equity-analysis-banking stocks invest leaf 2011

8/2/2019 Equity-Analysis-Banking Stocks Invest Leaf 2011

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SUMMARY

The Banking Sector, one of the core sectors, has undergone metamorphosis in the light of

liberalization and globalization. The sector seems to be optimistic of posting strong growth

in the couple of years in the view of a reasonable surge in demand. The rise of retail

lending in emerging economies like India has been of recent origin. Asia Pacifics vast

population, combined with high savings rates, explosive economic growth, and

underdeveloped retail banking services, provide the most significant growth opportunities

for banks. Banks will have to serve the retail banking segment effectively in order to utilize

the growth opportunity. A detailed analysis of Banking Sector has been covered in respect

of past growth and performance. Under this project to better understand the Industry I have

used Fundamental tools to make it more authentic and meaningful.

An economy-industry-company (E.I.C) approach has been followed under Fundamental

Analysis which covers effect of Recession, the impact of inflation, FDIs, Export, and GDP

etc. on Banking Sector. The Industry Analysis has been done with the help of SWOT

analysis and industry life cycle. For Company Analysis as a part of Fundamental tool I

have undertaken with the comparative analysis of ICICI Bank, AXIS Bank and HDFC

Bank along with the help of ratio analysis. The fundamental aspect consists of financial and

Non-Financial analysis of these companies.

At the end conclusion and recommendations have been specified so as to make the project

work more meaningful and purposeful.

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CONTENTS

Chapter No. Name of the concept Page No.

I

Introduction

Need of the study

Objectives of the study

Scope of the study

Importance of the study

Methodology of the study

Limitations of the study

II Review of Literature

III Industry Profile

IV Company Profile

V Data analysis and interpretation

VI Findings, Suggestions and Conclusion

VII Bibliography

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CHAPTER I - INTRODUCTION

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INTRODUCTION

India is a developing country. Nowadays many people are interested to invest in financial

markets especially on equities to get high returns, and to save tax in honest way. Equities

are playing a major role in contribution of capital to the business from the beginning. Since

the introduction of shares concept, large numbers of investors are showing interest to invest

in stock market.

In an industry plagued with skepticism and a stock market increasingly difficult to predict

and contend with, if one looks hard enough there may still be a genuine aid for the Day

Trader and Short Term Investor.

The price of a security represents a consensus. It is the price at which one person agrees to

buy and another agrees to sell. The price at which an investor is willing to buy or sell

depends primarily on his expectations. If he expects the security's price to rise, he will buy

it; if the investor expects the price to fall, he will sell it. These simple statements are the

cause of a major challenge in forecasting security prices, because they refer to human

expectations. As we all know firsthand, humans expectations are neither easily quantifiable

nor predictable. If prices are based on investor expectations, then knowing what a security

should sell for (i.e., fundamental analysis) becomes less important than knowing what otherinvestors expect it to sell for. That's not to say that knowing what a security should sell for

isn't important--it is. But there is usually a fairly strong consensus of a stock's future

earnings that the average investor cannot disprove

Fundamental analysis and technical analysis can co-exist in peace and complement each

other. Since all the investors in the stock market want to make the maximum profits

possible, they just cannot afford to ignore either fundamental or technical analysis.

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NEED OF THE STUDY

To start any business capital plays major role. Capital can be acquired in two ways by

issuing shares or by taking debt from financial institutions or borrowing money fromfinancial institutions. The owners of the company have to pay regular interest and principal

amount at the end.

Stock is ownership in a company, with each share of stock representing a tiny piece of

ownership. The more shares you own, the more of the company you own. The more shares

you own, the more dividends you earn when the company makes a profit. In the financial

world, ownership is called Equity.

Advantages of selling stock:

A company can raise more capital than it could borrow.

A company does not have to make periodic interest payments to creditors.

A company does not have to make principal payments

Stock/shares play a major role in acquiring capital to the business in return investors are

paid dividends to the shares they own. The more shares you own the more dividends you

receive.

The role of equity analysis is to provide information to the market. An efficient market

relies on information: a lack of information creates inefficiencies that result in stocks being

misrepresented (over or under valued). This is valuable because it fills information gaps so

that each individual investor does not need to analyze every stock thereby making themarkets more efficient.

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OBJECTIVES OF THE STUDY

The objective of this project is to deeply analyze our Banking Sector for investment

purpose by monitoring the growth rate and performance on the basis of historical data.

The main objectives of the Project study are:

To study the overall growth of Indian Economy which is growing at a fast pace.

Detailed analysis of Banking Sector which is gearing towards international

standards

Analyze the impact of qualitative factors on industrys and companys

prospects

Comparative analysis of three main banks in the industry ICICI Bank, HDFC

Bank and Axis Banks through fundamental analysis.

Suggesting as to which companys shares would be best for an investor to

invest.

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SCOPE OF THE STUDY

The scope of the study is identified after and during the study is conducted. The project

is based on tools like fundamental analysis and ratio analysis. Further, the study is

based on information of last five years.

The analysis is made by taking into consideration three banks i.e. ICICI Bank,

HDFC Bank and AXIS Banks.

The scope of the study is limited for a period of five years.

The scope is limited to only the fundamental analysis of the chosen stocks.

IMPORTANCE OF THE STUDY

Decisions like whether you should buy or sell when trading in the share market is a

difficult task to do. It requires split-hair analysis of the market. To do so one also needs

to have excellent understanding of the market. Equity analysis forms an integral part of

the share trading experience. Equity analysis decides the stance one would take in the

share trading industry. Finding out the highs and lows in the market and analyzing the

equity is of utmost importance before making any sort of investment. Technical

analysis and fundamental analysis form part of the equity analysis.

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METHODOLOGY

Research design or research methodology is the procedure of collecting, analyzing and

interpreting the data to diagnose the problem and react to the opportunity in such a way

where the costs can be minimized and the desired level of accuracy can be achieved to

arrive at a particular conclusion.

The methodology used in the study for the completion of the project and the fulfillment

of the project objectives.

The sample of the stocks for the purpose of collecting secondary data has been selected

on the basis of Random Sampling. The stocks are chosen in an unbiased manner and

each stock is chosen independent of the other stocks chosen. The stocks are chosen

from the automobile sector.

The sample size for the number of stocks is taken as three for fundamental analysis of

stocks as fundamental analysis is very exhaustive and requires detailed study.

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LIMITATIONS

This study has been conducted purely to understand Equity analysis for investors.

The study is restricted to three companies based on Fundamental analysis.

The study is limited to the companies having equities.

Detailed study of the topic was not possible due to limited size of the project.

There was a constraint with regard to time allocation for the research study i.e. for a

period of 45 days.

Suggestions and conclusions are based on the limited data of five years.

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CHAPTER II - REVIEW OF LITERATURE

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SECURITY ANALYSIS

Investment success is pretty much a matter of careful selection and timing of stock

purchases coupled with perfect matching to an individuals risk tolerance. In order to carry

out selection, timing and matching actions an investor must conduct deep security analysis.

