portfolio management banking sector

7/26/2019 Portfolio Management Banking Sector

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SECURITY ANALYSIS AND PORTFOLIO MANAGEMENT

OF FIVE MAJOR PLAYERS IN BANKING SECTOR

MAJOR PROJECT REPORTSubmitted by

AZHAR K.P

UNDER THE GUIDANCE OF

Mr.BIJU M.K.

Sr. Lecturer

In partial fulfillment

of the requirement for the Degree of

MASTER OF BUSINESS ADMINISTRATION

University of Calicut

DEPARTMENT OF MANAGEMENT SCIENCE

MES COLLEGE OF ENGINEERING

(Affiliated to University of Calicut)KUTTIURA!" KERA#A" INDIA

2!


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Project Report 2010Cochin Stock Exchange

DEPARTMENT OF MANAGEMENT SCIENCE

MES COLLEGE OF ENGINEERING

KUTTIPPURAM, KERALA

PIN: 679573

(AFFILIATED TO UNIVERSITY OF CALICUT)

CERTIFICATE

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Department of Management Science [2]MES College of Engineering


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DECLARATION

I %ere&y declare t%at t%is 'ro(ect re'ort titled *ecurity analysis and ortfolio!ana+e,ent of Five ,a(or 'layers in -an.in+ *ector/ is t%e ori+inal 0or.

done &y ,e under t%e +uidance of -I1U !$K" faculty" !E* Colle+e of

En+ineerin+" Kutti'ura, and su&,itted to t%e Calicut University in t%e 'artial

fulfil,ent of t%e re2uire,ent of t%e !aster of -usiness ad,inistration de+ree$

I furt%er declare t%at t%is re'ort %as not &een su&,itted earlier eit%er to t%is

institution or any ot%er institution for t%e fulfil,ent of t%e re2uire,ent for anycourse of studies$ I also declare t%at no c%a'ter of t%is ,anuscri't in 0%ole or

in 'art is lifted and incor'orated in t%is re'ort fro, any earlier 0or. done &y

ot%ers or ,e$

Date3

lace3 Kutti'ura, A4%ar K$



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ACKNO"LEDGEMENT

-e%ind every successful effort" t%ere lies a contri&ution fro, nu,erous sources

irres'ective of t%eir ,a+nitude$ !y 'ro(ect is no e5ce'tion and I ta.e t%is o''ortunity to

e5'ress ,y sincere t%an.s to t%ose %el'in+ %ands 0%ole%eartedly/$

First and fore,ost I t%an. God for %is al,i+%ty su''ort and ,ercy dro' of &lessin+s u'on

,e to co,'lete ,y 'ro(ect successfully$

T%e satisfaction t%at acco,'anyin+ t%e successful co,'letion of t%e tas. 0ould &e

inco,'lete 0it%out ,entionin+ t%e 'eo'le 0%o ,ade it 'ossi&le 0it% t%e constant +uidance

and encoura+e,ent all t%rou+% t%e 'eriod of study$

I a, inde&ted to ,y ro(ect Guide !r$ -i(u !$K 6Faculty Guide)" and all ot%er faculties

and staff ,e,&ers of De'art,ent Of !ana+e,ent science for t%eir valua&le su++estions

and sincere co7o'eration rendered to ,e durin+ t%e acade,ic 'eriod$

I a, 'rofoundly t%an.ful to *%ri$ T%o,as Geor+e !$A GDI! 6UK) %D 6E5ternal

Guide)" Coc%in *toc. E5c%an+e 0%o 0as +enerous 0it% ti,e and effort to e5'lain t%e

t%eoretical and 'ractical as'ects of *ecurity Analysis and ortfolio !ana+e,ent$

I 0is% to 'ay ,y +ratitude to ,y 'arents 0it%out 0%ose su''ort and ins'iration" t%is

'ro(ect 0ould %ave re,ained a drea,$ #ast &ut not least8 I ta.e t%is o''ortunity to t%an. all

,y friends and ot%ers 0%o %ave %el'ed ,e directly or indirectly for t%e successful

co,'letion of t%e 'ro(ect$

A9HAR K$



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TABLE OF CONTENTS

SERIALNO

LIST OF CONTENTS PAGE NO

#ist of Ta&les

#ist of C%arts

: C%a'ter I ; INTRODUCTION

Introduction to *tudy

*tate,ent of t%e ro&le, >

*i+nificance of t%e *tudy >

*co'e of t%e *tudy ?

< C%a'ter II Industry rofile @7>7:=

C%a'ter BII Findin+s" *u++estions and Conclusion :>7::

C%a'ter BIII -i&lio+ra'%y :::7:: ,e,&ers$ Today t%e e5c%an+e %as ? ,e,&ers

and listed co,'anies$ In : t%e co,'any 0ent for co,'uteri4ation of its offices$ In

order to .ee' 'ace 0it% t%e c%an+in+ scenario in t%e ca'ital ,ar.et C*E too. various

initiatives includin+ initiatin+ tradin+ in de,ateriali4ed s%ares$ T%is %as effected in t%e'ur'ose of &ad deliveries co,in+ do0n$

C*E introduced t%e facility of co,'uteri4ed tradin+ calledL Coc%in Online Tradin+$

6CO#T) on !arc% :" :$ C*E also &eca,e a ,e,&er 0it% an o&(ective of consolidatin+

t%e s,all" fra+,ented and less li2uid ,ar.ets into a national le+al inte+rated li2uid ,ar.et$

it% t%e enforce,ent of efficient ,ar+in syste, and surveillance C*E %as successfully

'revented ,a(or defaults$ Introduction of Fast Trac. *yste, ,ade C*E t%e stoc. e5c%an+e

