Risk premium is what a stock should return over a risk-free investment. It is your
reward for taking a risk with your money.
Weak demand is the important factor in stock pricing:
Despite high crude oil prices, its weak demand for gasoline that holds back oil stock
prices. Supply and demand is an important factor in determining price of stocks.
Corrections are natural part of stock market cycle.
Dont be too conservative with stocks in retirement:
There is a danger you can be too conservative in your investment strategy as you
approach retirementdont back off stocks too soon.
Step 2: Understanding stocks
Stocks are the basic units of ownership in publicly traded companies. There are two basic
types of stocks.
a. Common Stock: Common stock represents the majority of stock held by the
public. It has voting rights, along with the right to share in dividends.
b. Preferred Stock: Companies that issue preferred stocks usually pay consistent
dividends and preferred stock has first call on dividends over common stock.
Bull and Bear stock markets are the two sides of same coin:
Bull and bear markets go together and are necessary for an efficient market.
Poll results show confidence in stocks:
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The results of a poll on where the sensex be at the end of 2008 show stock investors are
positive.
Step 3: Finding a Broker
To decide which type of broker is right for you, you need to use these resources to find
the brokerage arrangement that best fits your needs.
Thirteen of the top online stock trading sites offer investors a wide variety of services
including research and advice.
Brokers offer different levels of service. A broker fills in the gaps in knowledge and
experience.
Broker explains what types of accounts are available and how to open an account.
Financial advisers can map a blue print that will get you from where you are to your
financial goals.
Financial advisers come in a variety of flavors. Finding the one right for you involves
knowing how each is compensated and what they do.
The new year poses many challenges for stocks, including high oil prices, the credit
crisis, and a potential recession.
Stock prices are driven by the relationship between buyers and sellers. Attractive stocks
have more buyers than sellers, which drives up prices, while less attractive stocks feel the
reverse effect.
Step 4: Evaluating stocks for investment
Fundamental analysis relies on several tools to give investors an accurate picture of
the financial health of a company and how the market values the stock. The following are the
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most popular tools of fundamental analysis. They focus on earnings, growth, and value in the
market.
a) Earnings per ShareEPS
b) Price to Earnings RatioP/E
c) Projected Earnings GrowthPEG
d) Price to SalesP/S
e) Price to BookP/B
f) Dividend Payout Ratio
g) Dividend Yield
h) Book Value
i) Return on Equity
Step 5: Research Tools
The internet is a gold mine of information, but youll need some tools to get to the
nuggets. Research tools make the job easier if you know where to find them and how to use
them.
The better stock screens offer similar characteristics that give you greater flexibility when
looking for investment candidates and eliminate other companies.
Stock screens will save time and help to build a thoughtful portfolio by focusing on those
companies that meet your investing requirements.
Stock screens can help any investor make better stock selections by reducing the number
of companies to research.
Dividend ratios can tell much about a stock and its future payout prospects.
One of the best sources of information on companies is free and as near as your computer.
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Step 6: Investing Strategies
What strategy to use as an investor? The different investment strategies and how to
develop personal investment strategy is explained below:
When and how to sell a winning stock?
Knowing when and how to sell a winning stock is as important as knowing when to sell a
losing stock.
Dont be too conservative with stocks:
Following a too conservative investment strategy in retirement may not protect you from
outliving your money.
Bottom-up investors focus on strong companies and believe they will perform well in any
market conditions.
Top-down investing looks at big picture before narrowing in on individual stocks.
Step 7: Investing Techniques
Investing techniques offer powerful ways for investors to execute their strategies.
These techniques provide a structure for investing.
After-hours trading of stocks may seem like a great idea, but it is full of risks for the
average investor.
Diversify stocks by industry to avoid across-the-board losses on bad economic news.
Investments should not be correlated to achieve diversity.
Investing with expectations of high returns is not investing but gambling. Dont try to
double or triple your money quickly in the stock market youll be disappointed and
perhaps poorer.
Step 8: What moves the market?
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What makes the market rise or fall? Sometimes it seems to have a mind of its own
that reacts poorly to good news and with enthusiasm to bad news. One should learn the
factors that are the major influences on the markets and how to use this information.
Basic steps in how stock trading works:
Trade = Buy or Sell
To trade means to buy and sell in the jargon of th e financial markets. How a system
that can accommodate one billion shares trading in a single day works is a mystery to most
people. No doubt, our financial markets are marvels of technological efficiency.
We dont need to know all of the technical details of how to buy or sell stocks,
however it is important to have a basic understanding of how the markets work.
Important terms in stock market and in stock trading :
Open - The first price at which the stock opens when market opens in the morning.
High -The stock price reached at the highest level in a day.
Low - The stock price reached the lowest level in a day.
Close - The stock price at which it remains after the end of market timings or the final
price of the stock when the market closes for a day.
Volume - Volume is nothing but quantity.
Bid - The Buying price is called as Bid price.
Offer - The selling price is called offer price.
Bid Quantity - The total number of stocks available for buying is called Bid
Quantity.
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Offer Quantity - The total number of stocks available for selling is called Offer Quantity.
Buying and selling of stocks - Buy is also called as demand or bid and selling is also called
as supply or offer. First selling and then buying (this only happens in day trading) is called as
shorting of stocks or short sell.
Stock Trading - Buying and Selling of stocks is called stock trading.
Transaction - One complete cycle of buying and selling of stocks is called One Transaction.
Squaring off - This term is used to complete one transaction. Means if we buy then we have
to sell (means square-off) and if we sell then we have to buy (means square-off).
Limit Order - In limit order the buying or selling price has to be mentioned and when the
stock price comes to that price then our order will get executed with the
mentioned price by us.
Market Order- When we put buy or sell price at market rate then the price get executes at
the current rate of market. The market order get immediately executed at the current available
price.
Success Mantra
There are two steps to achieve success in the stock market.
1) How not to loose
When you learn what to do and what not to do in order to lose nothing means you have
won the half battle. Only then you can learn how to gain or what to do in order to win. A new
investor should do paper trading in order to get the market knowledge before actually
entering into the market.
2) How to gain
How to gain requires deep understanding about the market trends and fluctuations.
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A new investor can take the route ofmutual fund.
The average person generally falls into one of two categories.
The first believe investing is a form of gambling; they are certain that if you
invest, you will more than likely end up losing your money.
The second category consists of those who know they should invest for the long-
run, but dont know where to begin.
Their characteristics.
feel investing in some sort of black-magic that only a few people hold the key to
they leave their financial decisions up to professionals
cannot tell you why they own a particular stock / mutual fund.
investment style is blind faith or limited to this stock is going up. We should but
it.
This group is in far more danger than the first. They invest like the masses and
then wonder why their results are mediocre [or in some cases, devastating.