Investors purchase equity shares with two basic objectives;

1. To make capital profits by selling shares at higher prices.

2. To earn dividend income.

These two factors are affected by a host of factors. An investor has to carefully understand

and analyze all these factors. There are basically two approaches to study security prices

and valuation i.e. fundamental analysis and technical analysis

The value of common stock is determined in large measure by the performance of the firm

that issued the stock. If the company is healthy and can demonstrate strength and growth,

the value of the stock will increase. When values increase then prices follow and returns on

an investment will increase. However, just to keep the savvy investor on their toes, the mix

is complicated by the risk factors involved. Fundamental analysis examines all the

dimensions of risk exposure and the probabilities of return, and merges them with broader

economic analysis and greater industry analysis to formulate the valuation of a stock.

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FUNDAMENTAL ANALYSIS

Fundamental analysis is a method of forecasting the future price movements of a

financial instrument based on economic, political, environmental and other relevant

factors and statistics that will affect the basic supply and demand of whatever underlies

the financial instrument. It is the study of economic, industry and company conditions in

an effort to determine the value of a companys stock. Fundamental analysis typically

focuses on key statistics in companys financial statements to determine if the stock price

is correctly valued. The term simply refers to the analysis of the economic well-being of

a financial entity as opposed to only its price movements.

Fundamental analysis is the cornerstone of investing. The basic philosophy underlying

the fundamental analysis is that if an investor invests re.1 in buying a share of a

company, how much expected returns from this investment he has.

The fundamental analysis is to appraise the intrinsic value of a security. It insists that no

one should purchase or sell a share on the basis of tips and rumors. The fundamental

approach calls upon the investors to make his buy or sell decision on the basis of a

detailed analysis of the information about the company, about the industry, and the

economy. It is also known as top-down approach. This approach attempts to study the

economic scenario, industry position and the company expectations and is also known as

economic-industry-company approach (EIC approach).

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Thus the EIC approach involves three steps:

1. Economic analysis

2. Industry analysis

3. Company analysis

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1. ECONOMIC ANALYSIS

The level of economic activity has an impact on investment in many ways. If the

economy grows rapidly, the industry can also be expected to show rapid growth and vice

versa. When the level of economic activity is low, stock prices are low, and when the

level of economic activity is high, stock prices are high reflecting the prosperous outlook

for sales and profits of the firms. The analysis of macro economic environment is

essential to understand the behavior of the stock prices.

The commonly analyzed macro economic factors are as follows:

Gross Domestic Product (GDP): GDP indicates the rate of growth of the economy. It

represents the aggregate value of the goods and services produced in the economy. It

consists of personal consumption expenditure, gross private domestic investment and

government expenditure on goods and services and net exports of goods and services.

The growth rate of economy points out the prospects for the industrial sector and the

return investors can expect from investment in shares. The higher growth rate is more

favorable to the stock market.

Savings and investment: It is obvious that growth requires investment which in turn

requires substantial amount of domestic savings. Stock market is a channel through

which the savings are made available to the corporate bodies. Savings are distributed

over various assets like equity shares, deposits, mutual funds, real estate and bullion. The

savings and investment patterns of the public affectthe stock to a great extent.

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Inflation: Along with the growth of GDP, if the inflation rate also increases, then the real

growth would be very little. The effects of inflation on capital markets are numerous. An

increase in the expected rate of inflation is expected to cause a nominal rise in interest

rates. Also, it increases uncertainty of future business and investment decisions. As

inflation increases, it results in extra costs to businesses, thereby squeezing their profit

margins and leading to real declines in profitability.

Interest rates: The interest rate affects the cost of financing to the firms. A decrease in

interest rate implies lower cost of finance for firms and more profitability. More money is

available at a lower interest rate for the brokers who are doing business with borrowed

money. Availability of cheap funds encourages speculation and rise in the price of shares.

Tax structure: Every year in March, the business community eagerly awaits the

Governments announcement regarding the tax policy. Concessions and incentives given

to a certain industry encourage investment in that particular industry. Tax reliefs given

to savings encourage savings. The type of tax exemption has impact on the profitability

of the industries.

Infrastructure facilities: Infrastructure facilities are essential for the growth of industrial

and agricultural sector. A wide network of communication system is a must for the

growth of the economy. Regular supply of power without any power cut would

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boost the production. Banking and financial sectors also should be sound enough to

provide adequate support to the industry. Good infrastructure facilities affect the stock

market favorably.

2.INDUSTRY ANALYSIS

An industry is a group of firms that have similar technological structure of production

and produce similar products and Industry analysis is a type of business research that

focuses on the status of an industry or an industrial sector (a broad industry classification,

like "manufacturing"). Irrespective of specific economic situations, some industries might

be expected to perform better, and share prices in these industries may not decline as

much as in other industries. This identification of economic and industry specific factors

influencing share prices will help investors to identify the shares that fit individual

expectations

Industry Life Cycle: The industry life cycle theory is generally attributed to Julius

Grodensky. The life cycle of the industry is separated into four well defined stages.

Pioneering stage: The prospective demand for the product is promising in this

stage and the technology of the product is low. The demand for the product attracts many

producers to produce the particular product. There would be severe competition and only

fittest companies survive this stage. The producers try to develop brand name,

differentiate the product and create a product image. In this situation, it is difficult to

select companies for investment because the survival rate is unknown.

Rapid growth stage: This stage starts with the appearance of surviving firms

from the pioneering stage. The companies that have withstood the competition grow

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strongly in market share and financial performance. The technology of the production

would have improved resulting in low cost of production and good quality products. The

companies have stable growth rate in this stage and they declare dividend to the share-

holders. It is advisable to invest in the shares of these companies.

Maturity and stabilization stage: the growth rate tends to moderate and the rate

of growth would be more or less equal to the industrial growth rate or the gross domestic

product growth rate. Symptoms of obsolescence may appear in the technology. To keep

going, technological innovations in the production process and products should be

introduced. The investors have to closely monitor the events that take place in the

maturity stage of the industry.

Decline stage: demand for the particular product and the earnings of the

companies in the industry decline. It is better to avoid investing in the shares of the low

growth industry even in the boom period. Investment in the shares of these types of

companies leads to erosion of capital.

Growth of the industry: The historical performance of the industry in terms of growth

and profitability should be analyzed. The past variability in return and growth in reaction

to macro economic factors provide an insight into the future.

Nature of competition: Nature of competition is an essential factor that determines the

demand for the particular product, its profitability and the price of the concerned

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company scrips. The companies' ability to withstand the local as well as the multinational

competition counts much. If too many firms are present in the organized sector, the

competition would be severe. The competition would lead to a decline in the price of the

product. The investor before investing in the scrip of a company should analyze the

market share of the particular company's product and should compare it with the top five

companies.

SWOT analysis: SWOT analysis represents the strength, weakness, opportunity and

threat for an industry. Every investor should carry out a SWOT analysis for the chosen

industry. Take for instance, increase in demand for the industrys product becomes its

strength, presence of numerous players in the market, i.e. competition becomes the threat

to a particular company. The progress in R & D in that industry is an opportunity and

entry of multinationals in the industry is a threat. In this way the factors are to be

arranged and analyzed.

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3. COMPANY ANALYSIS

In the company analysis the investor assimilates the several bits of information related to

the company and evaluates the present and future values of the stock. The risk and return

associated with the purchase of the stock is analyzed to take better investment decisions.

The present and future values are affected by a number of factors.

