CONTENTS

CHAPTER - 1

Introduction1.1 Executive Summary1.2 Objective1.3 Scope

CHAPTER – 2

Theoretical Overview

CHAPTER – 3

Organization Overview

CHAPTER – 4

Data Analysis

CHAPTER – 5

Project Finding & Conclusion Suggestions/Recommendation Bibliography.

CHAPTER 1 INTRODUCTION

INTRODUCTION

Risk is an important factor of the investment. Any rational investor, before investing his investible wealth in the stock, analyses the risk associated with the particular stock. The actual return he receives from a stock may vary from his expected return and the risk is expressed in terms of variability of return. The down side of risk may be caused by several factors, either common to all stocks or specific to a particular stock. Investor in general would like to analyze the risk factors and a thorough knowledge of the risk helps him to plan his portfolio in such a manner so as to minimize the risk associated with the investment.

Risk is the possibility of loss or injury. The concept of risk and return analysis is integral to the process of investing and finance. All financial decisions involve some amount of risk.

SUMMARY

Stock markets are barometers of the economy. It is expected that the markets and their indicators, in the form of indices, reflect the potential of the corporate listed on them and, in the process, the direction and health of the economy. If a country’s economy is performing well and expected to grow at a healthy rate, the market is usually expected to reflect that.

Indian economy is increasingly exposed to global markets post liberalization in the early 90s. So before analyzing domestic markets one needs to analyze the Global economy.

In India we have number of recognized stock exchanges which consists of a few at national level and majority at regional level. When an unlisted company makes either a fresh issue of securities or offers its existing securities for sale or both for the first time to the public, it is called IPO. This paves way for listing and trading of the issuer’s securities in the Stock Exchanges.

Many factors determine the price of an initial public offering (IPO). Ranging from a company’s marketing prowess to investor sentiment. The financial history of a company in addition to its profit-earning potential for the future also affects the price of an IPO. Pricing affects the performance of the IPO in the market as it leaves an impact on the investors and most of them are not much financially aware. Sometimes it may happen that there appears a huge demand for an IPO in the bidding process during the book building method, which in turn raises the issue price of the IPO, but when it comes into the market it does not perform as expected. Instead its price drops thus putting the investors at a loss and losing the confidence of the investors. Thus it is important for an IPO to be optimally priced so that it justifies with the issue price.

OBJECTIVE

Risk analysis is helpful for the investor to determine, what is the possibility of loss and profit on his investment.

Risk analysis is the forecasting to know what the future return is. The risk analysis calculation is not accurately, it is just probability of loss

and return. From the risk analysis if investor knows the possibility of loss is high, then

investor try to less amount of investment. If investor knows the return is high then he invest large amount.

The concept of risk and return analysis is integral to the process of investing and finance. All financial decisions involve some risk.

Return is simply a reward for investing as all investing involves some risk. The greater the risk, the greater the return expected. The objective of risk and return analysis is to minimize the return by

creating a balance of risk. Banking sector is also affect to the growth of the country.

SCOPE OF THE RISK ANALYSIS

There are two types of approaches to risk analysis: quantitative and qualitative. Quantitative risk analysis attempts to assign real and meaningful numbers to all elements of the risk analysis process. These elements may include safeguard costs, assets value, business impact, threat frequency, safeguard effectiveness, and exploit probabilities and so on. When all of these are quantified, the process is said to be quantitative. Quantitative risk analysis also provides concrete probability percentage when determining the likelihood of threats. Each element within the analysis (asset value, threat frequency, severity of vulnerability, impact damage, safeguard costs, safeguard effectiveness, uncertainty and probability items) is quantified and entered into equation to determine total and residual risks.

Purely quantitative risk analysis is not possible, because the method attempts to quantify qualitative items, and there are always uncertainties in quantitative values. For example, if a severity level is high and a threat frequency is low, it is hard to assign corresponding numbers to these ratings and come up with a useful outcome, In most instances today, qualitative risk analysis is used.