0it% s%ortest settle,ent cycle in t%e country$ T%e Coc%in *toc. E5c%an+e 6C*E) %as &een'layin+ a very vital role in t%e econo,ic develo',ent of t%e country in +eneral and Kerala

in 'articular$

R$-5t ,r+ t5e 4e-$&&$&- CSE 5') 4ee& )tr$/$&- 5'r* )+ ') t+ 'c5$e/e t5e ,+((+6$&-

-+'()7



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rovidin+ investors 0it% %i+% level of li2uidity 0%ere &y t%e cost and ti,e involved

in t%e entry and e5it fro, t%e ,ar.et &eco,es t%e least$

-rin+ in %i+% tec% solutions and ,a.e 'ossi&le a&solute trans'arency of all

o'erations$

*'read e2uity cult and to serve investors of t%e re+ion$

rofessional stoc. &ro.in+ and invest,ent ,ana+e,ent function$

I,'art ca'ital ,ar.et .no0led+e to all inter,ediaries on a continuous &asis$

ORGANISATIONAL STRUCTURE

C5'rt N+.2

ORGANIZATIONAL STRUCTURE

DEPARTMENTAL PROFILE

LEGAL DEPARTMENT


Le-'( S%)te) Me4er)

5$8

Sett(e

e&t

L$)t$&-L$)t$&-

BOARD OF DIRECTORS

E#ECUTIVE DIRECTOR

M'r1et$&-'&*Pu4($c

Re('t$+&)

F$&'&ce


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C*E %as a full7fled+ed #e+al De'art,ent" %eaded &y !ana+er7#e+al and is 'ri,arily

en+a+ed in advisin+ t%e ,ana+e,ent in t%e ,erits and de,erits of le+al issues involvin+ t%e

e5c%an+e$

A ,a(or function underta.en &y t%e de'art,ent is to ensure t%at t%e various rules"

re+ulations and directives of *E-I 0it% re+ard to tradin+ in t%e Ca'ital !ar.et &y &ro.ers and

su&7&ro.ers" are &rou+%t to t%e notice to ,e,&ers and t%e investin+ 'u&lic$ !ana+er7#e+al is

t%e co,'liance officer as 'er t%e 'rovisions of *E-I re+ulations and ensures strict co,'liance

of *E-I directives and +uidelines$

!ana+er7#e+al also functions as secretary to t%e &oard of directors$ T%e t%ree

i,'ortant areas &ein+ loo.ed after &y t%e le+al de'art,ent are3

6a) Investor Grievance *ervice

6&) Ar&itration

6c) Default

SYSTEM DEPARTMENT

It is t%e %eart of t%e various o'erations of C*E$ T%e de'art,ent 'rovides t%e

necessary tec%nical su''orts for screen &ased tradin+ and t%e co,'uteri4ed functionin+ of

all ot%er de'art,ents$

T%e various activities of t%e de'art,ent include3 7

Develo',ents of various soft0are needed for t%e functionin+ of t%e

e5c%an+e$

!aintenance of !ulte5 soft0are" 0%ic% 'rovides online tradin+ 0it% N*E

and -*E$

T%e ,a(or &ac. office syste, soft 0ares used are NE** and -O** for N*E and-*E trades calculations res'ectively$ T%ese soft 0ares are develo'ed in7%ouse &y C*E$ T%ese

soft 0ares are used to ,aintain t%e entire records of all t%e trades t%at occur eac% day$ It also

does all t%e re2uired calculations for deductions and also creates all .inds of re'orts needed

&y t%e &ro.ers and t%eir clients$



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SETTLEMENT DEPARTMENT

*ettle,ent de'art,ent is a .ey de'art,ent of t%e C*E$ It is dealin+ 0it% cas% and

securities$ It %el's t%e &ro.er in settin+ t%e ,atters related to t%eir 'ay7in and 'ayout"

recovery of dues and settlin+ t%e ,atters related to t%e &ad deliveries$ T%is de'art,ent is

%eaded &y a De'uty !ana+er and assisted &y t0o senior officers 0%o loo. into t%e

o'erations involved in t%e settle,ent activities in C*E$ C*E is follo0in+ TP< settle,ent

syste, 60%ere T7 dates of transaction)$

SURVEIALLANCE DEPARTMENT

T%e E5c%an+e %as set u' *urveillance De'art,ent to .ee' close 0atc% on 'rice

,ove,ents of scri'" detect ,ar.et a&uses li.e 'rice ri++in+" ,onitor a&nor,al 'rices and

volu,es 0%ic% are not consistent 0it% nor,al tradin+ 'attern etc$ T%e ,ain o&(ectives of

t%e de'art,ent are to 'rovide a free and fair ,ar.et" to arrest unsyste,atic ris. fro,

enterin+ into t%e syste, and to ,ana+e ris.s$ T%e surveillance function at t%e e5c%an+e %as

assu,ed +reater i,'ortance in t%e last fe0 years$ *E-I %as directed t%e stoc. e5c%an+es to

setu' a se'arate surveillance de'art,ent 0it% staff e5clusively assi+ned for t%is function$It also offers services li.e3

Kee'in+ a close 0atc% on t%e 'rice ,ove,ent of scri's$

Detect ,ar.et ,ani'ulations li.e 'rice ri++in+$

ADMINISTRATION DEPARTMENT

A le+al officer 0it% t0o De'uty !ana+ers for ad,inistration and co,'liance and

,ana+e,ent infor,ation syste, %eads t%e de'art,ent$ T0o senior officers loo.in+after 'u&lic relations and ad,inistration for, 'art of ad,inistration$

T%e ,a(or activities of t%is de'art,ent include3 7

Or+ani4in+ council ,eetin+" annual +eneral ,eetin+" e5tra ordinary +eneral

,eetin+" council ,eetin+s etc$



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#oo.in+ after t%e ad,ission and e5'ulsion of ,e,&ers$