Competitive edge of the company: Major industries in India are composed of hundreds

of individual companies. Though the number of companies is large, only few companies

control the major market share. The competitiveness of the company can be studied with

the help of the following;

Market share: The market share of the annual sales helps to determine a

companys relative competitive position within the industry. If the market share is

high, the company would be able to meet the competition successfully. The

companies in the market should be compared with like product groups otherwise,

the results will be misleading.

Growth of sales: The rapid growth in sales would keep the shareholder in a better

position than one with stagnant growth rate. Investors generally prefer size and

growth in sales because the larger size companies may be able to withstand the

business cycle rather than the company of smaller size.

Stability of sales: If a firm has stable sales revenue, it will have more stable

earnings. The fall in the market share indicates the declining trend of company,

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even if the sales are stable. Hence the stability of sales should be compared with

its market share and the competitors market share.

Earnings of the company: Sales alone do not increase the earnings but the costs and

expenses of the company also influence the earnings. Further, earnings do not always

increase with increase in sales. The companys sales might have increased but its

earnings per share may decline due to rise in costs. Hence, the investor should not only

depend on the sales, but should analyze the earnings of the company.

Financial analysis: The best source of financial information about a company is its own

financial statements. This is a primary source of information for evaluating the

investment prospects in the particular companys stock. Financial statement analysis is

the study of a companys financial statement from various viewpoints. The statement

gives the historical and current information about the companys operations. Historical

financial statement helps to predict the future and the current information aids to analyze

the present status of the company. The two main statements used in the analysis are

Balance sheet and Profit and Loss Account.

The balance sheet is one of the financial statements that companies prepare every year for

their shareholders. It is like a financial snapshot, the company's financial situation at a

moment in time. It is prepared at the year end, listing the company's current assets and

liabilities. It helps to study the capital structure of the company. It is better for the

investor to avoid a company with excessive debt component in its capital structure. From

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the balance sheet, liquidity position of the company can also be assessed with the

information on current assets and current liabilities.

Ratio analysis: Ratio is a relationship between two figures expressed mathematically.

Financial ratios provide numerical relationship between two relevant financial data.

Financial ratios are calculated from the balance sheet and profit and loss account. The

relationship can be either expressed as a percent or as a quotient. Ratios summarize the

data for easy understanding, comparison and interpretations.

Ratios for investment purposes can be classified into profitability ratios, turnover ratios,

and leverage ratios. Profitability ratios are the most popular ratios since investors prefer

to measure the present profit performance and use this information to forecast the future

strength of the company. The most often used profitability ratios are return on assets,

price earnings multiplier, price to book value, price to cash flow, and price to sales,

dividend yield, return on equity, present value of cash flows, and profit margins.

a) Return on Assets (ROA)

ROA is computed as the product of the net profit margin and the total asset turnover

ratios.

ROA = (Net Profit/Total income) x (Total income/Total Assets)

This ratio indicates the firm's strategic success. Companies can have one of two

strategies: cost leadership, or product differentiation. ROA should be rising or keeping

pace with the company's competitors if the company is successfully pursuing either of

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these strategies, but how ROA rises will depend on the company's strategy. ROA should

rise with a successful cost leadership strategy because the companys increasing

operating efficiency. An example is an increasing, total asset, turnover ratio as the

company expands into new markets, increasing its market share. The company may

achieve leadership by using its assets more efficiently. With a successful product

differentiation strategy, ROA will rise because of a rising profit margin.

b) Return on Investment (ROI)

ROI is the return on capital invested in business, i.e., if an investment Rs 1 crore in men,

machines, land and material is made to generate Rs. 25 lakhs of net profit, then the ROI

is 25%. The computation of return on investment is as follows:

Return on Investment (ROI) = (Net profit/Equity investments) x 100

As this ratio reveals how well the resources of a firm are being used, higher the ratio,

better are the results. The return on shareholders investment should be compared with

the return of other similar firms in the same industry. The inert-firm comparison of this

ratio determines whether the investments in the firm are attractive or not as the investors

would like to invest only where the return is higher.

c) Return on Equity

Return on equity measures how much an equity shareholder's investment is actually

earning. The return on equity tells the investor how much the invested rupee is earning

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from the company. The higher the number, the better is the performance of the company

and suggests the usefulness of the projects the company has invested in.

The computation of return on equity is as follows:

Return on equity = (Net profit to owners/value of the specific owner's

Contribution to the business) x 100

The ratio is more meaningful to the equity shareholders who are invested to know profits

earned by the company and those profits which can be made available to pay dividend to

them.

d) Earnings per Share (EPS)

This ratio determines what the company is earning for every share. For many investors,

earnings are the most important tool. EPS is calculated by dividing the earnings (net

profit) by the total number of equity shares.

The computation of EPS is as follows:

Earnings per share = Net profit/Number of shares outstanding

The EPS is a good measure of profitability and when compared with EPS of similar other

companies, it gives a view of the comparative earnings or earnings power of a firm. EPS

calculated for a number of years indicates whether or not earning power of the company

has increased.

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e) Dividend per Share (DPS)

The extent of payment of dividend to the shareholders is measured in the form of

dividend per share. The dividend per share gives the amount of cash flow from the

company to the owners and is calculated as follows:

Dividend per share = Total dividend payment / Number of shares outstanding

The payment of dividend can have several interpretations to the shareholder. The

distribution of dividend could be thought of as the distribution of excess profits/abnormal

profits by the company. On the other hand, it could also be negatively interpreted as lack

of investment opportunities. In all, dividend payout gives the extent of inflows to the

shareholders from the company.

f) Dividend Payout Ratio

From the profits of each company a cash flow called dividend is distributed among its

shareholders. This is the continuous stream of cash flow to the owners of shares, apart

from the price differentials (capital gains) in the market. The return to the shareholders,

in the form of dividend, out of the company's profit is measured through the payout ratio.

The payout ratio is computed as follows:

Payout Ratio = (Dividend per share / Earnings per share) * 100

The percentage of payout ratio can also be used to compute the percentage of retained

earnings. The profits available for distribution are either paid as dividends or retained

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internally for business growth opportunities. Hence, when dividends are not declared, the

entire profit is ploughed back into the business for its future investments.

g) Dividend Yield

Dividend yield is computed by relating the dividend per share to the market price of the

share. The market place provides opportunities for the investor to buy the company's

share at any point of time. The price at which the share has been bought from the market

is the actual cost of the investment to the shareholder. The market price is to be taken as

the cum-dividend price. Dividend yield relates the actual cost to the cash flows received

from the company. The computation of dividend yield is as follows

Dividend yield = (Dividend per share / Market price per share) * 100

High dividend yield ratios are usually interpreted as undervalued companies in the

market. The market price is a measure of future discounted values, while the dividend per

share is the present return from the investment. Hence, a high dividend yield implies that

the share has been under priced in the market. On the other hand a low dividend yield

need not be interpreted as overvaluation of shares. A company that does not pay out

dividends will not have a dividend yield and the real measure of the market price will be

in terms of earnings per share and not through the dividend payments.

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h) Price/Earnings Ratio (P/E)

The P/E multiplier or the price earnings ratio relates the current market price of the share

to the earnings per share. This is computed as follows:

Price/earnings ratio = Current market price / Earnings per share

This ratio is calculated to make an estimate of appreciation in the value of a share of a

company and is widely used by investors to decide whether or not to buy shares in a

particular company. Many investors prefer to buy the company's shares at a low P/E ratio

since the general interpretation is that the market is undervaluing the share and there will

be a correction in the market price sooner or later. A very high P/E ratio on the other

hand implies that the company's shares are overvalued and the investor can benefit by

selling the shares at this high market price.

i) Debt-to-Equity Ratio

Debt-Equity ratio is used to measure the claims of outsiders and the owners against the

firms assets.