The reason that a qualitative method is more commonly used than a quantitative method is because of the difficulty of assigning monetary values to assets, calculating the percentage of damage that could be ensured (exposure factor) and deriving the probability of frequency of a threat becoming realized (ARO).

Inserting a value, quantitative or qualitative, for probability is a difficult and potentially dangerous move. Most risk methodologies use some type of probability value to represent the likelihood of a threat being realized; i.e. a vulnerability being exploited.

So most organizations use a qualitative approach, but the industry as a whole is trying to define metrics that can be used for quantitative analysis. Almost everyone would like to use a quantitative risk analysis approach since the exercise is carried out to basically figure out where to best spend the company’s finite security budget. In this series I will be covering some risk management tools that use a quantitative approach and explain the pros and cons of these tools.

So far we have developed our IRM policy, created our IRM team, defined the team’s scope, and decided on if the team will be using a qualitative or quantitative approach to risk analysis. In the next article we will go through the steps of an actual risk analysis.

The Limitations of Risk Analysis

Risk analysis techniques help a project manager analyze events that could delay project completion. Then, she can identify actions that might minimize of eliminate disruptions. Limitations of risk analysis include lack of data, insufficient expertise and legal requirement.

Introduction

Risk analysis stares with identifying potential threats and the probability of their occurrence. Employee illness, supplier delays, computer failures, cost overruns, financial instability or natural disasters can all have an impact on a project in a significant way. Without proper planning, project managers limit their ability to respond effectively. Once the project manager identifies likely threats, she needs to access its impact using all the available data. Then, managing risks typically involves using existing resources to handle the situation, deploying a contingency plan or investing in alternative resources to accomplish project objectives. Reviewing the risk management plan with the team ensures that all members understand the ramifications of potential problems and solutions. Effective risk assessment analysis depends on recognizing the limitations of any technique used.

Lack of Data

Many risk assessment analysis techniques involve gathering data. For example, developing models or simulations can help predict the impact of events, such as natural disasters caused by severe weather conditions. Unfortunately, creating accurate models requires extensive data collection, which can be expensive and not necessarily completely reliable. Cost-benefit analysis activities undertaken to identify countermeasures may also suffer if incomplete data collection occurs. Legal and social or ethical requirements may override financial advantages. Using

data to make decisions may be unwise if the use of simple indicators does not reflect the complex realities of the situation at hand.

Insufficient Analysis Expertise and Time

Using decision trees to analyze risks may provide comprehensive input but analyzing the consequence arising from a myriad of possibilities may prove unwieldy. With the latest technology, the use of computer software programs to simulate activities that can cause a negative impact on project schedules has become much more cost effective. However, it still requires comprehensive skills and knowledge to interpret the results correctly. Complex programs with many variables require trained personnel, who may not be assigned to the project. Similarly, analyzing historical data to determine potential threats requires access to past project documentation and expertise in interpreting the criteria used to evaluate risk on prior efforts. Risk assessment analyzing helps project managers prepare to deal with events that can negatively impact project schedules. Analysis techniques typically capture and identify weaknesses and threats. Limitations to the analysis process include lack of comprehensive data, insufficient time or training to conduct a thorough investigation and legal or moral constraints that dictate managing events impacting project deadlines.

CHAPTER 2

THEORETICAL OVERVIEW

Risk

Risk is the possibility of loss or injury, the degree of probability of such loss. In risk, the probable outcomes of all events are listed. Once the events are subjectively, the derived probabilities can be assigned to the entire possible events.

The investor can analyze and find out the possible range of returns from his investments. He can assign some subjective probability to his returns. In-uncertainty, the possible events and probabilities of their occurrence are not known. Hence risk and uncertainty are different from each other.

Risk consists of two components,

Systematic risk and Unsystematic risk.

The systematic risk is caused by factors external to the particular company and uncontrollable by the company. The systematic risk affects the market as a whole. In case of unsystematic risk the factors are specific, unique and related to the particular industry or company.