Ta.in+ care of all related functions needed for t%e s,oot% functionin+ of t%e

e5c%an+e includin+ re+ular 'ay,ents of rent" &ills" ta5es" 'u&lic relations etc$

Givin+ necessary +uidelines and su''ort to students and ot%er 0%o visit t%e

e5c%an+e for various activities$

LISTING

#istin+ ,eans ad,ission of t%e securities of a co,'any to tradin+ 'rivile+es on a

*toc. E5c%an+e$ T%e 'rinci'al o&(ectives of listin+ are to 'rovide ready ,ar.eta&ility and

i,'art li2uidity and free ne+otia&ility to stoc.s and s%ares8 ensure 'ro'er su'ervision and

control of dealin+s t%erein8 and 'rotect t%e interests of s%are%olders and of t%e +eneral

investin+ 'u&lic$

FINANCE DEPARTMENT

T%is de'art,ent ta.es care of t%e various financial transactions of C*E t%us actin+

as t%e life line of t%e or+ani4ation$ T%e de'art,ent is %eaded &y a Finance officer and

assisted &y a De'uty !ana+er and several senior and (unior officers$

T%e ,a(or activities of t%e de'art,ent include3

Annual Re'ort Generation

Fund !ana+e,ent

Interaction 0it% &an.ers

Kee'in+ +eneral accounts of t%e C*E and Ta5ation

!aintainin+ of 'ayrolls and cas% re+ister

-ud+etin+ and E5'ense researc%

!aintenance of internal control syste,

Interaction 0it% e5ternal and internal audits



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CHATER IB

#ITERATURE REBIE



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LITERATURE RIVIE"

As 'er t%e study of J'&'1$ R'+ '&* S Dur-' R'+ Invest,ent decisions" in all

sectors" %ave &een +ainin+ 'ara,ount i,'ortance" 0arrantin+ t%e investors to &e

continuously cautious of ris. and return involved in t%e sa,e$ T%e faculty Qinvest,ent

analysis calls for 'lanned and ,eanin+ful a''raisal of &ot% internal and e5ternal factors

affectin+ t%e returns$ Ever since Indian econo,y o'ened its doors to !NCs" t%e Indian

&an.in+ sector %as &een 0itnessin+ &i4arre c%an+es in ter,s of ne0 'roducts and services

and stiff co,'etition as 0ell$ T%e sort of IOs t%at %ave &een ta.in+ 'lace in &an.in+

sector are a,a4in+$ In t%e li+%t of t%ese recent develo',ents" a careful analysis of t%e

'rofita&ility of Indian &an.in+ sector is inevita&le$ T%e 'resent study atte,'ts to analy4e

t%e 'rofita&ility of t%e t%ree ,a(or &an.s in India3 *-I" ICICI" and HDFC$ T%e varia&les

ta.en for t%e study are O'eratin+ rofit !ar+in 6O!)" Net rofit !ar+in 6N!)" Return

on E2uity 6RoE)" Earnin+s 'er *%are 6E*)" rice Earnin+s Ratio 6ER)" Dividends 'er

*%are 6D*)" and Dividends ayout Ratio 6DR)$ T%e study &rin+s out t%e co,'arativeefficiency of *-I" ICICI" and HDFC$

As 'er t%e study of Pr+, VR G'&e)5in %is article QAnalysis Of -an.in+ Industries

%e e5'lains" t%e &an.in+ industry is and al0ays %as &een one of t%e ,ost i,'ortant as'ects

of all industries$ T%e reason &ein+" every ot%er industry needs &an.s to ta.e 'art in any



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invest,ents or financial ,ove,ents as a 0ay to &etter t%eir 'osition in t%eir industries$

e 0ill loo. at %o0 and 0%y t%e &an.in+ industry %as &een a&le to %old t%is 'osition for so

lon+ t%rou+% t%e Co,'etitive #andsca'e" orters Five Forces Analysis" !a(or *e+,ents

of t%e Industry" t%e Industry #ife cycle" and T%e E*TE# Factors$ T%ese tools 0ill %el''rovide data and a t%orou+% analysis of t%e 'erfor,ance in t%e &an.in+ industry$ it%in t%e

&an.in+ industry t%ere are a lot of co,'etitors 0%ic% offer t%e sa,e services &ut for so,e

reason so,e are doin+ &etter t%an ot%ers$ A *trate+ic Grou' Analysis %as &een done to

s%o0 t%e co,'arison &et0een to' co,'etitors$

As 'er t%e study of Sree R' G-an.in+ *ector in India is one of t%e +ro0in+

sectors 0it% +reat dyna,ics$ T%ere are various factors 0%ic% affect t%e s%are 'rices of

-an.in+ Co,'anies$ T%is re'ort is all a&out %o0 various factors 6Internal and E5ternal)affect t%e -an.in+ *ector *%are rices$ In t%is re'ort a detailed analysis of t%e factors

affectin+ t%e s%are 'rices is carried on and a ,odel is develo'ed to study t%e effect of

various factors on t%e s%are 'rices$ Here" various internal factors 6-an. s rofita&ility"

Inco,e" E5'enses" and Ne0s a&out t%e -an.$) and e5ternal factors 6Govern,ent 'olicies"

CRR" Re'o Rate" Reverse Re'o Rate" Rules and Re+ulations$) are considered 0%ic% affect

t%e 'rices of t%e s%ares of -an.$ Data s are collected for all t%e 2uantifia&le factors and for

t%e rest factors a t%eoretical e5'lanation is +iven in detail$ Usin+ *** a ,odel isdevelo'ed 0%ic% s%o0s t%e re+ression and correlation co7efficient &et0een t%e s%are 'rices

and various factors affectin+ t%e sa,e$

Accordin+ to D'&$e( G$'+*$ur) '&* L'+&&$) D Vr+&t+) in t%eir article studies

t%e i,'act of ,odelin+ ti,e7varyin+ covariancescorrelations of %ed+e fund returns in

ter,s of %ed+e fund 'ortfolio construction and ris. ,easure,ent$ e use a variety of static

and dyna,ic covariancecorrelation 'rediction ,odels and co,'are t%e o'ti,i4ed

'ortfolios out7of7sa,'le 'erfor,ance$ e find t%at dyna,ic covariancecorrelation ,odelsconstruct 'ortfolios 0it% lo0er ris. and %i+%er out7of7sa,'le ris.7ad(usted reali4ed return$