FUNDAMENTAL ANALYSIS
To determine the intrinsic value of an equity share, the security analyst must forecast the
earnings and dividends expected from the stock and choose a discount rate which reflects the
riskiness of the stock. This is what is involved in fundamental analysis, perhaps the most
popular method used by investment professionals. The earnings potential and riskiness of a
firm are linked to the prospects of the industry to which it belongs. The prospects of various
industries, in turn, are largely influenced by the developments in the macro economy.
Researchers have found that stock price changes can be attributed to the following
factors:
Economy-wide factors: 30-35 percent
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Industry factors: 15-20 percent
Company factors: 30-35 percent
Others factors: 15-25 percent
Based on the above evidence, a commonly advocated procedure of fundamental
analysis involves a three-step examination, which calls for:
1) Understanding of the macro-economic environment and developments.
2) Analyzing the prospects of the industry to which the firm belongs.
3) Assessing the projected performance of the company and the intrinsic value of
its shares.
A. MACRO-ECONOMIC ANALYSIS
The macro-economy is the overall economic environment in which all firms operate.
The key variables commonly used to describe the state of the macro-economy are:
a) Growth Rate of Gross Domestic Product (GDP)
The gross domestic product (GDP) is a measure of the total production of final goods and
services in the economy during a specified period usually a year. The growth rate of GDP is
the most important indicator of the performance of the economy. Firm estimates of GDP
growth rate are available with a time lag of one to two years or so, but preliminary estimates
are made from time to time by various bodies like CMIE, NCAER, and the RBI. The higher
the growth rate of GDP, other things being equal, the more favorable it is for the stock
market.
b) Industrial Growth Rate
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The GDP growth rate represents the average of the growth rates of the three principal
sectors of the economy, viz. the services sector, the industrial sector and the agricultural
sector.
Publicly listed companies play a major role in the industrial sector but only a minor role
in the services sector and the agricultural sector. Hence stock market analysts focus more on
the industrial sector. They look at the overall industrial growth rate as well as the growth
rates of different industries. The higher the growth rate of the industrial sector, other things
being equal, the more favorable it is for the stock market.
c) Agriculture and Monsoons
Agriculture accounts for about a quarter of the Indian economy and has important
linkages, direct and indirect, with industry. Companies using agricultural raw materials as
inputs or supplying inputs to agriculture are directly affected by the changes in agricultural
production. Other companies also tend to be affected due to indirect linkages.
A spell of good monsoons imparts dynamism to the industrial sector and buoyancy to the
stock market. Likewise, a streak of bad monsoons casts its shadow over the industrial sector
and the stock market.
d)Savings and Investment
The demand for corporate securities has an important bearing on stock price movements.
So investment analysts should know what the level of investment in the economy is and what
proportion of that investment is directed toward the capital market.
The level of investment in the economy is equal to:
Domestic savings + Inflow of foreign capitalInvestment made abroad.
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In India, as in many other countries, the domestic savings is the dominant component
in this expression. In addition to knowing what the savings are we should also know how the
same are allocated over various instruments like equities, bonds, bank deposits, small savings
schemes, and bullion.
Other things being equal, the higher the level of savings and investments and the greater
the allocation of the same to equities, the more favorable it is for the stock market.
e) Government Budget and Deficit
Governments play an important role in most economies, including the Indian economy.
The central budget as well as the state budgets prepared annually provides information on
revenues, expenditures, and deficit or surplus.
In India, governmental revenues come more from indirect taxes such as excise duty and
customs duty and less from direct taxes such as income tax. The bulk of the governmental
expenditures goes toward administration, interest payment, defence, and subsidies, leaving
very little for public investment. The excess of governmental expenditures over governmental
revenues represents the deficit. While there are several measures of deficit, the most popular
measure is the fiscal deficit.
The fiscal deficit has to be financed with government a borrowing which is done in three
ways. First, the government can borrow from the Reserve Bank of India. This leads to
increase in money supply which has an inflationary impact on the economy. Second, the
government can resort to borrowing in domestic capital market. This tends to push up
domestic interest rates and crowd out private sector investment. Third, the government may
borrow from abroad.
Investment analysts examine the government budget to assess how it is likely to impact
on the stock market.
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f) Money Supply
There are several definitions of money. The two more commonly used ones are:
M1 = currency with public + demand deposits with bank + other
deposits with RBI.
M3 = M1 + time deposits with banks
When we talk of money supply, we usually refer to M3. The growth rate of M3 in India
has been around 15 percent per year. This growth can be explained by three factors in the
main: growth in the real economy, monetization of a portion of deficit financing and
financial deepening of the economy. Monetization of a portion of deficit financing means
the RBI buys the securities issued by the government.
g) Price Level and Inflation
The price level measures the degree to which the nominal rate of growth in GDP is
attributable to the factor of inflation. The effect of inflation on the corporate sector tends to
be uneven. While certain industries may benefit, others tends to suffer. Industries that enjoy a
strong market for their products and which do not come under the purview of price control
may benefit. On the whole, it appears that a mild level of inflation is good for the stock
market.
h) Interest Rate
Interest rates vary with maturity, default risk, inflation rate, and productivity of capital
and so on. The interest rates on money market instruments which are virtually risk free tend
to be the lowest. Long dated government securities generally carry slightly higher interest
rates. Corporate debentures which have some default risk associated with them carry still
higher interest rates.
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A rise in interest rates depresses corporate profitability and also leads to an increase in the
discount rate applied by equity investors, both of which have an adverse impact on stock
prices.
i) Foreign Investment
Foreign investment in India comes in two forms: foreign direct investment and foreign
portfolio investment. The former represents investment for setting up new projects and hence
is long term in nature; the latter is in the form of purchase of outstanding securities in the
capital market and hence can be reversed easily.
j) Infrastructural Facilities and Arrangements
Infrastructural facilities and arrangements significantly influence industrial performance.
More specifically, the following are important:
Adequate and regular supply of electric power at a reasonable tariff.
A well-developed transportation and communication system.
An assured supply of basic industrial raw materials like steel, coal, petroleum
products and cement.
Responsive financial support for fixed assets and working capital.
k)Sentiments
The sentiments of consumers and businessmen can have an important bearing on
economic performance. Higher consumer confidence leads to higher expenditure on big ticket
items. Higher business confidence gets translated into greater business investment that has a
stimulating effect on the economy. Thus, sentiments influence consumption and investment
decisions and have a bearing on the aggregate demand for goods and services.
A.INDUSTRY ANALYSIS
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The objective of industry analysis is to assess the prospects of various industrial
groupings. It is almost impossible to forecast exactly which industrial groupings will
appreciate the most. Yet careful analysis can suggest which industries have a brighter future
than others and which industries are plagued with problems that are likely to persist for a
while.