Systematic Risk

The systematic risk affects the entire market. Often we read in the newspaper that the stock market is in the bear hug or in bull grip. This indicates that the entire market is moving in a particular direction either downward or upward. The economic conditions, political situations and the sociological changes affect the security market.

The recession in the economy affects the profit prospect of the industry and stock market. The 1998 recession experienced by developed and developing countries have affected the stock markets all over the world. The south-east Asian crisis has affected the stock market worldwide. There factors are beyond the control of the corporate and the investor. They cannot be entirely avoided by the investor. It drives home the point that the systematic risk is unavoidable.

The systematic risk is further sub-divided into

Market risk Interest rate risk Purchasing power risk

Market risk

Market risk as that portion of total variability of return caused by the alternating forces of bull and bear markets. When the security index moves haltingly for a significant period of time, it is known as bull market. In the bull market the index moves from a low level to the peak. Bear market is just a reverse to the bull market, the index declines haltingly from the peak to a market low point called through for a significant period of time. During the bull market and bear market more than 80 percent of the securities prices rise of fall along with the stock market indices.

The forces that affect the stock market are tangible and intangible events. The tangible events are real events such as earthquake, war, political uncertainty and fall in the value of currency.

Intangible events are related to market psychology. The psychology is affected by the real events. But reactions to the tangible events become over reactions and they push the market in a particular direction.

INTEREST RATE RISK

Interest rate risk is the variation in the single period rates of return caused by the fluctuations in the market interest rate. Most commonly interest rate affects the price of bonds, debenture and stocks. The fluctuations in the interest rates are caused by the changes in the government monetary policy and the changes that occur in the interest rates of treasury bills and the government bonds. The bonds issued by the government and quasi-government are considered to be risk free. If higher interest rates are offered, investor would like to switch his investments from private sector bonds to public sector bonds. If the government to tide over the deficit in the budget floats a new loan/bond of higher rate of interest, there would be a definite shift in the funds from low yielding bonds to high yielding bonds and from stock to bonds.

Likewise, if the stock market is in a depressed condition, investors would like to shift their money to the bond market, to have an assured rate of return. The best example is that in April 1996, most of the initial public offering of many companies remained undersubscribed, but IDBI and IFC bonds were oversubscribed.

The assured rate of return attracted the investors from the stock market to the band market.

The fall in the demand for securities would lead to a fall in the value of the stock index. Interest rates not only affect the security traders but also the corporate bodies who carry their business with borrowed funds. The cost of borrowing would increase and a heavy outflow of profit would take place in the form of interest to the capital borrowed. This would lead to a reduction in earnings per share and a consequent fall in the price of share.

Purchasing power risk

Variations in the return are caused also by the loss of purchasing power of currency. Inflation is the reason behind the loss of purchasing power. The level of inflation proceeds faster than the increase in capital value. Purchasing power of the reruns to be received. The rise in price penalizes the returns to the investor, and every potential rise in price is a risk to the investor. The inflation may be demand-pull or cost-push inflation. In the demand pull inflation, the demand for goods and services are in excess of their supply. At full employment level of factors of production. The economy would not be able to supply more goods in the short run and the demand for product pushes the price upward. The supply cannot be increased unless there is an expansion of labour force or machinery for production. The equilibrium between demand and supply is attained at a higher price level.

The cost-push inflation, as the name itself indicates that the inflation or the rise in price is caused by the increase in the cost. The increase in the cost of raw material, labour and equipment makes the cost of production high and ends in high price level.

UNSYSTEMATIC RISK

Unsystematic risk is unique and peculiar to firm or an industry. Unsystematic risk stems from managerial inefficiency, technological changes in the production process, availability of raw material, changes in the consumer preference and labour problems. Technological changes affect the information technology industry more than that of consumer product industry. Thus, it differs from industry to industry. Broadly unsystematic risk can be classified into.