Debt-to-equity ratio = Outsiders Funds / Shareholders Funds

The debt-equity ratio is calculated to measure the extent to which debt financing has been

used in a business. It indicates the proportionate claims of owners and the outsiders

against the firms assets. The purpose is to get an idea of the cushion available to

outsiders on the liquidation of the firm.

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CHAPTER III - INDUSTRY PROFILE

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FINANCIAL MARKETS

Finance is the pre-requisite for modern business and financial institutions play a vital role

in the economic system. It is through financial markets and institutions that the financial

system of an economy works. Financial markets refer to the institutional arrangements

for dealing in financial assets and credit instruments of different types such as currency,

cheques, bank deposits, bills, bonds, equities, etc.

Financial market is a broad term describing any marketplace where buyers and sellers

participate in the trade of assets such as equities, bonds, currencies and derivatives. They

are typically defined by having transparent pricing, basic regulations on trading, costs

and fees and market forces determining the prices of securities that trade.

Generally, there is no specific place or location to indicate a financial market. Wherever a

financial transaction takes place, it is deemed to have taken place in the financial market.

Hence financial markets are pervasive in nature since financial transactions are

themselves very pervasive throughout the economic system. For instance, issue of equity

shares, granting of loan by term lending institutions, deposit of money into a bank,

purchase of debentures, sale of shares and so on.

In a nutshell, financial markets are the credit markets catering to the various needs of the

individuals, firms and institutions by facilitating buying and selling of financial assets,

claims and services.

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CLASSIFICATION OF FINANCIAL MARKETS

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Financial markets

Organized markets Unorganized markets

Capital Markets Money Markets

Industrial Securities

Market

Government

Securities Market

Long-term loan

market

Primary Market

Secondary market

Call Money Market

Commercial Bill

Market

Treasury Bill Market

Money Lenders,

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Capital Market

The capital market is a market for financial assets which have a long or indefinite

maturity. Generally, it deals with long term securities which have a period of above one

year. In the widest sense, it consists of a series of channels through which the savings of

the community are made available for industrial and commercial enterprises and public

authorities. As a whole, capital market facilitates raising of capital.

The major functions performed by a capital market are:

1. Mobilization of financial resources on a nation-wide scale.

2. Securing the foreign capital and know-how to fill up deficit in the required

resources for economic growth at a faster rate.

3. Effective allocation of the mobilized financial resources, by directing the same to

projects yielding highest yield or to the projects needed to promote balanced

economic development.

Capital market consists of primary market and secondary market.

Primary market: Primary market is a market for new issues or new financial claims.

Hence it is also called as New Issue Market. It basically deals with those securities which

are issued to the public for the first time. The market, therefore, makes available a new

block of securities for public subscription. In other words, it deals with raising of fresh

capital by companies either for cash or for consideration other than cash. The best

example could be Initial Public Offering (IPO) where a firm offers shares to the public

for the first time.

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Secondary market: Secondary market is a market where existing securities are traded. In

other words, securities which have already passed through new issue market are traded in

this market. Generally, such securities are quoted in the stock exchange and it provides a

continuous and regular market for buying and selling of securities. This market consists

of all stock exchanges recognized by the government of India.

Money Market

Money markets are the markets for short-term, highly liquid debt securities. Money

market securities are generally very safe investments which return relatively low interest

rate that is most appropriate for temporary cash storage or short term time needs. It

consists of a number of sub-markets which collectively constitute the money market

namely call money market, commercial bills market, acceptance market, and Treasury

bill market.

Derivatives Market

The derivatives market is the financial market forderivatives, financial instruments like

futures contracts or options, which are derived from other forms ofassets. A derivative is

a security whose price is dependent upon or derived from one or more underlying

assets. The derivative itself is merely a contract between two or more parties. Its value is

determined by fluctuations in the underlying asset. The most common underlying assets

include stocks, bonds, commodities, currencies, interest rates and market indexes. The

important financial derivatives are the following:

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Forwards: Forwards are the oldest of all the derivatives. A forward contract

refers to an agreement between two parties to exchange an agreed quantity of an

asset for cash at a certain date in future at a predetermined price specified in that

agreement. The promised asset may be currency, commodity, instrument etc.

Futures: Future contract is very similar to a forward contract in all respects

excepting the fact that it is completely a standardized one. It is nothing but a

standardized forward contract which is legally enforceable and always traded on

an organized exchange.

Options: A financial derivative that represents a contract sold by one party

(option writer) to another party (option holder). The contract offers the buyer the

right, but not the obligation, to buy (call) or sell (put) a security or other financial

asset at an agreed-upon price (the strike price) during a certain period of time or

on a specific date (exercise date). Call options give the option to buy at certain

price, so the buyer would want the stock to go up. Put options give the option to

sell at a certain price, so the buyer would want the stock to go down.

Swaps: It is yet another exciting trading instrument. Infact, it is the combination

of forwards by two counterparties. It is arranged to reap the benefits arising from

the fluctuations in the market either currency market or interest rate market or

any other market for that matter.

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Foreign Exchange Market

It is a market in which participants are able to buy, sell, exchange and speculate on

currencies. Foreign exchange markets are made up of banks, commercial companies,

central banks, investment management firms, hedge funds, and retail forex brokers and

investors. The forex market is considered to be the largest financial market in the world.

It is a worldwide decentralized over-the-counter financial market for the trading of

currencies. Because the currency markets are large and liquid, they are believed to be the

most efficient financial markets. It is important to realize that the foreign exchange

market is not a single exchange, but is constructed of a global network of computers that

connects participants from all parts of the world.

Commodities Market

It is a physical or virtual marketplace for buying, selling and trading raw or primary

products. For investors' purposes there are currently about 50 major commodity markets

worldwide that facilitate investment trade in nearly 100 primary

commodities. Commodities are split into two types: hard and soft commodities. Hard

commodities are typically natural resources that must be mined or extracted (gold,

rubber, oil, etc.), whereas soft commodities are agricultural products or livestock (corn,

wheat, coffee, sugar, soybeans, pork, etc.)

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INDIAN FINANCIAL MARKETS

India Financial market is one of the oldest in the world and is considered to be the fastest

growing and best among all the markets of the emerging economies.

The history of Indian capital markets dates back 200 years toward the end of the

18th century when India was under the rule of the East India Company. The

development of the capital market in India concentrated around Mumbai where

no less than 200 to 250 securities brokers were active during the second half of

the 19th century.

The financial market in India today is more developed than many other sectors because it

was organized long before with the securities exchanges of Mumbai, Ahmadabad

and Kolkata were established as early as the 19th century.

By the early 1960s the total number of securities exchanges in India rose to eight,

including Mumbai, Ahmadabad and Kolkata apart from Madras, Kanpur, Delhi,

Bangalore and Pune. Today there are 21 regional securities exchanges in India in

addition to the centralized NSE (National Stock Exchange) and OTCEI (Over the

Counter Exchange of India).