Industrial analysis is divided into three parts namely,
I. Industry life cycle analysis
II. Structure and characteristics of an industry
III. Profit potential of industries: Porter model.
I. Industry Life Cycle Analysis
Many industrial economists believe that the development of almost every industry may be
analyzed in terms of a life cycle with four well-defined stages:
a. Pioneering Stage
b. Rapid Growth Stage
c. Maturity and Stabilization Stage
d. Decline Stage
a. Pioneering Stage: During this stage, the technology and or the product is relatively new.
Lured by promising prospects, many entrepreneurs enter this field. As a result, there is
keen, and often chaotic, competition. Only a few entrants may survive this stage.
b. Rapid Growth Stage: Once the period of chaotic developments is over, the rapid growth
stage arise. Firms which survive the intense competition of the pioneering stage, witness
significant expansion in their sales and profits.
c. Maturity and Stabilization Stage: During this stage, when the industry is more or less
fully developed, its growth rate is comparable to that of the economy as a whole.
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d. Decline Stage: With the satiation of demand, encroachment of new products, and
changes in consumer preferences, the industry enters the decline stage, relative to the
economy as a whole. In this stage, the industry may grow slightly during prosperous
periods, stagnate during normal periods and decline during recessionary periods.
The experience of most industries suggests that they go through the 4 phases of
the industry life cycle though there are considerable variations in terms of the relative
duration of various stages and the rates of growth during these stages.
II. Structure and Characteristics of an Industry
Since each industry is unique, a systematic study of its specific features and
characteristics must be an integral part of the investment decision process. Industry analysis
should focus on the following:
a. Structure of the industry and nature of competition:
The number of the firms in the industry and market share of the top
few firms in the industry.
Licensing policy of the government.
Entry barriers, if any.
Pricing policies of the firm.
Differentiation among products.
Competition from foreign firms.
b. Nature and prospects of demand:
Major customers and their requirements.
Key determinants of demand.
Degree of cyclicality in demand.
Expected rate of growth in the foreseeable future.
c. Cost, efficiency and profitability:
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Proportions of the key cost elementsraw materials, labor, utilities
and fuel.
Productivity of labor.
Turnover of inventory, receivables and fixed assets.
Control over prices of outputs and inputs.
Gross profit, operating profit and net profit margins.
Return on assets, earning power and return on equity.
d. Technology and research:
Degree of technological stability.
Important technological changes on the horizon and their
implications.
Research and development outlays as a percentage of industry
sales.
Proportion of sales growth attributable to new products.
I. Profit Potential of Industries: Porter Model
Michael Porter has argued that the profit potential of an industry depends on
the combined strength of the following five basic competitive forces:
a. Threat of new entrants
b. Rivalry among the existing firms
c. Pressure from substitute products
d. Bargaining power of buyers
e. Bargaining power of sellers
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Following figure shows the forces that drive competition and
determine industry profit potential:
a. Threat of new entrance
New entrants add capacity, inflate costs, push prices down, and reduce profitability. If an
industry faces the threat of new entrants, its profit potential would be limited. The threat of
new entrants is low if the entry barriers confer an advantage on existing firms and deter new
entrants. Entry barriers are high when:
The new entrants have to invest substantial resources to enter the industry.
Economies of scale are enjoyed by the industry.
Existing firms control the distribution channels, benefit from product differentiation
in the form of brand image and customer loyalty.
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Switching coststhese are essentially onetime cost of switching from the products of
one supplier to another-are high.
b. Rivalry between existing firms
Firms in an industry compete on the basis of price quality, promotion, service, warranties,
and so on if the rivalry between the firms in an industry is strong, competitive moves and
counter moves dampen the average profitability of the industry. The intensity of rivalry in an
industry tends to be high when:
The number of competitors in an industry is large.
At least a few firms are relatively balanced and capable of engaging in a sustained
competitive battle.
The industry growth is sluggish, prodding firms to strive for a higher market share.
There is chronic over capacity in the industry.
The industry confronts high exit barriers.
c. Pressure from substitute products
All firms in an industry face competition from industries producing substitute
products. Substitute products may limit a profit potential of the industry by imposing a
ceiling on the prices that can be charged by the firms in the industry. The threat from
substitute products is high when:
The price- performance trade off offered by the substitute products is attractive.
The switching costs for prospective buyers are minimal
The substitute products are being produced by industries earning superior profits.
d. Bargaining power of buyers
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Buyers are competitive force. They can bargain for price cut, ask for superior quality
and better service and induce rivalry among competitors. If they are powerful, they can
depress the profitability of the supplier industry. The bargaining power of a buyer group is
high when:
Its purchases are large relative to the sales of the seller.
Its switching costs are low.
It poses a strong threat of back ward integration.
e. Bargaining power of suppliers:
Suppliers can exert a competitive force in an industry as they can raise prices, lower
quality and curtail the range of free services they provide. Suppliers have strong bargaining
power when;
There is hardly any viable substitute for the products supplied.
Few suppliers dominate and the supplier group is more concentrated than the buyer
group.
The switching cost for the buyers is high.
Suppliers do present a real threat of forward integration.
B.COMPANY ANALYSIS
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Company analysis is concerned with fundamental analysis of equity shares.
Fundamental analysts take two somewhat different approaches in their search for
mispriced securities. The first approach involves estimating the intrinsic value and
comparing the same with the prevailing market price to determine whether the security is
underpriced or fairly priced or overpriced. The second approach involves estimating a
securitys expected return, given its current price and intrinsic value, and then comparing
it with the appropriate return for securities with similar characteristics.
Company analysis is the last leg in the economy-industry-company analysis sequence.
It may be organized into two parts (a) a study of financials, and (b) a study of other
factors.
Investment analysts start with a historical analysis of earning (and dividends), growth,
risk, and valuation and use company analysis as a foundation for developing the forecasts
required for estimating the intrinsic value.
TECHNICAL ANALYSIS
Technical analysis is radically different from fundamental analysis. While the
fundamental analyst believes that the market is 90 percent logical and 10 percent
psychological, the technical analyst assumes that it is 90 percent psychological and 10
percent logical. Technical analysts dont evaluate a large number of fundamental factors
relating to the company, the industry and the economy. Instead, they analyze internal market
data with the help of charts and graphs. Subscribing to the castles-in-the-air approach, they
view the investment game as an exercise in anticipating the behavior of market participants.
They look at charts to understand what the market participants have been doing and believe
that this provides a basis for predicting future behavior.
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The technical approach is the oldest approach to equity investment, dating back to the
late 19th century. It continues to flourish in modern times as well. As an investor, we will
often encounter technical analysis because newspapers cover it, television programmes
routinely call technical experts for their comments, and investment advisory services circulate
technical reports. Technical analysis can be applied to commodities, currencies, bonds, and
equity stocks, our studies are restricted to equity stocks.