T%e tail7ris. of t%e constructed 'ortfolios is also lo0er$ Usin+ a ,ean7conditional7value7at7

ris. fra,e0or. 0e s%o0 t%at dyna,ic covariancecorrelation ,odels are also successful in

constructin+ 'ortfolios 0it% ,ini,u, tail7ris.$



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Accordin+ to K6'&9 C('re&ceC$J$A si,'le ran.in+ ,odel for o'ti,al 'ortfolio

construction under institutional 'rocedures for s%ort sellin+ is introduced$ T%e study

(ustifies t%is a''roac% and offers econo,ic insi+%ts" includin+ t%ose concernin+ s%ort

sellin+s %ed+in+ i,'act in a 'ortfolio conte5t$ T%e ran.in+ ,odel can &e used to analy4evarious treat,ents of t%e s%ort7sale 'roceeds and ,ar+in de'osits$ It is also found to &e

su'erior to ot%er 'ortfolio ,odels in t%at it does not rely on assu,'tions t%at e5a++erate

s%ort7sale &enefits for ,aintainin+ analytical tracta&ility$

THEORETICAL PERSPECTIVE

SECURITY ANALYSIS

*ecurities analysis refers to t%e analysis of tradin+ securities fro, t%e 'oint of vie0

of t%eir 'rices" returns and ris.s$ All invest,ents are ris.y and t%e e5'ected return is related

to t%eir ris.$ T%eir analysis 0ill %el' in understandin+ t%e &e%avior of security 'rices and

t%e ,ar.et in decision7,a.in+ for invest,ent$ If it is an analysis of only one scri'" it is

called ,icroanalysis of a co,'any$ If it is an analysis of ,ar.et of securities" it is referred

to as a ,acro 'icture of t%e &e%avior of t%e ,ar.et$

It is ,ainly out in t0o a''roac%es na,ely3 Funda,ental analysis and Tec%nical

analysis$ Under funda,ental analysis t%e s%are value de'ends on t%e intrinsic 0ort% of t%e

s%are$ It is &asically an econo,y industry7co,'any analysis$ It considers t%e e5ternal as

0ell as t%e internal factors t%at deter,ine a co,'anys efficient functionin+$ In tec%nical

analysis t%e 'rice ,oves in a 'redicta&le ,anner and in 0aves and trends$ T%e 'resent

'rices are t%e result of 'ast trends and can accordin+ly &e 'redicted$ T%us securities

analysis for,s t%e first ste' to0ards devisin+ an efficient 'ortfolio of securities



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FUNDAMENTAL ANALYSIS

Funda,ental Analysis is really a lo+ical and a syste,atic a''roac% to esti,atin+ t%efuture dividends and s%are 'rice$ It is &ased on t%e econo,ic 're,ise t%at s%ares 'rice is

deter,ined &y a nu,&er of funda,ental factors relatin+ to t%e econo,y" industry and

co,'any$ Hence" t%e econo,y funda,entals" industry funda,entals and co,'any

funda,entals %ave to &e considered 0%ile analy4in+ a security for invest,ent 'ur'ose

Eac% of t%e s%ares is assu,ed to %ave an econo,ic 0ort% &ased on its 'resent and

future earnin+ ca'acity$ T%is is called its intrinsic value or funda,ental value$ T%e 'ur'ose

of funda,ental analysis is to evaluate t%e 'resent and future ;earnin+ ca'acity of t%e s%are&ased on t%e econo,y" industry and co,'any funda,entals and t%ere &y assess t%e

intrinsic value of t%e s%are 0it% t%e 'revailin+ ,ar.et 'rice to arrive at an invest,ent

decision$ If t%e ,ar.et 'rice of t%e s%are is lo0er t%an t%e intrinsic value" as t%e investor is

decide to &uy t%e s%are as it is under 'riced$ T%e 'rice of suc% s%are is e5'ected to ,ove u'

in future to ,atc% 0it% its intrinsic value$

On t%e contrary" 0%en t%e ,ar.et 'rice of t%e s%are is %i+%er t%an its intrinsic

value" it is 'erceived to &e over 'riced t%e ,ar.et 'rice of suc% s%are is e5'ected to co,edo0n in t%e future and %ence t%e investor 0ould decide to sell suc% a s%are$ Funda,ental

Analysis t%us 'rovides an analytical fra,e 0or. for invest,ent decision ,a.in+$ T%is

analytical fra,e 0or. is .no0n as E7I7C fra,e0or. 6Econo,y7Industry7Co,'any

Analysis)$

T%e funda,ental Analysis insists t%at no one s%ould 'urc%ase or sell a s%are on t%e

&asis of ti's or ru,ors$ T%e funda,ental a''roac% calls u' on t%e investor to ,a.e %is &uy

or sell decision on t%e &asis of a detailed analysis of t%e infor,ation a&out t%e co,'any"

industry to 0%ic% t%e co,'any &elon+s" and econo,y$ T%is results in infor,ed investin+$