However the stock markets in India remained stagnant due to stringent controls on the

market economy that allowed only a handful of monopolies to dominate their respective

sectors. The corporate sector wasn't allowed into many industry segments, which were

dominated by the state controlled public sector resulting in stagnation of the economy

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right up to the early 1990s. Thereafter when the Indian economy began liberalizing and

the controls began to be dismantled or eased out; the securities markets witnessed a flurry

of IPOs that were launched. This resulted in many new companies across different

industry segments to come up with newer products and services.

A remarkable feature of the growth of the Indian economy in recent years has been the

role played by its securities markets in assisting and fuelling that growth with money rose

within the economy. This was in marked contrast to the initial phase of growth in many

of the fast growing economies of East Asia that witnessed huge doses of FDI (Foreign

Direct Investment) spurring growth in their initial days of market decontrol. During this

phase in India much of the organized sector has been affected by high growth as the

financial markets played an all-inclusive role in sustaining financial resource

mobilization. Many PSUs (Public Sector Undertakings) that decided to offload part of

their equity were also helped by the well-organized securities market in India.

The launch of the NSE (National Stock Exchange) and the OTCEI (Over the Counter

Exchange of India) during the mid 1990s by the government of India was meant to usher

in an easier and more transparent form of trading in securities. The NSE was conceived

as the market for trading in the securities of companies from the large-scale sector and

the OTCEI for those from the small-scale sector. While the NSE has not just done well to

grow and evolve into the virtual backbone of capital markets in India the OTCEI

struggled and is yet to show any sign of growth and development. The integration of IT

into the capital market infrastructure has been particularly smooth in India due to the

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countrys world class IT industry. This has pushed up the operational efficiency of the

Indian stock market to global standards and as a result the country has been able to

capitalize on its high growth and attract foreign capital like never before.

The regulating authority for capital markets in India is the SEBI (Securities and

Exchange Board of India). SEBI came into prominence in the 1990s after the capital

markets experienced some turbulence. It had to take drastic measures to plug many

loopholes that were exploited by certain market forces to advance their vested interests.

After this initial phase of struggle SEBI has grown in strength as the regulator of Indias

capital markets and as one of the countrys most important institutions.

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FINANCIAL MARKET REGULATIONS

Regulations are an absolute necessity in the face of the growing importance of capital

markets throughout the world. The development of a market economy is dependent on

the development of the capital market. The regulation of a capital market involves the

regulation of securities; these rules enable the capital market to function more efficiently

and impartially.

A well regulated market has the potential to encourage additional investors to partake,

and contribute in, furthering the development of the economy. The chief capital market

regulatory authority is Securities and Exchange Board of India (SEBI).

SEBI is the regulatorfor the securities market in India. It is the apex body to develop and

regulate the stock market in India It was formed officially by the Government of India in

1992 with SEBI Act 1992 being passed by the Indian Parliament. Chaired by C B Bhave,

SEBI is headquartered in the popular business district of Bandra-Kurla complex in

Mumbai, and has Northern, Eastern, Southern and Western regional offices in New

Delhi, Kolkata, Chennai and Ahmedabad. In place of Government Control, a statutory

and autonomous regulatory board with defined responsibilities, to cover both

development & regulation of the market, and independent powers has been set up.

The basic objectives of the Board were identified as:

to protect the interests of investors in securities;

to promote the development of Securities Market;

to regulate the securities market and

Equity Analysis
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For matters connected therewith or incidental thereto.

Since its inception SEBI has been working targeting the securities and is attending to the

fulfillment of its objectives with commendable zeal and dexterity. The improvements in

the securities markets like capitalization requirements, margining, establishment of

clearing corporations etc. reduced the risk of credit and also reduced the market.

SEBI has introduced the comprehensive regulatory measures, prescribed registration

norms, the eligibility criteria, the code of obligations and the code of conduct for

different intermediaries like, bankers to issue, merchant bankers, brokers and sub-

brokers, registrars, portfolio managers, credit rating agencies, underwriters and others. It

has framed bye-laws, risk identification and risk management systems for Clearing

houses of stock exchanges, surveillance system etc. which has made dealing in securities

both safe and transparent to the end investor.

Another significant event is the approval of trading in stock indices (like S&P CNX Nifty

& Sensex) in 2000. A market Index is a convenient and effective product because of the

following reasons:

It acts as a barometer for market behavior;

It is used to benchmark portfolio performance;

It is used in derivative instruments like index futures and index options;

It can be used for passive fund management as in case of Index Funds.

Equity Analysis
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Two broad approaches of SEBI is to integrate the securities market at the national level,

and also to diversify the trading products, so that there is an increase in number of traders

including banks, financial institutions, insurance companies, mutual funds, primary

dealers etc. to transact through the Exchanges. In this context the introduction of

derivatives trading through Indian Stock Exchanges permitted by SEBI in 2000 AD is a

real landmark.

SEBI has enjoyed success as a regulator by pushing systemic reforms aggressively and

successively (e.g. the quick movement towards making the markets electronic and

paperless rolling settlement on T+2 bases). SEBI has been active in setting up the

regulations as required under law.

STOCK EXCHANGES IN INDIA

Stock Exchanges are an organized marketplace, either corporation or mutual

organization, where members of the organization gather to trade company stocks or other

securities. The members may act either as agents for their customers, or as principals for

their own accounts.

As per the Securities Contracts Regulation Act, 1956 a stock exchange is an association,

organization or body of individuals whether incorporated or not, established for the

purpose of assisting, regulating and controlling business in buying, selling and dealing in

securities.

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Stock exchanges facilitate for the issue and redemption of securities and other financial

instruments including the payment of income and dividends. The record keeping is

central but trade is linked to such physical place because modern markets are

computerized. The trade on an exchange is only by members and stock broker do have a

seat on the exchange.

List of Stock Exchanges in India

Bombay Stock Exchange

National Stock Exchange

OTC Exchange of India

Regional Stock Exchanges

1. Ahmedabad

2. Bangalore

3. Bhubaneswar

4. Calcutta

5. Cochin

6. Coimbatore7. Delhi

8. Guwahati

9. Hyderabad

10. Jaipur

11. Ludhiana

12. Madhya Pradesh

13. Madras

14. Magadh

15. Mangalore

16. Meerut

17. Pune

18. Saurashtra Kutch

19. Uttar Pradesh

20. Vadodara

Equity Analysis
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BOMBAY STOCK EXCHANGE

A very common name for all traders in the stock market, BSE, stands for Bombay

Stock Exchange. It is the oldest market not only in the country, but also in Asia. In the

early days, BSE was known as "The Native Share & Stock Brokers Association." It

was established in the year 1875 and became the first stock exchange in the country to

be recognized by the government. In 1956, BSE obtained a permanent recognition from

the Government of India under the Securities Contracts (Regulation) Act, 1956.

In the past and even now, it plays a pivotal role in the development of the country's

capital market. This is recognized worldwide and its index, SENSEX, is also tracked

worldwide. Earlier it was an Association of Persons (AOP), but now it is a

demutualised and corporatised entity incorporated under the provisions of the

Companies Act, 1956, pursuant to the BSE (Corporatisation and Demutualization)

Scheme, 2005 notified by the Securities and Exchange Board of India (SEBI).