Technical analysis involves a study of market generated data like prices and volumes
to determine the future direction of price movement.
Martin J. Pring explains: The technical approach to investing is essentially a
reflection of the idea that prices move in trends which are determined by the changing
attitudes of investors toward a variety of economic, monetary, political and psychological
forces. The art of technical analysis--for it is artis to identify trend changes at an early
stage and to maintain an investment posture until the weight of the evidence indicates that the
trend has been reversed.
THE DOW THEORY
Originally proposed in the late nineteenth century by Charles H. Dow, the editor of
the Wall Street Journal, the Dow Theory is perhaps the oldest and best known theory of
technical analysis.
In the words of Charles Dow:
The market is always considered as having three movements, all going at the same
time. The first is the narrow movement from day to day. The second is the short swing,
running from two weeks to a month or more; the third is the main movement, covering at
least four years in its duration.
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Proponents of the Dow Theory refer to the three movements as: (a) daily fluctuations
that are random day-to-day wiggles; (b) secondary movements or corrections that may last
for a few weeks to some months; and (c) primary trends representing bull and bear phases of
the market.
An upward primary trend represents a bull market, whereas a downward primary
trend represents a bear market. A major upward move is said to occur when the high point of
each rally is higher than the low point of the preceding decline. Likewise, a major downward
move is said to occur when the high point of each rally is lower than the low point of the
preceding decline.
The secondary movements represent technical correction. They represent adjustments
to the excesses that may have occurred in the primary movements. These movements are
considered quite significant in the application of the Dow Theory.
The daily fluctuations are considered to be minor significance. Even zealous technical
analysts do not usually try to forecast day-to-day movements in the market.
Bar and Line Charts
The bar chart, one of the simplest and most commonly used tool of technical analysis,
depicts the daily price range along with the closing price. In addition, it may show the daily
volume of transactions. The upper end of each bar represents the days highest price and the
lower end the days lowest price. The small cross across the bar marks the days closing
price.
Technical analysts believe that certain formations or patterns observed on the bar char
or line chart have predictive value. The more important formations and their indications are
described below:
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Head and Shoulders Top (HST) Pattern: As the name suggests, the HST formation has a
left shoulder, a head, and a right shoulder. The HST formation represents a bearish
development. It the price falls below the neckline (the line drawn tangentially to the left and
right shoulders), a price decline is expected. Hence, it is a signal to sell.
Inverse Head and Shoulders Top (IHST) Pattern: As the name indicates, the IHST
formation is the inverse of the HST formation. Hence, it reflects a bullish development. It the
price rises above the neck line, a price rise is expected. Hence, it is a signal to buy.
Triangle or Coil Formation: This formation represents a pattern of uncertainty. Hence, it is
difficult to predict which way the price will break out.
Flags and Pennants Formation: It typically signifies a pause after which the previous price
trend is likely to continue.
Double Top Formation: It represents a Bearish Development, Signaling that the price is
expected to fall.
Double Bottom Formation: It reflects a bullish development, signaling that the price is
expected to rise.
Point and Figure Chart
More complex than a bar chart, a Point and Figure Chart (PFC) has the following features:
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Company
Profile
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ABOUT THE ORGANISATION
CD Equi has established Brokerage house with over 30 years of rich experience in financial
services. It has the Professional Management
Its Guiding principlesTrust, Transparency and Thought leadership and It Empanelledwith large number of FIIs and DII
One of the most reputed names in fundamental research
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CD has been set up to engage in
Stock Broking
Equity
Derivatives Depository Services
Distribution of Investment Products
Distribution of Insurance
Commodities Broking
Currency
Headquartered inMumbai, CD has a growing network of offices across several states to ensure
easy accessibility to our clients wherever they are. CD has Branch Offices spread across the
country to offer better reach and service to the investor. The company currently marks its presence
in the following regions:
Mumbai
Kolkata
Delhi
Hyderabad
Jaipur
Vijayawada
Opening Shortly
Ahmedabad
Bangalore
Pune
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Expansion Plans
Setting up Regional Offices/Branch Office in 25 Metros/ Tier II cities in next 24 months
Expansion at 1000+ locations through Sub Brokers in the next 24 months
IPO / PE in another 3-4 years
To be amongst the top 10 broking house in India by 2012
Access to clients
User friendly back office software
All segments through single login
Client Position
1. Segment wise ledger balance
2. DP stock positionDP, pool, BTST3. Open position in FNO and commodities.
Viewing and printing of bills
Viewing and printing of ledger for all the segments
Sauda summary
Risk Management report
Brokerage report
User friendly back office software All segments through single login
MANAGEMENT
CD Equisearch is managed byprofessionals who have years of experience in financial
service industry
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Mr. Chandravadan DesaiChairman
Mr. Pranay DesaiDirector
Mr. VikashKalaniCOO
Mr. JayeshVoraCFO
GUIDING PRINCIPLE
At CD Equisearch, the selection and recommendations of wealth creating opportunities are
primarily based on the 3C Principles:
Conservation of capital
Consistent growth in value of investment over a period of time
Continual cash inflow through handsome dividends
PRODUCTS AND SERVICES
We are a one-stop financial services shop, most respected for quality of its advice,
personalized service and cutting-edge technology.
Equities
CD 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 CD. CD
leveraged technology to bring the convenience of trading to the investors location of
preference (residence or office) through computerized access. CD 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 CD invest your resources into
stocks from different sectors, depending on your risk-return profile. This service is particularly
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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. CD 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. They choose Ford Equity Research when they can clear your
doubts.
Commodities
CD 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). Average monthly turnover on the commodity exchanges increased from Rs 0.34
bn to Rs 20.02 bn. The commodities market has several products with different and non-
correlated cycles. On the whole, the business is fairly insulated against cyclical gyrations
Invest Online
CD has made investing in Mutual funds and primary market so effortless. All you have
to do is register with us and thats all. No paperwork no queues and No registration charges.
INVEST IN Mutual Fund
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CD offers you a host of mutual fund choices under one roof, backed by in-depth
research and advice from research house and tools configured as investor friendly.
APPLY IN IPOs
You could also invest in Initial Public Offers (IPOs) online without going through the hassles
of filling ANY application form/ paperwork
SMS
Stay connected to the market:
The trader of today, you are constantly on the move. But how do you stay connected to the
market while on the move? Simple, subscribe to CD Stock Messaging Service and get Market
on your Mobile!