1. Business risk2. Financial risk

Business Risk

Business risk is that portion of the unsystematic risk caused by the operating environment of the business. Business risk rises from the inability of a firm to maintain its competitive edge and the growth or stability of the earning variation that occurs in the operating environment is reflected on the operating income and expect dividend. The variation in the expected operating income indicates the business risk. Business risk can be divided into

1. Internal business risk2. External business risk

Internal business risk

Internal business risk is associated with the operational efficiency of the firm. The operational efficiency differs from company to company. The efficiency of operation is reflected on the company’s achievement of its pre-set and the fulfillment of the investors.

External business risk

External risk is the result of operating conditions imposes on the firm by circumstances beyond its control. The external factors are social and regulatory factory. For instant, the Indian sugar and fertilizer industry depend much on external factors.

Financial Risk

It refers to the variability of the income to the equity capital due to the debt capital. Financial risk in a company associated with the capital structure of the company. Capital structure of the company consists of equity funds and barrowed funds. The presence of debt and preference capital results in a commitment of paying interest of pre fixed rate of dividend. The residual income alone would be

available to the equity holders; the interest payment affects the payments that are due to the equity investors. The debt financing increases the variability of the returns to the common stock holders and affects their expectations regarding the return, the use of debt with the owned funds to increase the return to the shareholders is known as financial leverage.

Debt financing enables the corporate to have funds at low cost and financial leverage to the shareholders. As long as the earnings of a company are higher than the cost of borrowed funds, shareholders earning are increased.

MINIMISING RISK

Every investor wants to guard himself from the risk. This can be done by understanding the nature of the risk and careful planning. The following points to give the protection the investors from the different type of risks.

Market risk protection Protection against interest rate risk Protection against inflation Protection against business and financial risk

RISK MEASUREMENT

Understanding the nature of risk is not adequate unless the investor or analyst is capable of expressing it in some quantitative terms makes it comparable with other stocks. Measurement cannot be assured of cent percent accuracy because risk is caused by numerous factors such as political, economic and managerial efficiency. Measurement provides an approximate quantification of risk.

OBJECTIVE OF RISK ANALYSIS

We provide an objective and quantitative method for analyzing risk for unauthorized disclosure of private patient information. The current method, experts generate scenarios of how security or privacy violations might occur and organizations protect themselves against these risks. The current approach leaves healthcare organizations at mercy of vivid imagination of their consultants. In contrast, we propose a method that relies on objective data regarding actual occurrences of privacy violations. The proposed method relies on a National Database Unauthorized Disclosures (NUDUD) to identify a small set of risk factors that have led to unauthorized disclosure. Using this set of factors, Health Care Organizations complete a survey and report the frequency of the hazards within their organization. Bayesian probability models are used to compute the overall

probability of unauthorized disclosure from survey responses. This paper provides a tutorial on how to do objective risk analysis within health care organizations as well as a test of the concept. We show the application of the approach to four health care institutions.

The methodology for probabilistic risk analysis has over the years through its application in the aerospace, nuclear power, and the chemical industries. The Health Care industry can build its risk assessment procedures based on progress made in these industries. A key feature of risk assessment procedures in these industries has been a cumulative database of hazards and scenarios from accidents or near-accidents. For example, following Challenger disaster, the National Aeronautical and Space Administration had to revise its procedures for risk assessment to include scenarios previously not considered in the predictive models and to correct and revise.

The probabilities of other types of failures. Similarly, after the Three Mile Island nuclear accident, risk assessment procedures had to be revised and the probabilities associated with human error had to be significantly increased. Experiences of other industries highlight the need to take an evolutionary approach to risk analysis, to share information across organizations and to increase the knowledge base by allowing each incidence of unauthorized disclosure to inform us of emerging hazards. In this paper, we show how one can use the procedures for risk analysis in these industries to healthcare. Like these industries, we propose the creation of centralized repository of adverse events.

The concept of risk and return analysis is integral to the process of investing and finance. All financial decisions involve some risk. You may expect to get a return of 15% per annum in your investment but the risk of “not able to achieve 15% return “will always be there.