BSE Vision

The vision of the Bombay Stock Exchange is to "Emerge as the premier Indian stock

exchange by establishing global benchmarks."


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BSE Management

Bombay Stock Exchange is managed professionally by Board of Directors. It

comprises of eminent professionals, representatives of Trading Members and the

Managing Director. The Board is an inclusive one and is shaped to benefit from the

market intermediaries participation.

The Board exercises complete control and formulates larger policy issues. The day-to-

day operations of BSE are managed by the Managing Director and its school of

professional as a management team.

BSE Network

The Exchange reaches physically to 417 cities and towns in the country. The

framework of it has been designed to safeguard market integrity and to operate with

transparency. It provides an efficient market for the trading in equity, debt instruments

and derivatives. Its online trading system, popularly known as BOLT, is a proprietary

system and it is BS 7799-2-2002 certified. The BOLT network was expanded,

nationwide, in 1997. The surveillance and clearing & settlement functions of the

Exchange are ISO 9001:2000 certified.


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BSE Facts

BSE as a brand is synonymous with capital markets in India. The BSE SENSEX is the

benchmark equity index that reflects the robustness of the economy and finance. It was

the

First in India to introduce Equity Derivatives

First in India to launch a Free Float Index

First in India to launch US$ version of BSE Sensex

First in India to launch Exchange Enabled Internet Trading Platform

First in India to obtain ISO certification for Surveillance, Clearing & Settlement

'BSE On-Line Trading System (BOLT) has been awarded the globally

recognized the Information Security Management System standard

BS7799-2:2002.

First to have an exclusive facility for financial training

Moved from Open Outcry to Electronic Trading within just 50 days

BSE with its long history of capital market development is fully geared to continue

its contributions to further the growth of the securities markets of the country, thus

helping India increases its sphere of influence in international financial markets.


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NATIONAL STOCK EXCHANGE OF INDIA

LIMITED

The National Stock Exchange of India Limited has genesis in the report of the High

Powered Study Group on Establishment of New Stock Exchanges, which

recommended promotion of a National Stock Exchange by financial institutions (FIs)

to provide access to investors from all across the country on an equal footing. Based on

the recommendations, NSE was promoted by leading Financial Institutions at the

behest of the Government of India and was incorporated in November 1992 as a tax-

paying company unlike other stock Exchange in the country.

On its recognition as a stock exchange under the Securities Contracts (Regulation) Act,

1956 in April 1993, NSE commenced operations in the Wholesale Debt Market

(WDM) segment in June 1994. The Capital Market (Equities) segment commenced

operations in November 1994 and operations in Derivatives segment commenced in

June 2000.

NSE GROUP

National Securities Clearing Corporation Ltd. (NSCCL)

It is a wholly owned subsidiary, which was incorporated in August 1995 and

commenced clearing operations in April 1996. It was formed to build confidence in

clearing and settlement of securities, to promote and maintain the short and consistent


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settlement cycles, to provide a counter-party risk guarantee and to operate a tight risk

containment system.

NSE.IT Ltd.

It is also a wholly owned subsidiary of NSE and is its IT arm. This arm of the NSE is

uniquely positioned to provide products, services and solutions for the securities

industry. NSE.IT primarily focuses on in the area of trading, broker front-end and back-

office, clearing and settlement, web-based, insurance, etc. Along with this, it also

provides consultancy and implementation services in Data Warehousing, Business

Continuity Plans, Site Maintenance and Backups, Stratus Mainframe Facility

Management, Real Time Market Analysis & Financial News.

India Index Services & Products Ltd. (IISL)

It is a joint venture between NSE and CRISIL Ltd. to provide a variety of indices and

index related services and products for the Indian Capital markets. It was set up in May

1998. IISL has a consulting and licensing agreement with the Standard and Poor's

(S&P), world's leading provider of investible equity indices, for co-branding equity

indices.

National Securities Depository Ltd. (NSDL)

NSE joined hands with IDBI and UTI to promote dematerialization of securities. This

step was taken to solve problems related to trading in physical securities. It commenced

operations in November 1996.


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NSE Facts

It uses satellite communication technology to energize participation from

around 400 cities in India.

NSE can handle up to 1 million trades per day.

It is one of the largest interactive VSAT based stock exchanges in the world.

The NSE- network is the largest private wide area network in India and the first

extended C- Band VSAT network in the world.

Presently more than 9000 users are trading on the real time-online NSE

application.

Today, NSE is one of the largest exchanges in the world and still forging ahead. At

NSE, we are constantly working towards creating a more transparent, vibrant and

innovative capital market.

OVER THE COUNTER EXCHANGE OF INDIA

OTCEI was incorporated in 1990 as a section 25 company under the companies Act

1956 and is recognized as a stock exchange under section 4 of the securities Contracts

Regulation Act, 1956. The exchange was set up to aid enterprising promotes in raising

finance for new projects in a cost effective manner and to provide investors with a

transparent and efficient mode of trading Modeled along the lines of the NASDAQ

market of USA, OTCEI introduced many novel concepts to the Indian capital markets

such as screen-based nationwide trading, sponsorship of companies, market making


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and scrip less trading. As a measure of success of these efforts, the Exchange today has

115 listings and has assisted in providing capital for enterprises that have gone on to

build successful brands for themselves like VIP Advanta, Sonora Tiles & Brilliant

mineral water, etc.

Need for OTCEI:

Studies by NASSCOM, software technology parks of India, the venture capitals funds

and the governments IT tasks Force, as well as rising interest in IT, Pharmaceutical,

Biotechnology and Media shares have repeatedly emphasized the need for a national

stock market for innovation and high growth companies.

Innovative companies are critical to developing economics like India, which is

undergoing a major technological revolution. With their abilities to generate

employment opportunities and contribute to the economy, it is essential that these

companies not only expand existing operations but also set up new units. The key issue

for these companies is raising timely, cost effective and long term capital to sustain

their operations and enhance growth. Such companies, particularly those that have been

in operation for a short time, are unable to raise funds through the traditional financing

methods, because they have not yet been evaluated by the financial world.


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CHAPTER IV - COMPANY PROFILE


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About the Company

Investleaf Management Solutions incorporated as Private Limited company in the

year 2010hasestablished itself as one of the Premier Investment Consultancy Firms,

known for making investing simpler, more understandable and profitable for the

investors. The company directly and through its affiliate programs offers a wide range

of products & services viz: Equity, Derivatives, Currency Futures, Commodities

Trading, IPO's, Mutual Funds, Insurance, Real Estate, Portfolio Management Services

& Depository Services all under one roof, for the convenience and benefit of its

customers.

Equities

Investleaf offers you the best 3-IN-1 online trading accounts from different online

trading firms, blending the best of technology with traditional broking. Investleaf offers

Equity Trading through its business partner Angel Broking Ltd. Angel Broking

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

Angel Broking.

Mutual Funds

Investleaf has a dedicated team of research analysts specializing in mutual funds. This

is a unique feature not found in many other firms. The team comprises analysts from

different fields such as economics, statistics and finance among others. This diverse

background helps us to analyze funds and performance on a variety of parameters both

conventional as well as unconventional. We have developed a proprietary ranking of

mutual funds which is a combination of quantitative and qualitative factors. The team is

equipped to serve both institutional and retail clients. Our research includes

independent objective analysis as well as interactions with fund managers and asset

management companies.