Insurance
An entry into this segment helped complete the clients product basket; concurrently, it
graduated the Company into a one-stop retail financial solutions provider. To ensure maximum
reach to customers across India, we have employed a multi pronged approach and reach out to
customers via our Network, Direct and Affiliate channels. Following the opening of the sector
in 1999-2000, a number of private sector insurance service providers commenced operations
aggressively and helped grow the market. The companys entry into the insurance sector de -
risked the company from a predominant dependence on broking and equity-linked revenues.
The annuity based income generated from insurance intermediation result in solid core
revenues across the tenure of the policy.
Wealth Management Service
Imagine a financial firm with the heart and soul of a two-person organization. A world-
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leading wealth management company that sits down with you to understand your needs and
goals. We offer you a dedicated group for giving you the most personal attentionat every level.
Roles and Responsibilities in Organisation:
We will give updates to customers in
Economic Outlook and Updates
Sector & Company Reports
Technical Recommendations
Daily Market Report
Daily Technical Outlook
Reports on New Fund Offerings
Weekly analysis of mutual fundsFund Focus
Weekly debt report: Debt Dose
Offer daily technical calls through SMS to our clients.
KEY LEARNINGS IN ORGANISATION:
EQUITY
MUTUAL FUNDS
TAX SAVINGS SCHEMES IN MUTUAL FUNDS
ONLINE AND OFFLINE TRADING
IPO (INITIAL PUBLIC OFFER)
DERIVATIVES
FOREX MARKET
CURRENCY
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COMMODITIES
RISK-RETURN PROFILE IN FUTURES AND OPTIONS-S&P CNX NIFTY
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Data
Analysis
ANALYSIS
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COMPANY PROFILE:
ICICI:
ICICI Bank is India's second-largest bank with total assets of Rs. 3,634.00 billion (US$ 81 billion)
at March 31, 2011 and profit after tax Rs. 40.25 billion (US$ 896 million) for the year ended March
31, 2011. The Bank has a network of 2,044 branches and about 5,546 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 specialized
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 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).
History:
ICICI Bank was originally promoted in 1994 by ICICI Limited, an Indian financial institution, andwas its wholly-owned subsidiary. ICICI's shareholding in ICICI Bank was reduced to 46% througha public offering of shares in India in fiscal 1998, an equity offering in the form of ADRs listed onthe NYSE in fiscal 2000, ICICI Bank's acquisition of Bank of Madura Limited in an all-stockamalgamation in fiscal 2001, and secondary market sales by ICICI to institutional investors infiscal 2001 and fiscal 2002. ICICI was formed in 1955 at the initiative of the World Bank, theGovernment of India and representatives of Indian industry. The principal objective was to create a
development financial institution for providing medium-term and long-term project financing toIndian businesses. In the 1990s, ICICI transformed its business from a development financialinstitution offering only project finance to a diversified financial services group offering a widevariety of products and services, both directly and through a number of subsidiaries and affiliateslike ICICI Bank. In 1999, ICICI become the first Indian company and the first bank or financialinstitution from non-Japan Asia to be listed on the NYSE.
After consideration of various corporate structuring alternatives in the context of the emerging
competitive scenario in the Indian banking industry, and the move towards universal banking, the
managements of ICICI and ICICI Bank formed the view that the merger of ICICI with ICICI Bank
would be the optimal strategic alternative for both entities, and would create the optimal legal
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structure for the ICICI group's universal banking strategy. The merger would enhance value for
ICICI shareholders through the merged entity's access to low-cost deposits, greater opportunities
for earning fee-based income and the ability to participate in the payments system and provide
transaction-banking services. The merger would enhance value for ICICI Bank shareholders
through a large capital base and scale of operations, seamless access to ICICI's strong corporate
relationships built up over five decades, entry into new business segments, higher market share in
various business segments, particularly fee-based services, and access to the vast talent pool o
ICICI and its subsidiaries. In October 2001, the Boards of Directors of ICICI and ICICI Bank
approved the merger of ICICI and two of its wholly-owned retail finance subsidiaries, ICICI
Personal Financial Services Limited and ICICI Capital Services Limited, with ICICI Bank. The
merger was approved by shareholders of ICICI and ICICI Bank in January 2002, by the High Court
of Gujarat at Ahmadabad in March 2002, and by the High Court of Judicature at Mumbai and the
Reserve Bank of India in April 2002. Consequent to the merger, the ICICI group's financing and
banking operations, both wholesale and retail, have been integrated in a single entity.
Board of Directors:
ICICI Bank's Board members include eminent individuals with a wealth of experience in
international business, management consulting, banking and financial services.
Director's Profiles
ChandaKochharManaging Director and Chief Executive Officer
N.S. Kannan K. Ramkumar Rajiv SabharwalExecutive Director & CFO Executive Director Executive Director
Board Members:
Mr. K. V. Kamath, Chairman
Mr. SridarIyengar
Mr. Homi R. Khusrokhan
Dr. Anup K. Pujari
Mr. M.S. Ramachandran
http://www.icicibank.com/aboutus/board-of-members-kvk.htmlhttp://www.icicibank.com/aboutus/board-of-members-iyengar.htmlhttp://www.icicibank.com/aboutus/board-of-directors-homi.htmlhttp://www.icicibank.com/aboutus/board-of-members-pujari.htmlhttp://www.icicibank.com/aboutus/board-of-members-ramachandran.htmlhttp://www.icicibank.com/aboutus/board-of-members-ramachandran.htmlhttp://www.icicibank.com/aboutus/board-of-members-pujari.htmlhttp://www.icicibank.com/aboutus/board-of-directors-homi.htmlhttp://www.icicibank.com/aboutus/board-of-members-iyengar.htmlhttp://www.icicibank.com/aboutus/board-of-members-kvk.html -
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Dr. Tushaar Shah
Mr. M.K. Sharma
Mr.V.Sridar
Mr. V. PremWatsa
Ms.ChandaD.Kochhar,
Managing Director & CEO
Mr.N.S.Kannan,
Executive Director & CFO
Mr.K.Ramkumar,
Executive Director
Mr.RajivSabharwal,
Executive Director
Investor Relations:
All the latest, in-depth information about ICICI Bank's financial performance and businessinitiatives.
ICICI Bank disseminates information on its operations and initiatives on a regular basis. The ICICI
Bank website serves as a key investor awareness facility, allowing stakeholders to access
information on ICICI Bank at their convenience. ICICI Bank's dedicated investor relations
personnel play a proactive role in disseminating information to both analysts and investors andrespond to specific queries.