Return is simply a reward for investing as all investing involves some risk. The greater the risk, the greater the return expected.

The objective of risk and return analysis is to maximize the return by creating a balance of risk. For example, in case of working capital management, the less inventory you keep, the higher the expected return as less of your money is locked as asset, but you also have a increased risk of running out of raw material when you actually need it for production or maintenance. Which means you loose sale. Thus all companies tries very hard to maintain a minimum inventory as possible without effecting smooth production. This is a very common example of risk return trade-off.

In case of an investment in shares/stocks, I as an investor accept to get a better return than fixed deposits but I am also ready to take risk of losing my money in stock market.

Hence important is to understand how much risk you can take and invest accordingly.

A lay man shall ask himself:

1. How much money I can put in stocks today, and even if I loose this money it will not affect my way of life? If your answer is Rs100 it means you are ready to take risk for Rs100.

2. How much return I expect from stock in next one year? If you want to make 12% per annum your expectation as real and you are taking a risk of Rs100 dollars to make 12% per annum.

CHAPTER 3 ORGANISATION OVERVIEW

ABOUT BHSE

The Bhubaneswar Stock Exchange (BHSE) was incorporated on 17th April, 1989 as a Public Company Limited by guarantee with an object to facilitate, assist, regulate and control the business of dealing in Stocks, Shares and like Securities in the State of Odisha. Ministry of Finance, Govt. of India, New Delhi granted recognition to the Stock Exchange on 5th June, 1989 under the provisions of the Securities Contracts (Regulations) Act, 1956 and the Rule made there under for an initial period of five years. The Exchange admitted 161 members and commenced its trading operation on 2nd January, 1991. To import greater liquidity in both shares and debentures and to increase the volume of business, the Exchange has expanded its membership strength by admitting 75 new members thus making a total of 225 members including 10 Corporate Members.

On 15th September, 2005, SEBI approved the corporatization and demutualization schemes of the Bhubaneswar Stock Exchange which were required in accordance with the provisions of the Securities Contract (Regulation) Act, 1956.

Operations

It is one among the 21 odd regional stock exchanges in India. By 1999-2000, the exchange had a total of 234 brokers, out of which 15 were corporate brokers. Among 234 brokers, it was further classified as 209 proprietors and 15 corporate brokers. Then, there were only 17 sub-brokers registered. The trading membership strength of Bhubaneswar Stock Exchange is 196 at present against the sanctioned strength of 350

Organization Structure

The affairs of the BHSE are managed by Board of Directors consisting 8 Directors from the following categories.

2 Trading Member Directors 2 Public Interest Directors 4 Shareholder Directors

STATE BANK OF INDIA

State Bank of India (SBI) (NSE: SBIN, BSE: 500112, LSE: SBID) is the largest banking and financial services company in India by revenue, assets and market

capitalization. It is a state-owned corporation with its headquarters in Mumbai, Maharashtra. As of March 2012, it had assets of USRs360 billion with over 13,577 outlets including 157 overseas branches and agents globally. The bank traces its ancestry to British India, through the Imperial Bank of India, to the founding in 1806 of the Bank of Calcutta, making it the oldest commercial bank in the Indian Subcontinent. Bank of Madras merged into the other two presidencies banks – Bank of Calcutta and Bank of Bombay – to form the Imperial Bank of India, which in turn became the State Bank of India. The Government of India nationalized the Imperial Bank of India in 1955, with the Reserve Bank of India taking a 60% stake, and renamed it the State Bank of India. In 2008, the government took over the stake held by Reserve Bank of India. SBI has been ranked 285 th in the Fortune Global 500 ranking of the world’s biggest corporations for the year 2012.