For t%is t%e funda,ental Analysis ,a.es use of EIC fra,e0or. of analysis$

Funda,ental Analysis involves t%ree ste's3



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:$ Econo,y Analysis


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An investor ulti,ately invests %is ,oney in t%e securities of one or ,ore s'ecific

co,'anies$ Eac% co,'any can &e c%aracteri4ed as &elon+in+ to an industry$ T%e

'erfor,ance of t%e co,'anies 0ould t%erefore" &e influenced &y t%e fortunes of t%e

industry to 0%ic% it &elon+s$

At any sta+e of econo,y" t%ere are so,e industries" 0%ic% are fast +ro0in+ and

ot%ers are sta+natin+ or declinin+$ If an industry is +ro0in+ t%e co,'anies 0it%in t%e

industries ,ay also &e 'ros'erous$ T%e 'erfor,ance of t%e co,'anies 0ill de'end" a,on+

ot%er t%in+s" u'on t%e state of industry to 0%ic% t%ey &elon+$ Industry analysis refers to t%e

evaluation of t%e relative stren+t% and 0ea.ness of 'articular industries$

COMPANY ANALYSISIt is t%e final sta+e of funda,ental analysis$ T%e econo,y analysis %el's t%e

investor a &road outline of t%e 'ros'ects of t%e +ro0t% in t%e econo,y$ T%e industry

analysis %el's t%e investor to select t%e industry in 0%ic% invest,ent 0ould &e re0ardin+$

No0 %e %as to decide t%e co,'any in 0%ic% %e s%ould invest %is ,oney$ Co,'any

Analysis 'rovides t%e ans0er to t%is 2uestion$

It deals 0it% t%e esti,ation of return and ris. of individual s%ares$ T%is calls for

infor,ation$ !any 'ieces of infor,ation influence invest,ent decisions$ Infor,ation

re+ardin+ co,'anies can &e &roadly classified into t0o &road cate+ories3 Internal M

E5ternal$ Internal infor,ation consists of data and events ,ade 'u&lic &y co,'anies

concernin+ t%eir o'erations$ T%e internal infor,ation sources include annual re'orts to

s%are%olders" 'u&lic and 'rivate state,ents of officers of t%e co,'any" t%e co,'anys

financial state,ents etc$ E5ternal sources of infor,ation are t%ose +enerated inde'endently

outside t%e co,'any$ T%ese 're'ared &y invest,ent services and t%e financial 'ress$

TECHNICAL ANALYSIS

Tec%nical analysis is t%e na,e +iven to forecastin+ tec%ni2ue t%at utili4e %istorical

s%are 'rice data$ rices of securities in t%e stoc. ,ar.et fluctuate daily on account of

continuous &uyin+ and sellin+$ *toc. 'rices ,ove in trend and cycles and are never sta&le$

T%e rationale &e%ind tec%nical analysis is t%at s%are 'rice &e%avior re'eats itself over ti,e



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and analysts atte,'t to derive ,et%ods to 'redict t%is re'etition$ He loo.s at current 'rice

data to see if any of t%e esta&lis%ed 'atterns are a''lica&le and" if so" e5tra'olations can &e

,ade to 'redict t%e future 'rice ,ove,ents$ T%e data used is 'ri,arily 'ast s%are 'rices$

Ot%er statistics suc% as volu,e of tradin+ and stoc. ,ar.et indices are also utili4ed to so,ee5tent$

TOOLS FOR TECHNICAL ANALYSIS

C%artin+ is t%e .ey in tec%nical analysis and security 'rices are 0%at is c%arted$ T%e

c%arts for, 'atterns 0%ic% are studied to reveal t%e underlyin+ trends$ Often s%are 'rice

,ove,ents are erratic and +au+in+ t%e underlyin+ trend &eco,es difficult$ *o as to

s,oot%en out t%e a''arent erratic ,ove,ents of s%are 'rice and %i+%li+%t t%e underlyin+

trend" ,at%e,atical tools are used$

E#PONENTIAL MOVING AVERAGE EMA3

!ovin+ avera+es are ,at%e,atical indicators of t%e underlyin+ trend of t%e 'rice

,ove,ent$ An e5'onential ,ovin+ avera+e" also called E5'onential ei+%ted !ovin+

Avera+es6E!A)" a''lies 0ei+%in+ factors 0%ic% decrease e5'onentially$ T%e 0ei+%in+

for eac% older data 'oint decreases e5'onentially" +ivin+ ,uc% i,'ortance to recent

o&servations 0%ile still not discardin+ older o&servations entirely$

E!A 6Current Closin+ rice ; revious E!A) 5 Factor P revious E!A

%ere Factor


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ROC is a 'o'ular oscillator 0%ic% ,easure t%e rate of c%an+e of t%e current 'rice as

co,'ared to t%e 'rice a certain nu,&er of days or 0ee.s &ac.$T%e for,ula used is

ROC Current rice

rice Qn 'eriod a+o

MOVING AVERAGES CONVERGANCE AND DIVERGENCE MACD3

!ACD is an oscillator t%at ,easures t%e conver+ence and diver+ence &et0een t0o

e5'onential ,ovin+ avera+es$ It is called so as it continuously conver+es and diver+es

a0ay fro, t%e %ori4ontal reference line$ T%e reference line re'resents t%e 'oints" 0%ere t%e

t0o E!As %ave identical values$ A s%ort ter, E!A and lon+ ter, E!A are calculated

0it% %el' of t%e closin+ 'rice data$:< day and > day E!As constitute a 'o'ular

co,&ination$ T%e difference &et0een t%e s%ort ter, E!A and lon+ ter, E!A re'resentst%e !ACD$

T%e !ACD values for different days are derived &y deductin+ t%e lon+ ter, E!A

for eac% day fro, t%e corres'ondin+ s%ort7ter, E!A for t%e day$ T%ese !ACD values are

'lotted on an J +ra'% 0it% !ACD values on t%e J a5is and to,e 'eriods on a5is$ T%e

!ACD line 0ould oscillate across t%e 4ero line$

PORTFOLIO CONSTRUCTION

ortfolio construction is t%e 'rocess of &lendin+ securities in a ,anner t%at t%ey