BALANCE SHEET AS AT MARCH 31, 2011
PARTICULARS As atMarch 31, 2011
As atMarch 31, 2010
http://www.icicibank.com/aboutus/board-of-members-tushaar.htmlhttp://www.icicibank.com/aboutus/board-of-members-sharma.htmlhttp://www.icicibank.com/aboutus/board-of-directors-sridhar.htmlhttp://www.icicibank.com/aboutus/board-of-members-watsa.htmlhttp://www.icicibank.com/aboutus/board-of-directors-kochhar.htmlhttp://www.icicibank.com/aboutus/board-of-directors-kochhar.htmlhttp://www.icicibank.com/aboutus/board-of-directors-kannan.htmlhttp://www.icicibank.com/aboutus/board-of-directors-kannan.htmlhttp://www.icicibank.com/aboutus/board-of-directors-ramkumar.htmlhttp://www.icicibank.com/aboutus/board-of-directors-ramkumar.htmlhttp://www.icicibank.com/aboutus/board-of-directors-rajiv-sabharwal.htmlhttp://www.icicibank.com/aboutus/board-of-directors-rajiv-sabharwal.htmlhttp://www.icicibank.com/aboutus/board-of-directors-rajiv-sabharwal.htmlhttp://www.icicibank.com/aboutus/board-of-directors-rajiv-sabharwal.htmlhttp://www.icicibank.com/aboutus/board-of-directors-ramkumar.htmlhttp://www.icicibank.com/aboutus/board-of-directors-ramkumar.htmlhttp://www.icicibank.com/aboutus/board-of-directors-kannan.htmlhttp://www.icicibank.com/aboutus/board-of-directors-kannan.htmlhttp://www.icicibank.com/aboutus/board-of-directors-kochhar.htmlhttp://www.icicibank.com/aboutus/board-of-directors-kochhar.htmlhttp://www.icicibank.com/aboutus/board-of-members-watsa.htmlhttp://www.icicibank.com/aboutus/board-of-directors-sridhar.htmlhttp://www.icicibank.com/aboutus/board-of-directors-sridhar.htmlhttp://www.icicibank.com/aboutus/board-of-members-sharma.htmlhttp://www.icicibank.com/aboutus/board-of-members-tushaar.html -
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Rs.in crores Rs. in crores
SOURCES OF FUNDS:
Share Capital 11518.20 11148.89
Share warrants and outstanding 2.93 0.00
Total reserve 539388.24 505034.77
Deposits 2256021.08 2020165.97
Borrowings 1095542.77 942635.00
Other liabilities and provisions 159863.47 155011.83
TOTAL LIABILITIES
4062336.69 3633997.15
APPLICATION OF FUNDS:
Cash and balance with reserve bank ofindia 209069.70 275142.92
Balance with banks and money at calland short notice 131831.13 113594.02
Investments 1346859.63 1208928.01
Advances 2163659.01 1812055.97
(a) Gross Block 91074.66 71141.15
(b) Less:- Accumulated Depreciation 43632.11 39014.25
Less: impairment of assets 0 0
(c) Net Block 47442.55 32126.90
Lease adjustment0 0
(d) Capital Work-in-Progress 0 0
OTHER ASSETS 163474.66 192149.34
TOTAL ASSETS 4062336.69 3633997.15
Contingent liability 9231216.14 7270840.59
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Bills of collection 85300.27 64749.54
CASH FLOW STATEMENT(Rs. in Million)
Year ended March 31,
2011 2010
Net profit before tax 67607.03 53453.22
Adjustments for expenses and provisions 36340.87 52409.07
Adjustments for liabilities and assets -154534.06 -711840.82
Cash flow from investing activities -21088.25 61507.32
Cash flow from financing activities 31059.74 13826.17
Effect of exchange fluctuation on translation reserve -490.69 -4954.30
Net increase (decrease) in cash and cash equivalents -59117.72 94025.60
Cash and cash equivalents at 1st April 388736.94 299665.64
Cash and cash equivalents at 31st
march 340900.83 388736.94
APPLICATION OF DOW THEORY:
DATE CLOSING PRICE
2-Jan-12 696.55
3-Jan-12 725.8
4-Jan-12 743.1
5-Jan-12 748.1
6-Jan-12 751.7
7-Jan-12 745.2
9-Jan-12 747.8
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10-Jan-12 774.5
11-Jan-12 780.15
12-Jan-12 781.4
13-Jan-12 789.45
16-Jan-12 791.6
17-Jan-12 785.55
18-Jan-12 769.65
19-Jan-12 797.2
20-Jan-12 842.45
23-Jan-12 856.75
24-Jan-12 888.05
25-Jan-12 880.05
27-Jan-12 887.95
30-Jan-12 852.2
31-Jan-12 902.15
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INFERENCE:
The above graph represents the daily fluctuations n the Market
which is one of the major proponent in Dow Theory. It is difficult
to forecast day-to-day movements in the market. In the above 20
days of trading, the share price of ICICI lowest was on 2nd JAN.-
Rs.696.55 and the highest was on 23rd MAY.Rs. 902.15.
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INFER
ENCES
:
A 20-
day
moving average of daily prices may be used to detect a short term trend. This stock price line
stands as an indicator to an investor whether to buy the share or to sell it. In the above 20-day
average the highest 3-year moving average is on 25th JAN.
DATE CLOSING
PRICE
SUM OF THREE
YEARS.
AVERAGE
2-Jan-12 696.55
3-Jan-12 725.8 2165.45 721.81
4-Jan-12 743.1 2217 7395-Jan-12 748.1 2242.9 747.63
6-Jan-12 751.7 2245 748.33
7-Jan-12 745.2 2244.7 748.23
9-Jan-12 747.8 2267.5 755.83
10-Jan-12 774.5 2302.45 767.48
11-Jan-12 780.15 2336.05 778.68
12-Jan-12 781.4 2351 783.66
13-Jan-12 789.45 2362.45 787.48
16-Jan-12 791.6 2366.6 788.8617-Jan-12 785.55 2346.8 782.26
18-Jan-12 769.65 2352.4 784.13
19-Jan-12 797.2 2409.3 803.1
20-Jan-12 842.45 2496.4 832.13
23-Jan-12 856.75 2587.25 862.41
24-Jan-12 888.05 2624.85 874.95
25-Jan-12 880.05 2656.05 885.35
27-Jan-12 887.95 2620.2 873.4
30-Jan-12 852.2 2642.3 880.7631-Jan-12 902.15
STATE BANK OF INDIA
Company Profile:
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The evolution of State Bank of India can be traced back to the first decade of the 19th
century. It began with the establishment of the Bank of Calcutta in Calcutta, on 2 June 1806.