SBI provides a range of banking products through its vast network of branches in India and overseas, including products aimed at non-resident Indians (NRIs). The State Bank Group, with over 18,324 branches, has the largest banking branch network in India. SBI has 14 local head offices situated at Chandigarh, Delhi, Luck now, Patna, Kolkata, Guwahati (North East Circle), Bhubaneswar, Hyderabad, Chennai, Trivandrum, Bangalore, Mumbai, Bhopal & Ahmadabad and 57 Zonal Offices that are located at important cities throughout the country. It also has 157 branches overseas.

SBI is a regional banking behemoth and is one of the largest financial institutions in the world. It has a market share among Indian commercial banks of about 20% in deposits and loans. The State Bank of India is the 29th most

Reputed company in the world according to Forbes. Also, SBI is the only bank featured in the coveted “top 10 brands of India” list in an annual survey conducted by Brand Finance and The Economic Times in 2010.

The State Bank of India is the largest of the Big Four banks of India, along with ICICI Bank, Punjab National Bank and HDFC Bank- its main competitors. The roots of the State Bank of India lie in the first decade of 19 th century, when the Bank of Calcutta, later named Bank of Bengal, was established on 2nd June 1806. The Bank of Bengal was one of three Presidency banks, the other two being the Bank of Bombay (incorporated on 15th April 1840) and the Bank of Madras (incorporated on 1st July 1843. All three Presidency banks were incorporated as joint stock companies and were the result of the royal charters. These three banks received the exclusive right to issue paper currency in 1861 with the Paper Currency Act, a right they retained until the formation of the Reserve Bank of India. The Presidency banks amalgamated on 27 January 1921, and the re-organized banking

entity took as its name Imperial Bank of India. The Imperial Bank of India remained a joint stock company.

Pursuant to the provisions of the State Bank of India act of 1955, the Reserve Bank of India, which is India’s central bank, acquired a controlling interest in the Imperial Bank of India. On 30 April 1955, the Imperial Bank of India became the State Bank of India. The government of India recently acquired the Reserve Bank of India’s stake in SBI so as to remove any conflict of interest because the RBI is the country’s banking regulatory authority.

In 1959, the government passed the State Bank of India (Subsidiary banks)Act, enabling the State Bank of India to take over eight former state-associated banks as its subsidiaries. On 13 September 2008, the State Bank of Saurashtra, one of its associate banks, merged with the State Bank of India.

SBI has acquired local banks in rescues. For instance, in 1985, it acquired the bank of Cochin in Kerala, which had 120 branches. SBI was the acquirer as its affiliate, the State Bank of Travancore, already had an extensive network in Kerala.

As of 31 December 2009, the bank had 157 overseas offices spread over 32 countries. It has branches of the parent in Colombo, Dhaka, Frankfurt, Hong Kong, Tehran, Johannesburg, London, Los Angeles, Male in the Maldives, Muscat, Dubai, New York, Osaka, Sydney, and Tokyo. It has offshore banking units in the Bahamas, Bahrain, and Singapore and representative offices in Bhutan and Cape Town. It also has an ADB in Boston, USA.

SBI operates several foreign subsidiaries or affiliates. In 1990, it established an offshore bank: State Bank of India (Mauritius).

In 1982, the bank established a subsidiary, State Bank of India (California), which now has ten branches – nine branches in the state of California and one in Washington, D.C. The 10th branch was opened in Fremont, California on 28 March 2011. The other eight branches in California are located in Los Angeles, Artesia, San Jose, Canoga Park, Fresno, San Diego, Tustin and Bakersfield.

The Canadian subsidiary, State Bank of India (Canada) also dates to 1982. It has seven branches, four in the Toronto area and three in British Columbia.

In Nigeria, SBI operates as INMB Bank. This bank began in 1981 as the Indi-Nigerian Merchant Bank and received permission in 2002 to commerce retail banking. It now has five branches in Nigeria.

In Nepal, SBI owns 55% of Nepal SBI Bank, which has branches throughout the country. In Moscow, SBI owns 60% of Commercial Bank if India, with Canara Bank owning the rest. In Indonesia, it owns 76% of PT Bank Indo Money.