+ive ,a5i,u, return at a ,ini,u, of ris.$

No0 t%at t%e securities for inclusion in t%e ortfolio" 0e 'roceed 0it% t%e 'ortfolio

construction" &y decidin+ on %o0 ,uc% a,ount s%ould t%e investor allocate to eac%

security$ In t%e 'resent study t%ree different 0ays of allocation are c%osen" &ased on3

:$ E2ual a,ount to t%e five scri's$


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PORTFOLIO ANALYSIS

Fro, a +iven set of securities" any nu,&er of 'ortfolios can &e constructed &y an

investor" &y c%oosin+ different set of securities and also varyin+ t%e 'ro'ortion of

invest,ent in eac% security$ A rational investor atte,'ts to find out ,ost efficient one fro,

t%ose 'ortfolios$ T%e efficiency of eac% 'ortfolio can &e evaluated only in ter,s of t%e

e5'ected return and ris. of t%e 'ortfolio as suc%$ T%us" deter,inin+ t%e e5'ected return and

ris. of different 'ortfolios is a 'ri,ary ste' in 'ortfolio ,ana+e,ent desi+nated ortfolio

Analysis$

PORTFOLIO RETURN

All invest,ent are c%aracteri4ed &y t%e e5'ectation of a return$ In fact" invest,entis ,ade 0it% t%e 'ri,ary o&(ective of derivin+ a return$ T%e return ,ay &e in t%e for, of

yield 'lus ca'ital a''reciation$ Different ty'es of invest,ent 'ro,ise different rates of

return$ T%e return fro, an invest,ent de'ends u'on t%e nature of t%e invest,ent" t%e

,aturity 'eriod etc$

ortfolio returns refers to t%e total return t%at ,ay &e received if t%e entire securities

are 'ut to+et%er$ It need not &e t%e inte+ration of t%e returns of individual securities$ If t%e

'ortfolio is 0ell diversified" t%e returns fro, t%e 'ortfolio 0ill &e %i+%er t%an t%ose fro,

individual securities$

ortfolio return can &e calculated usin+ t%e follo0in+ for,ula3

P+rt,+($+ retur&9 R8 : '8 ;


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Qsyste,atic and Qunsyste,atic$*yste,atic ris. is e5'ressed as &eta6S) and unsyste,atic

ris. is e5'ressed as 6a)$

ortfolio ris. refers to t%e ris. faced due to t%e ivest,ent in t%e entire 'ortfolio$ T%e ,ore

t%e diversification of t%e invest,ent in various securities" t%e lo0er 0ill &e t%e ris.$

ortfolio ris. can &e calculated usin+ t%e follo0in+ for,ula3

P+rt,+($+ R$)1 =>8: 8 => ; =>?@

CHATER B



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RE*EARCH !ETHODO#OGJ

RESEARCH METHODOLOGY

T%is is &asically an Analytical researc% de'ends on t%e 'u&licly availa&le data$

T%e ,et%od used in t%e study is t%e funda,ental and tec%nical analysis of so,e s'ecificco,'anies in &an.in+ industry$ T%e co,'anies are selected &ased on ,ar.et

ca'itali4ation$ T%e funda,ental analysis includes Econo,ic analysis" Industry analysis

and Co,'any analysis$

SOURCES OF DATA

Data for t%e study is collected fro, t%e secondary sources$ Data is collected fro,

t%e 0e&sites li.e 000$&seindia$co,"000$india&ulls$co," 000$ca'italine$co,$ Co,'any

0e&sites" &oo.s" ne0s'a'ers and 'eriodicals is also &e referred to durin+ t%e study$

POPULATION AND SAMPLE

Accordin+ to t%e Indian -an.in+ Industry esti,ates t%ere are a total of

co,,ercial &an.s o'eratin+ in India out of 0%ic%


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&an.s are in t%e 'rivate sector$ T%is total &an.s %ave &een ta.en as t%e 'o'ulation for

t%e study$ On t%e &asis of %i+% ,ar.et ca'itali4ation" t%e to' five 0ere selected to 'erfor,

t%e detailed study$ Financial data 0%ic% is relevant to ? years is ta.en as t%e sa,'le si4e

for funda,ental analysis and ei+%teen ,ont%s for tec%nical analysis$

PERIOD OF STUDY

T%e 'eriod of study is conducted for a 'eriod of >? days fro, A'ril :t%to 1une


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= HDFC -ANK >">?$ AI* -ANK @"=@$> :::


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T'4(e N+.!!

NORMALIZED PRICE EARNING RATIO

ITEMS 2 2 2 2 2

Re'orted E*


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INTRINSIC VALUE CALCULATION7

Dividend declaredDividend ay7Out Ratio 777777777777777777777777

E*Dividend ay7out Ratio for ? JearsAv+$ Dividend ay7out Ratio 7777777777777777777777777777777777777777777777

? $=P$=:@P$=>:=@P$=?=@P$=>@


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ro(ected E* for E* for Current year 5 6:P+)

=@$:: 5 6:P$?) .!

Intrinsic Balue ro(ected$ E* 5 Nor,ali4ed Av+$ E Ratio

=$?:@ 5


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ICICI BANK TECHNICAL ANALYSIS

CHART N+7 !

(Source: Secondary Data)

INFERENCE

T%e


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T%e !ACD line a&ove t%e 4ero line indicates a &ullis% trend$ It is s%o0in+ a decline

in t%e trend reversal$ An investor can %old t%is s%are for a lesser 'eriod$

ANALYSIS AND INTERPRETATION OF HDFC BANK

SHARE HOLDING PATTERN OF HDFC BANK

T'4(e N+.!2

SHARE HOLDING PATTERNSHARES

Forei+n :?>?Govt$ Holdin+ @":=?