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Commodities

Investleaf has a dedicated team of analysts specializing in commodities and

commodities trading. The team comprises analysts from different fields such as

economics, agriculture science, statistics, and finance among others. This diverse

manpower mix helps us to do a multi perspective analysis of all commodities and filter

the information as per the duration of the trading call. The team is equipped to serve

both institutional and retail clients. Our research, well recognized in the industry is

based on primary surveys, interactions with physical markets players, fundamental,

derivatives, technical and statistical analysis, giving it a sense of completeness.

Analysts have access to the latest market data, charts, market intelligence etc.

constantly analyzing the data to facilitate your trading decisions. Our research is aimed

not only at the long-term traders & investors, but also caters to the needs of short term /

intra day traders. The research calls are disseminated to clients through SMS Alerts,

RM calls and email.

Real Estate

Investleaf brings together a range of services under a single roof.

New Projects aggregated across builders and pass our stringent project and

builder selection criteria and could be Commercial, Industrial or Residential

properties.

Facilities Management for Commercial and Residential Complexes for

housekeeping, building management and office support solutions.

Finance for Commercial and Residential Properties that call for specialist

expertise.

Property Insurance Advisory on the right Insurance solutions.


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Investment Research

Investleaf offers the most comprehensive deal coverage that covers Indias investment

eco-system. Investleaf offers information and reports on M&A, Project Financing,

Initial Public Offerings, Private Placements, Private Equity and Venture Capital

transactions including transaction terms, structures, deal amounts and valuations. It also

contains entity information on all companies involved in these transactions including

target companies, investors and advisors. The hosted platform provides information on

demand and helps reduce research time, allowing users to spend more time on analysis.

Investleaf uses advanced web tools to provide information in an intuitive and user-

friendly format. Investleaf also provides information in spreadsheet & pdf formats to

make life of a financial researcher easy. Investleaf is supported by a team of highly

skilled analysts and journalists who understand the information needs of clients. Users

associated with private equity, venture capital, investment banking, corporate law,

finance and consulting or anyone else with an interest in the Indian deal landscape will

find Investleaf as an indispensable resource.

Vision

Investleaf Management Solutions' Vision is to build brand Value by innovating to

deliver consumer value and customer leadership faster, better and more completely

than our competition. This Vision is supported by two fundamental principles that

provide the foundation for all of our activities: Organizational Excellence and Core

Values.

Attaining this Vision requires superior and continually improving performance in every

area and at every level of the organization.

Investleaf's performance will be guided by a clear and concise strategic statement for


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each business unit and by an ongoing Quest for Excellence within all operational and

staff functions.

This Quest for Excellence requires hiring, developing and retaining a diverse workforce

of the highest caliber. To support this Quest, each function employs metrics to define,

and implements processes to achieve, world-class status.

Mission

The mission of Investleaf Management Solutions is to provide results-oriented

advertising, public relations, and marketing designed to meet our client's objectives by

providing strong marketing concepts and excelling at customer service. We seek to

establish a long lasting partnership with our clients. We desire to measure success for

our clients through awareness, increased service, or other criteria mutually agreed upon

between the agency and the clients. We are committed to maintaining a rewarding

environment in which we can accomplish our mission.

Management Team

Investleaf Management Solutions was founded by Srinivas Gattupalli and Vamshi

Battini. Investleaf believes in successfully delivering value for its customers, partners

and shareholders by way of superior products , services and timely execution.

Srinivas Gattupalli

An MBA Graduate & Financial Research Expert over 12 years of proven skill-sets in

leading Research & Financial services companies and currently pioneering his

entrepreneurial venture Investleaf Management Solutions. His areas of expertise

include Initial Public Offerings, Mergers & Acquisitions, Private Equity and Venture

Capital.


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Mr. Gattupalli is competent in leading functional teams by effectively mentoring and

guiding individual members, recruiting personnel, and training new recruits for

successfully developing new products. A committed financial expert desirous of

assuming wider & more challenging roles for spearheading organizational growth &

profitability by utilizing vast domain knowledge & functional abilities.

His other areas of business interest include web site designing, knowledge

dissemination through web portals, internet and digital marketing, and content

development services. Mr. Gattupalli joined as Research Associate with CapitalIQ in

the year 2000 and gradually moved on to work for leading research companies

including Factset Research Systems, R.R. Donnelley & Sons Company and

GlobalData.

Vamshi B

An MCA graduate and co-promoter of Investleaf Management Solutions, Mr. Vamshi

is efficient in providing guidance and quality technology services to the organization.

Mr. Vamshi is based out in U.S from where he leads the marketing efforts of the

organization. His 10 years stint in the industry and his association with major

companies has offered him complex challenges which he handled efficiently.


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CHAPTER V

DATA ANALYSIS & INTERPRETATIONS


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1. ECONOMY ANALYSIS

Economic analysis is the analysis of forces operating the overall economy a country.

Economic analysis is a process whereby strengths and weaknesses of an economy are

analyzed. Economic analysis is important in order to understand exact condition of an

economy.

The Centre for Monitoring Indian Economy (CMIE) has estimated Indias gross

domestic product (GDP) to expand at 9.2 per cent in 2010-11 as compared to the

growth of 7.4 per cent in 2009-10. Overall growth in industrial output was 10.8 per cent

year-on-year (y-o-y) in October 2010. The growth in the industrial sector is expected to

increase at 9.4 per cent in 2010-11, as compared to 9.2 per cent in 2009-10. According

to a survey by the Confederation of Indian Industry (CII) and ASCON, around 50

segments (out of 127) in the manufacturing sector grew by 39 per cent, entering the

'excellent growth' category, during April-December 2010-11 compared to 29 sectors

(22.9 per cent) in April-December 2009 which shows a marked improvement. Also,

services sector is projected to expand by 10 per cent as compared to 8.6 per cent last

year, led by the trade and transport segment. The major turnaround is expected from the

agriculture and allied sector, which is being projected to grow by 5.7 per cent in 2010-11. As per Use-based classification, the Sectoral growth rates in October 2010 over

October 2009 are 7.7 per cent in Basic goods, 22 per cent in Capital goods and 9.5 per

cent in Intermediate goods. The Consumer durables and Consumer non-durables have

expanded by 31 per cent and 0.1 per cent respectively in the reported month.

The industrial output registered a robust growth of 10.8 per cent year-on-year (y-o-y) in

October 2010. Among the three major constituents of the IIP, manufacturing and

electricity recorded higher growth rates of 11.3 per cent and 8.8 per cent in October as

against their corresponding levels of 10.8 per cent and 4 per cent for the corresponding

month in 2009. The third constituent mining index registered 6.5 per cent in October

2010.


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The Economic scenario

Foreign injections amounted to US$ 6.4 billion in October 2010, which was almost 25

per cent of the total inflows in the stock market registered so far in 2010. The net

foreign fund investment crossed the US$ 100 billion mark on November 8 2010, since

the liberalization policy was implemented in 1992. As per the data given by SEBI, the

total figure stood at US$100.9 billion, wherein US$ 4.78 billion were infused in

November itself. The humungous increase in investment mirrors the foreign investors

faith in the Indian markets. FIIs have made investments worth US$ 4.11 billion in

equities and poured US$ 667.71 million into the debt market.