The State Bank of India already has a branch in Shanghai and plans to open one in Tianjin.

In Kenya, State Bank of India owns 76% of Giro Commercial Bank, which it acquired for USRs8 million in October 2005.

The State Bank of India (with 74% of the total capital) along with the largest global banking group – BNP Paribas (with 26% of the remaining capital) headquartered in Paris – formed a joint venture which established India’s most reputed and trusted life insurance company named SBI Life Insurance Company Ltd. In March 2001

ASSOCIATE BANK

SBI has five associate banks; all use the same logo of a blue circle and all the associates use the “State Bank of” name, followed by the regional headquarters name:

State Bank of Bikaner & Jaipur State Bank of Hyderabad State bank of Mysore State Bank of Patiala State Bank of Travancore

Earlier SBI had only seven associate banks that constituted the State Bank Group.

Originally, the then seven banks that became the associate banks belonged to princely states until the government nationalized them between October 1959 and May 1060. In the tune with the first Five Year Plan, emphasizing the development of rural in India, the government integrated these banks into the State Bank of India system to expand its rural outreach. There has been a proposal to merge all the associate banks into SBI to create a Mega Bank and streamline operations.

The first step towards unification occurred on 13 August when Stat Bank of Saurashtra merged with SBI, reducing the number of state banks from seven to six. Then on 19 June 2009 the SBI board approved the merger of its subsidiary, State Bank of Indore, with itself. SBI holds 98.3% in State Bank of Indore.

(Individuals who held the shares prior to its takeover by the government hold the balance of 1.77%.)

The acquisition of State Bank of Indore added 470 branches to SBI’s existing network of 12,448 and over 21,000 ATMs. Also, following the acquisition, SBI’s total assets will inch very close to the 10 trillion marks. The total assets of SBI and the State Bank of Indore stood at 9,981,190 million as of March 2009. The process of merging of State Bank of Indore was completed by April 2010, and the SBI Indore branches started functioning as SBI branches on 26 August 2010

Non-Banking Subsidiaries

Apart from its five associate banks, SBI also has the following non-banking subsidiaries:

SBI Capital Markets Ltd SBI Fund Management Pvt. Ltd SBI Factors & Commercial Services Pvt. Ltd SBI Card & Payments Services Pvt. Ltd (SBICPSL) SBI DFHI Ltd SBI Life Insurance Company Ltd SBI General Insurance

Branches of SBI

State Bank of India has 172 foreign offices in 37 countries across the globe. SBI has about 26,000+ ATMs (25,000th ATM was inaugurated by the then

Chairman of State Bank Sri O.P. Bhatt on 31 March 2011, the day of his retirement); and SBI group (including associate banks) has about 45,000 ATMs.

SBI has 21,500 branches, including branches that belong to its associate banks.

SBI includes 99345 offices in India. India’s number one ADB is in Bellary i.e. State Bank of India bellary ADB

Loan to NTPC

On 8 July 2011, SBI agreed to give a loan of 100 billion to NTPC, making it the largest loan SBI had ever given to any single customer in its entire 200 year history. The loan had a “door-to door” maturity period of 12 years, accompanied by a drawdown period of four years. An NTPC press release said at the time of the

declaration of the loan that:”the loan shall be utilized for financing the capital expenditure of ongoing and new projects.”

1. NTPC chairman at the time, Arup Roy Choudhury clarified that the loan amount would be use to add 128,000 MW capacities by the end of the year 2032 (NTPC’s capacity at the time of the declaration of the loan was 34,584 MW).This loan was offered amidst declining finance for power project in India, which were a direct result of the lending constraints placed by the Reserve bank of India and the increased risk awareness of power project. It will also help minimize the shortfall of around 4.51 trillion that the power ministry of India expected to insure in achieving the objectives of the Eleventh five year plan (This plan targeted an addition of 78,577 MW or power generation capacities which would require an investment of 10.3 trillion).