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HDFC BANK RATIO ANALYSIS

T'4(e N+.!

BOOK VALUE

ITEMS 2 2 2 2 2

!.t$3 Hi+%

#o0

>$??

>@:$:?

::?$

@


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T'4(e N+.!

RETURN ON EUITY

ITEMS 2 2 2 2 2

E2uity *%are =$ =:=$:> =:$= =?>$>= >


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CHART N+7 22


T'4(e N+.!

NORMALIZED PRICE EARNING RATIO

ITEMS 2 2 2 2 2

Re'orted E* =>$?? >=$>< ?$@

!.t$3 Hi+%

!.t$3 #o0

>$??

>@:$:?

::?

@


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.!!

INTERPRETATION

T%e stoc. is said to &e under 'riced as t%e intrinsic value of t%e security 6::>$=>)

is %i+%er t%an current ,ar.et 'rice :$> 6=:st!arc%


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INFERENCE

T%e


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INFERENCE

T%e ROC line is in t%e over&ou+%t re+ion at 'resent and indicates a sellin+

o''ortunity$ -ut as it is clear fro, t%e +ra'% t%is is slo0ly c%an+in+ and is ta.in+ a

do0n0ard turn$

CHART N+7 2


INFERENCE

T%e !ACD line a&ove t%e 4ero line is a clear indicator or t%e &ullis% trend 0%ic% is

visi&le in t%is s%are for so,e ti,e no0$ It ,ay +o even %i+%er$ It ,ay +o even %i+%er$ T%e

investor can stay invested in t%is s%are for no0$



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ANALYSIS AND INTERPRETATION OF A#IS BANK

T'4(e N+.!

SHARE HOLDING PATTERN OF A#IS BANK

SHARE HOLDING PATTERN SHARES

Forei+n :==


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T'4(e N+.!

PAYOUT POLICY

ITEMS 2 2 2 2 2

Re'orted E* ::$: :@$


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T'4(e N+.2

RETURN ON EUITY

ITEMS 2 2 2 2 2

E2uity *%are Ca'ital


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NORMALIZED PRICE EARNING RATIO OF A#IS BANK

T'4(e N+.2!

NORMALIZED PRICE EARNING RATIO7

ITEMS 2 2 2 2 2

Re'orted E* ::$: :@$


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INTRINSIC VALUE CALCULATION7

Dividend declaredDividend ay7Out Ratio 777777777777777777777777

E*

Dividend ay7out Ratio for ? JearsAv+$ Dividend ay7out Ratio 77777777777777777777777777777777777777777777

?

$

7777777777777777777777777777777777777777777777777777777777777777?

.!

Avera+e Retention Ratio : 7 Avera+e Dividend ay7out Ratio

: ; $:@=@

.2

*u, of ROE for ? JearsAvera+e Return on E2uity 7777777777777777777777777777777 ?

::=$=>


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A#IS BANK TECHNICAL ANALYSIS

CHART N+7 2


INFERENCE

T%e lon+" ,ediu, and s%ort ter, E!A are in a &ullis% trend$ All are s%o0in+ au'0ard trend$ Investor 0it% a lon+ ter, invest,ent 'ers'ective can still &uy t%is s%are at

t%e current rate$



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CHART N+7


INFERENCE

T%e ROC line is a&ove t%e 4ero line at 'resent and if it crosses t%e 4ero line fro,

a&ove to &elo0 it is a sellin+ o''ortunity ot%er0ise it is a &uyin+ o''ortunity$

CHART N+7



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T'4(e N+.2

PAYOUT POLICY

ITEMS 2 2 2 2 2

Re'orted E* >=$ >>$: >$


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T'4(e N+. 2

RETURN ON EUITY7

ITEMS 2 2 2 2 2

E2uity *%are Ca'ital =:?$= =:?$= =:?$= =:?$= =:?$=

Reserves and *ur'lus ?==$?: ?$@ @$=: :>@$=? :>@$=?

NET ORTH >$: =$ ::::$@: :=$=: :?>$ $@


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ROE 3 :$@@=@ :?$@:> :?$=$ >>$: >$$

$


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!.t$3 Hi+%E*

!.t$3 #o0E*

::$>@

$@?

:=$?=>

:>$::@

$>@=:

::$>@=

?$

=$>::


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777777777777777777777777777777777777777777777777777777777777777 ?

.!22

Avera+e Retention Ratio : 7 Avera+e Dividend ay7out Ratio : ; $:P:?$


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INFERENCE

T%e


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INFERENCE

T%e ROC line is a&ove t%e 4ero line" 0%ic% is t%e over&ou+%t 4one$ Ideally" one

s%ould sell a s%are t%at is over&ou+%t$ Hence it is %i+%ly advisa&le to sell t%is s%are at t%is

level

CHART N+7 2


INFERENCE

*ince t%e !ACD line is s%o0in+ is a&ove t%e 4ero line it i still t%e &ullis% trend and

it does not s%o0 any si+ns of do0n0ard turn no0 and %ence is a &uyin+ o''ortunity$

COMPARISON OF MARKET VALUE "ITH INTRINSIC VALUE



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T'4(e N+7 2

ITEMS SBI ICICI HDFC A#IS PNB

!ARKET BA#UE $ @$?

INTRIN*IC BA#UE $== $:?