The bank was redesigned as the Bank of Bengal, three years later, on 2 January 1809. It was
the first ever joint-stock bank of the British India, established under the sponsorship of the
Government of Bengal. Subsequently, the Bank of Bombay (established on 15 April 1840)
and the Bank of Madras (established on 1 July 1843) followed the Bank of Bengal. These
three banks dominated the modern banking scenario in India, until when they were
amalgamated to form the Imperial Bank of India, on 27 January1921
State Bank of India is an India-based bank. In addition to banking, the Company,
through its subsidiaries, provides a range of financial services, which include life insurance,
merchant banking, mutual funds, credit card, factoring, security trading, pension fund
management and primary dealership in the money market. It operates in four business
segments: Treasury, Corporate/Wholesale Banking, Retail Banking and Other Banking
Business. The Treasury segment includes the investment portfolio and trading in foreign
exchange contracts and derivative contracts.
The Corporate/Wholesale Banking segment comprises the lending activities of
Corporate Accounts Group, Mid Corporate Accounts Group and Stressed Assets
Management Group. The Retail Banking segment consists of branches in National Banking
Group, which primarily includes personal banking activities, including lending activities to
corporate customers having banking relations with branches in the National Banking Group.
History:
An important turning point in the history of State Bank of India is the launch of the first Five
Year Plan of independent India, in 1951. The Plan aimed at serving the Indian economy ingeneral and the rural sector of the country, in particular. Until the Plan, the commercial banks
of the country, including the Imperial Bank of India, confined their services to the urban
sector. Moreover, they were not equipped to respond to the growing needs of the economic
revival taking shape in the rural areas of the country. Therefore, in order to serve the
economy as a whole and rural sector in particular, the All India Rural Credit Survey
Committee recommended the formationof a state-partnered and state-sponsoredbank.
The All India Rural Credit Survey Committee proposed the take over of the Imperial Bank of
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India, and integrating with it, the former state-owned or state-associate banks. Subsequently,
an Act was passed in the Parliament of India in May 1955. As a result, the State Bank of
India (SBI) was established on 1 July 1955. This resulted in making the State Bank of India
more powerful, because as much as a quarter of the resources of the Indian banking system
were controlled directly by the State. Later on, the State Bank of India (Subsidiary Banks)
Act was passed in 1959. The Act enabled the State Bank of India to make the eight
formerState-associated banks as its subsidiaries.
The State Bank of India emerged as a pacesetter, with its operations carried out by the 480
offices comprising branches, sub offices and three Local Head Offices, inherited from the
Imperial Bank. Instead of serving as mere repositories of the community's savings and
lending to creditworthy parties, the State Bank of India catered to the needs of the customers,
by banking purposefully. The bank served the heterogeneous financial needs of the planned
economic development.
INVESTOR RELATIONS :
State Bank of India, the countrys largest commercial Bank in terms of profits, assets,
deposits, branches and employees, welcomes you to its Investors Relations Section. SBI,
with its heritage dating back to the year 1806, strives to continuously provide latest and up to
date information on its financial performance. It is our endeavour to walk on the path of
transparency and allow complete access to all the stakeholders enabling total awareness about
the Bank. The Bank communicates with the stakeholders through a variety of channels, such
as through e-mail, website, conference call, one-on-one meeting, analysts meet and
attendance at Investor Conference throughout the world.
Please find below Banks financial results, analysis of performance and other highlights
which will be of interest to Investors, Fund Managers and Analysts. SBI has always been
fundamentally strong in its core business which is mirrored in its resultsyear after year.
Board of directors:
1 Mr. P Bhatt Chairman / Chair Person
2 Dr.AshokJhunjhunwala Director
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Branches:
The corporate centre of SBI is located in Mumbai. In order to cater to different functions,
there are several other establishments in and outside Mumbai, apart from the corporate
centre. The bank boasts of having as many as 14 local head offices and 57 Zonal Offices,
located at major cities throughout India. It is recorded that SBI has about 10000 branches,
well networked to cater to its customers throughout India.
ATMServices:
SBI provides easy access to money to its customers through more than 8500 ATMs in India.
The Bank also facilitates the free transaction of money at the ATMs of State Bank Group,
which includes the ATMs of State Bank of India as
Well as the Associate BanksState Bank of Bikaner & Jaipur,State Bank of Hyderabad,State Bank of Indore, etc.
You may also transact money through SBI Commercial and International Bank Ltd by using
the State Bank ATM-cum-Debit (Cash Plus) card.
3 Dr.(Mrs.)VasanthaBharuchaDirector
4 Mrs.ShyamalaGopinathDirector
5 Mr.SVenkatachalam Director
6 Mr.AshokChawlaDirector
7 Mr.DSundaramDirector
8 Mr.Dileep C ChoksiDirector
9 Dr.Rajiv Kumar Director
10 Mr.RSridharanManaging Director
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Subsidiaries:
The State Bank Group includes a network of eight banking subsidiaries and several non-
banking subsidiaries. Through the establishments, it offers various services including
merchant banking services, fund management, factoring services, primary dealership in
government securities, credit cards and insurance.
The eight banking subsidiaries are:
State Bank of Bikaner and Jaipur (SBBJ)
State Bank of Hyderabad (SBH)
State Bank of India (SBI)
State Bank of Indore (SBIR) State Bank of Mysore (SBM)
State Bank of Patiala (SBP)
State Bank of Saurashtra (SBS)
State Bank of Travancore (SBT)
Personal Banking:
SBI Term Deposits SBI Loan For Pensioners
SBI Recurring Deposits Loan Against Mortgage Of Property SBI Housing Loan Against Shares & Debentures
SBI Car Loan Rent Plus Scheme
SBI Educational Loan Medi-Plus Scheme
Other Services:
Agriculture/Rural Banking
NRI Services ATM Services
Demat Services
Corporate Banking
Internet Banking
Mobile Banking
International Banking
Safe Deposit Locker
RBIEFT
E-Pay
E-Rail SBI VishwaYatra Foreign Travel Card
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Broking Services
Gift Cheques
BALANCE SHEET AS AT MARCH 31, 2011
PARTICULARS As atMarch 31, 2011
Rs.in crores
As atMarch 31, 2010
Rs. in crores
SOURCES OF FUNDS:
Share Capital 6349.99 6348.83
Share warrants and outstanding 0.00 0.00
Total reserve 643510.44 653143.16
Deposits 9339358.13 8041162.27
Borrowings 1195689.55 1030116.01
Other liabilities and provisions 1052483.89 803367.04
TOTAL LIABILITIES 12237362.01 10534137.31
APPLICATION OF FUNDS:
Cash and balance with reserve bank of india 943955.02 612908.65
Balance with banks and money at call andshort notice 284786.46 348929.76
Investments 2956005.69 2857900.71
Advances 7567194.48 6319141.52
(a) Gross Block 131892.85 118316.27
(b) Less:- Accumulated Depreciation 87575.29 77141.07
Less: impairment of assets 0 0
(c) Net Block 44317.56 41175.20
Lease adjustment 2.03 2.03
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(d) Capital Work-in-Progress 3322.31 2951.84
Other assets 437778.47 351127.60
Total assets 12237362.01 10534137.31
Contingent liability 7304846.05 5484468.85
Bills of collection 599049.83 479223.28
CASH FLOW STATEMENT
(Rs. in Million)
Year ended March 31,
2011 2010
Net profit before tax 149542.31 139260.96
Adjustments for expenses and provisions 126615.34 51863.33
Adjustments for liabilities and assets 131861.30 -140025.50
Cash flow from investing activities -12455.31 -17615.23
Cash flow from financing activities 20571.07 -33596.71
Effect of exchange fluctuation on translation reserve -547.61 -12937.75
Net increase (decrease) in cash and cash equivalents 350940.98 -69261.82
Cash and cash equivalents at 1st April 861887.14 1044037.99
Cash and cash equivalents at 31st march 1228741.48 961838.42
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APPLICATION OF DOW THEORY:
DATE CLOSING PRICE
2-Jan-12 1,627.65
3-Jan-12 1,705.65
4-Jan-12 1,696.05
5-Jan-12 1,692.45
6-Jan-12 1,672.75
7-Jan-12 1,669.10
9-Jan-12 1,637.2510-Jan-12 1,702.60
11-Jan-12 1,726.95
12-Jan-12 1,764.40
13-Jan-12 1,776.10
16-Jan-12 1,816.40
17-Jan-12 1,844.00
18-Jan-12 1,865.35
19-Jan-12 1,884.30
20-Jan-12 1,932.85
23-Jan-12 1,940.5024-Jan-12 2,040.80
25-Jan-12 2,058.00
27-Jan-12 2,040.60
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INFERENCE:
The above graph represents the daily fluctuations in the market which is one of the major
proponent in Dow Theory. It is difficult to forecast day-to-day movements in the market. In
the above 20 days of trading, the share price ofSBIN lowest was on 2nd JAN.Rs. 1627.65
and the highest was on 25th JAN.Rs. 2058.60.