Data sourced from SEBI shows that the number of registered FIIs stood at 1,738 and

number of registered sub-accounts rose to 5,592 as of November 10, 2010.

As on December 17, 2010, India's foreign exchange reserves totalled US$ 294.60

billion, an increase of US$ 11.13 billion over the same period last year, according to

the Reserve Bank of India's (RBI) Weekly Statistical Supplement.

Moreover, India received foreign direct investment (FDI) equity worth US$ 12.39

billion during April-October, 2010-11, taking the cumulative amount of FDI inflows

during April 2000 - October 2010 to US$ 179.45 billion, according to the Department

of Industrial Policy and Promotion (DIPP).

The services sector comprising financial and non-financial services attracted 21 per

cent of the total FDI equity inflow into India, with FDI worth US$ 2,163 million during

April-October 2010, while telecommunications including radio paging, cellular mobile

and basic telephone services attracted second largest amount of FDI worth US$ 1,062

million during the same period. Metallurgical industries were the third highest sector

attracting FDI worth US$ 920 million followed by power sector which garnered US$

729 million during the financial year April-October 2010.


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Exports from India have increased by 26.8 per cent year-on-year (y-o-y) to

touch US$ 18.9 billion in November 2010, urging the Government to exude

confidence that overall shipments in 2010-11 may touch US$ 215 billion. For

the April-November 2010 period, exports have grown by 26.7 per cent to US$

140.3 billion, while imports totaled up to US$ 222 billion, expanding 24 per

cent.

India's logistics sector is witnessing increased activity. According to the Indian

Shipping ministry, the country's major ports handled 44.4 million tones of cargo

during September 2010, 4.5 per cent higher as compared to 5.9 per cent growth

in September 2009. Leading consultants Frost&Sullivan, as cited by The

Economic Times, are expecting traffic to boost at Indian ports from 814.1

million tones (MT) to 1,373.1 MT from 2010 to 2015 at a CAGR of 11 per cent.

The study group has underlined three key trends in the sector, namely, increase

in containerized cargo, increased private sector participation and traffic

diversion toward minor ports.

Foreign Tourist Arrivals (FTA) in India during the period of January-

November 2010 were 4.93 million as compared to the FTAs of 4.46 million

during the same period of 2009, showing a growth of 10.4 per cent. The Foreign

Exchange Earnings (FEE) during the period of January-November 2010 were

US$ 12.88 billion as compared to US$ 10.67 billion during the same period of

2009, registering a growth rate of 20.7 per cent, according to data released by

the Ministry of Tourism.

The total telephone subscriber base in the country reached 742.12 million as on

October 31, 2010, taking the overall tele-density to 62.51, according to the

figures released by the Telecom Regulatory Authority of India (TRAI). Also the

wireless subscriber base increased to 706.69 million.

The average assets under management of the mutual fund industry stood at US$

160.44 billion for the month of September 2010, according to the data released

by Association of Mutual Funds in India (AMFI).


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As per NASSCOMs Strategic Review 2010, the Indian IT-BPO sector

continues to be the fastest growing segment of the industry and is estimated to

aggregate revenues of USD 73.1 billion in FY2010, with the IT software and

services industry accounting for USD 63.7 billion of revenues.

The cumulative production of vehicles in India grew by 32.4 per cent upto

August 2010 as compared to the same period in 2009, Mr B S Meena,

Secretary, Ministry of Heavy Industry, reported. Passenger vehicles,

commercial vehicles and two-wheeler segments had all recorded impressive

growth rates of 32 per cent, 49 per cent and 31 per cent, respectively during the

period upto August 2010.

According to the Gem and Jewellery Export Promotion Council, jewellery

shipments were worth US$ 23.57 billion in April-November 2010, registering a

rise of 38.25 per cent as compared to US$ 17.05 billion in the corresponding

period of 2009.

According to the Ministry of Civil Aviation, passengers carried by domestic

airlines from January-November, 2010 were 46.81 million as against 39.35

million in the corresponding period of year 2009, thereby registering a growth

of 18.9 per cent.

According to Ernst & Young (E&Y), a global consultancy firm, India is

expected to receive more than US$ 7 billion in private equity (PE) investments

in 2010, on the back of robust economic growth. According to research firm

VCCEdge, mergers and acquisition (M&A) deals worth US$ 54.6 billion have

been signed till December 15, 2010, significantly more than the previous high

of US$ 42 billion achieved in 2007.

The HSBC Market Business Activity Index, which measures business activity

among Indian services companies, based on a survey of 400 firms, rose to 60.1

in November 2010 from 56.2 in October 2010.


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Agriculture

Agriculture is one of the strongholds of the Indian economy and accounts for 14.6 per

cent of the country's gross domestic product (GDP) in 2009-10, and 10.23 per cent

(provisional) of the total exports. Furthermore, the sector provided employment to 55

per cent of the work force.

India's agriculture and allied sector grew by 3.8 per cent in the first six months of the

current fiscal (2010-11). Capital investment in agriculture has increased from US$ 1.2

billion in 2007-08 to US$ 3.26 billion in 2010-11 (inclusive of State Plan Scheme

Rashtriya Krishi Vikas Yojana), as per a Ministry of Agriculture press release dated

August 3, 2010.

In the Union Budget 2010-11, the Finance Minister, Mr Pranab Mukherjee made the

following announcements for the agriculture sector.

US$ 86.89 million is provided to increase the Green Revolution to the eastern

region of the country comprising Bihar, Chattisgarh, Jharkhand, Eastern up,

West Bengal and Orissa.

US$ 65.17 million has been provided to organise 60,000 pulses and oil-seed

villages in rain-fed areas in 2010-11 and provide an integrated intervention for

water harvesting, watershed management and soil health to improve

productivitiy of the dry land farming areas.

Banks have been consistently meeting the targets set for agricultural credit flow

in the past few years. For the year 2010-11, the target has been set at US$ 81.47

billion.

In addition to the 10 mega food park projects already being set up, the

government has decided to set up five more such parks.

External commercial borrowings are available for cold storage for preservation

or storage of agricultural and allied products, marine products and meat.

Growth potential story


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The data centre services market in the country is forecast to grow at a

compound annual growth rate (CAGR) of 22.7 per cent between 2009 and

2011, to touch close to US$ 2.2 billion by the end of 2011, according to

research firm IDC Indias report published in March 2010. The report further

stated that the overall India data centre services market in 2009 was estimated at

US$ 1.39 billion.

According to a report by research and advisory firm Gartner published in March

2010, the domestic BPO market is expected to grow at 25 per cent in 2010 to

touch US$ 1.2 billion by 2011. Further, the BPO market in India is estimated to

grow 19 per cent through 2013 and grow to US$ 1.8 billion by 2013. According

to the report, the domestic India BPO services market grew by 7.3 per cent

year-on-year in 2009.

The BMI India Retail Report Quarter 3, 2010 released in May 2010, forecasts

that total retail sales will grow from US$ 353 billion in 2010 to US$ 543.2

billion by 2014.

According to a report titled 'India 2020: Seeing, Beyond', published by

domestic broking major, Edelweiss Capital in March 2010, stated that India's

GDP is set to quadruple over the next ten years and the country is likely to

become an over US$ 4 trillion economy by 2020.

India will overtake China to become the world's fastest growing economy by

2018, according to the Economist I

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