CHART N+7

INTERPRETATION

For all of t%ese -an.s e5ce't HDFC t%e ,ar.et 'rice is %i+%er t%an t%e intrinsic

value" t%e scri' is considered to &e over 'riced and it is not suita&le for t%e invest,ent

'ur'oses$ *o investor cannot %old %is invest,ent in t%ese stoc. or sell additional s%ares tot%e ,ar.et$ Out of t%ese *-I AI* and N- -an. %ave a si+nificant difference in t%e

,ar.et value and t%e intrinsic value$ *o t%e invest,ent in t%ese t0o stoc.s are said to &e

less attractive$



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PORTFOLIO MANAGEMENT

CALCULATION OF ALPHA AND BETA

STATE BANK OF INDIA

Return Closin+ ; O'enin+ V : O'enin+

2 2 2 2 2

O8e&$&- @>$ :=$@? ::?$


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T%e E5'ected Return fro, *-I" 0%en t%e Inde5 ,oves u' &y : can &e calculated as3

Ri YPS6R,) 7=$:: P :$>6:) !.!

ICIC! BANK


2 2 2 2 2

O8e&$&- =:?$


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Ri YPS6R,) @$@ P $6:) !!.2

PUNJAB NATIONAL BANK


2 2 2 2 2

O8e&$&- =?$: =>@$==$? ?=$> ??$C(+)$&- ==$= >:$:$@? ?$:? >:$(Source: Secondary Data)

PNB Retur& Y3

>$?=@$:$:$>7


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Ri YPS6R,) 7>$? P $?@$? $=C(+)$&- $:? :$:? >:>$?

A#IS Retur& Y3

?@$:

?>$@

>:$$::) ; @=$

Y yZ ; SZZ :@=$ ; :$ V


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2 2 2 2 2

O8e&$&- =?$ ?=$$


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2 2 2 2 2

O8e&$&- $@ @$? >::=$= ?@$?

C(+)$&- $ >@?$ @:?$> =@@$


INDE# Retur& #3

::$@

@=$:

::$

=$=?

7=@$>$:: ; @=$


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N- $ $:> :>ICICI


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TOTAL !.!2 ! !


Secur$t% A(85' Bet' "e$-5t 6e$-5t < 6e$-5t

*-I 7=$:: :$> $= 7$== $=:

N- 7>$? $?< $:< 7$?? $@

W'


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In t%e year


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T%e focus of t%e study 0as construction of ortfolio and its evaluation to find t%e

o'ti,al 'ortfolio and *ecurity analysis on t%e selected five securities in t%e &an.in+ sector$

Out of t%e ten co,'anies" 0%ic% 0ere ta.en t%e, on t%e &asis of ,ar.et ca'itali4ation

fro, t%e -*E 6-o,&ay *toc. E5c%an+e) list" five co,'anies 0ere selected to 'erfor, t%edetailed study$ Data 0ere selected fro, t%e secondary sources$ T%e analysis 0as done 0it%

five years data$ -ot% relevant funda,ental and tec%nical analysis 0ere used for t%e

analysis$

T%e funda,ental analysis %ad s%o0n t%e real 'osition of t%e Indian econo,y"

0%ic% is in a &oo,in+ sta+e and t%e stoc. ,ar.et indicatin+ t%e &est &uyin+ and sellin+

o''ortunities$ *elected &an.s %ave &een analy4ed for t%eir 'erfor,ance in t%e last five

years$ T%is analysis revealed t%at all t%e &an.s %ave s%o0n consistently +ood 'erfor,anceand t%e 'erfor,ance is i,'rovin+ every year$ T%erefore t%e 'erfor,ances of all t%ese

&an.s are li.ely to &e ,uc% &etter in t%e years to co,e$

T%is is t%e &est ti,e to invest ,oney in s%ares" es'ecially in &an.in+ sector$ No0

t%e ,ar.et is ,ovin+ u' fro, t%e financial crisis$ *o t%e investors reco,,ended to &uy t%e

s%ares$ T%e intrinsic values of s%ares are %i+%er t%an t%e current ,ar.et 'rice of s%ares$ It

indicates t%e co,in+ ,ove,ent of s%ares$ -ased on t%ree 'ortfolios 6E ratio !ar.et

Ca'itali4ation and E2ual ei+%t)" 0e invest on t%e &asis of E Ratio 0as ,ore 'rofita&le$



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Pu&0'4 N't$+&'( B'&1I&*u)tr% 7B'&1) Pu4($c Sect+r

BALANCE SHEET

Ye'r M'r M'r M'r M'r M'r

SOURCES OF FUNDS 7

Ca'ital P =:?$= =:?$= =:?$= =:?$= =:?$=

Reserves Total P :>"==$== :


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HDFC B'&1 Lt*

I&*u)tr% 7B'&1) Pr$/'te Sect+r

PROFIT AND LOSS ACCOUNT

Ye'r M'r !23 M'r !23 M'r !23 M'r !23 M'r !23

INCOME 7

Interest Earned P :@"==">?$=> ="=$>

Ot%er Inco,e P =">$: $? :" =:$

Total :"


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I&*u)tr% 7B'&1) Pr$/'te Sect+r

BALANCE SHEET


SOURCES OF FUNDS 7

Ca'ital P :">@=$ :":$= >?"=?$?= $< >">=:$? $=> :"


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SOURCES OF FUNDS 7

Ca'ital P @=>$ @=:$> ?$?:$ :":>$=: Ot%er #ia&ilities M rovisions P :::"=$>> ="@:$ @"@$: ?:"?=>$@: $>?

Fi5ed Assets P ="=$? ="==$> >$:> >?":?$


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Ye'r M'r !23 M'r !23 M'r !23 M'r !23 M'r !23

INCOME 7

Interest Earned P @="$>= >"?$=: ="$:: "> "? ?">=$>< >>"@:$= >="?$= ="?>$=

II$ E5'enditureInterest e5'ended P >$=: "?$ "= @$ @@$@ >"=>$?$?< :$= 7$??$= >"=?$> rior Jear Ad(ust,ents P $ $ $ $ $

rofit &rou+%t for0ard $=> $=> $=> $=> $=>

IB$ A''ro'riations

Transfer to *tatutory Reserve P ?""=$ ="=?$::

portfolio management banking sector

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