DATE CLOSING
PRICE
SUM OF THREE
YEARS
AVERAGE
2-Jan-12 1,627.65
3-Jan-12 1,705.65 5029.35 1676.45
4-Jan-12 1,696.05 5094.15 1698.05
5-Jan-12 1,692.45 5061.25 1672.08
6-Jan-12 1,672.75 5034.3 1678.1
7-Jan-12 1,669.10 4979.1 1659.7
9-Jan-12 1,637.25 5008.95 1669.65
10-Jan-12 1,702.60 5066.8 1688.93
11-Jan-12 1,726.95 5193.95 1731.31
12-Jan-12 1,764.40 5267.45 1755.81
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13-Jan-12 1,776.10 5356.9 1785.63
16-Jan-12 1,816.40 5436.5 1812.16
17-Jan-12 1,844.00 5525.75 1841.91
18-Jan-12 1,865.35 5593.65 1864.55
19-Jan-12 1,884.30 5682.5 1894.1620-Jan-12 1,932.85 5757.65 1919.21
23-Jan-12 1,940.50 5914.15 1971.38
24-Jan-12 2,040.80 6039.3 2013.1
25-Jan-12 2,058.00 6139.4 2046.46
27-Jan-12 2,040.60
INFERENCES:
A 18-day moving average of daily prices may be used to detect a short term trend. This stock
price line stands as an indicator to an investor whether to buy the share or to sell it. In the
above 18-day average the highest 3-year moving average is on 25 th Jan.
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SUMMARY
Investing in financial securities is now considered to be one of the best avenues for
investing ones savings while it is acknowledged to be one of the most risky avenues of
investment. Even Indian Government is planning to encourage people in rural areas to invest
in equity. This will help the markets to stabilize by tapping the rural areas and decreases the
dependency on Foreign Institutional Investors.
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The factors which were studied under this are to know about stock markets in India,
how they work, prerequisites to enter the stock markets, market design, stock selection, when
to buy or sell a stock, how to invest, knowing about market intermediaries.
For successful investment factors like timing, selection, setting targets, avoiding
speculation and constant review of portfolio is advised.
FINDINGS
From the above analysis, it is found that:
ICICI has the worlds best way of delivering banking services and investment
options.ICICI has worldwide branches Due to this, its services are of world class.Total
assets of company have shown an 4.19 percent increase in FY 2010-2011.
SBI has recorded an 9.22 percent of increase in its total assets.
In comparison to ICICI and SBI share price analysis, it is found out that SBI has the
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highest share price value because of its wide spread coverage of market.
If the stock price line falls below the moving average line, the investor should purchase
the stock because the intrinsic value is more than the market price. That means that is
undervalued.
If the stock price line rises above the moving average line, the investor should sell the
stock as the intrinsic value is more than the market price. Therefore, the stock is
overvalued.
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Suggestions
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SUGGESTIONS
Suggestions to an investor for reaping good returns in Equity Investment
Proper scientific way of investigation should be undertaken about sector and its
players before investment
Clear targets should be set before investment
Stock pickup should be always selective and should not depend on rumors of the
market
Define price range first before buying and selling shares
Before buying and selling shares latest price movement trends should be analyzed
Speculation is not advised in the market
Individual Risk tolerance should be known and then be ready for unexpected
Constant proper review of portfolio should be done and wherever required buying and
selling of shares should be done.
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Conclusions
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CONCLUSIONS
Economic liberalization has accelerated the pace of development in the securities market. In
India, the role of securities market has undergone structural transformation with the
introduction of computerized online trading and interconnected market system.
Investment in securities such as shares, debentures and bonds is profitable, but also
involves great deal of risk. Even Indian Government wants to encourage Equity Investment.
According to Fundamental Analysis:
Economy:
While analyzing stock, investor should consider GNP, Price conditions, Economy, Housing,
Construction Activity, Employment, Accumulation of inventories, Personal Disposable
Income, Personal savings, Interest rates, Balance of Trade, Strength of the Rupee in Forex
market and Corporate Taxation (Direct and Indirect)
Sector Analysis:
It is advised to invest in a sector that is either in a pioneering stage or in its expansion stage.
It is advisable to quickly get out of sectors which are in the stagnation stage prior to its lapse
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into the decline stage. The particular phase or stage of a sector can be determined in terms of
sales, profitability and their growth rates amongst other factors.
Company Analysis:
In company analysis, history of the company and line of business, Product portfolios
strength, Market share, Top Management, Intrinsic Values like Patents and
Trademarks held, Foreign collaboration, its need and availability for future, Quality of
competition in the market, present and future, Future business plans and projects,
Level of trading of the companys listed scrip, EPS, its growth and rating vis--vis
other companies in the industry, P/E Ratio, Growth in Sales are analyzed.
According to technical analysis:
The fundamental analysis is the de
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