Recent awards and recognizing

Best online Banking Award, Best customer Initiative Award & Best Risk Management Award (Runner Up) by IBA Banking Technology Awards 2010

The Bank of the year 2009, India (won the second year in a row) by the banker magazine.

Best Bank- Large and Most Socially Responsible Bank by the Business Bank Award 2009

Best Bank 2009 by Business India 11th most trusted brand in India The Most Trusted Brand 2009 by The Economic Times Most Preferred Bank & Most preferred Home loan provider by CNBC Visionaries of Financial Inclusion by FINO Technology Bank of the Year by IBA Banking Technology Awards SKOCH Award 2010 for Virtual Corporation Category for its E-

payment Solution.

PUNJAB NATIONAL BANK

Punjab National Bank was registered on 19 May 1984 under the Indian Companies Act with its office in Antalkali Bazaar Lahore. The founding board was drawn from different parts of India professing different faith and a varied back-ground with, however, the common objective of providing country with a truly national bank

which would further the economic interest of the country. PNB’s founders included several leaders of the SWADESHI movement such as Dayal Singh Majithia and Lala Harkishan Lal, Lala Lalchand , Shri Koli Prosanna Roy, Shri E.C. Jessawala, Shri Prabhu Dayal, Bakshi Jaishi Ram and Lala Dholan Dass. Lala Lajpat Rai was actively associated with the management of the Bank in its early years. The board first met on 23 May 1894. Ironcally, the PNB Website now claims Lala Lajpat Rai to be the founding father, surpassing Rai Mul Raj and Dayal Singh Majithia.

PNB has the destination of being the first Indian bank to have been started solely with Indian capital that has survived to the present. (The first entirely Indian bank, Commercial Bank, was established in 1881 in Faizabad, but failed in 1958.)

PNB has had the privilege of maintaining accounts of national leaders such as Mahatma Gandhi, Shri Jawaharlal Nehru, Shri Lal Bahadur Shastri, Shrimati Indira Gandhi, as well as the account of the famous Jalianwala Bagh Committee

Timeline

1895: PNB commenced its operations in Lahore. 1904: PNB established branches in Karachi and Peshawar. 1940: PNB absorbed Bhagwan Dass Bank, a scheduled bank located in Delhi

Circle. 1947: At the Partition of India and the commencement of Pakistani

independence, PNB lost its premises in Lahore, but continued to operate in Pakistan. PNB had already shifted its registered office Lahore to Calcutta in June 1947 – even the announcement of the Pakistan.

1951: PNB acquired the 39 branches of Bharat Bank (estd. 1942); Bharat Bank became Bharat Nidhi Ltd.

1960: PNB again shifted its head office, this time from Calcutta to Delhi. 1961: PNB acquired Universal Bank of India. 1963: The Government of Burma nationalized PNB’S branch in Rangoon

(Yangon). September 1965: After the Indo-Pak war the government of Pakistan seized

all the offices in Pakistan of Indian banks. PNB also had one or more branches in East Pakistan (Bangladesh).

1960s: PNB amalgamated Indo Commercial Bank (est.1933) in a rescue. 1969: The Government of India (GOI) nationalized PNB and other major

commercial banks, on 19 July 1969. 1976 or 1978: PNB opened a branch in London. 1986 The Reserve Bank of India required PNB to transfer its London branch

to State Bank of India after the branch was involved in a fraud scandal.

1986: PNB acquired Hindustan Commercial Bank (est.1943)in a rescue. The acquisition added Hindustan’s 142 branches to PNB’ network.

1993: PNB acquired New Bank of India. which the GOI had nationalized in 1980.

1998: PNB set up a representative office in Almaty, Kazakhstan. 2003: PNB took over Nedungadi Bank, the oldest private sector bank in

Kerala. At the of the merger with PNB, Nedungadi Bank’s shares had zero value, with the result that its shareholder’s received no payment for their shares.PNB also opened a representative office in London.

2004: PNB established a branch in Kabul, Afganistan.

PNB also opened a representative office in Shanghai.

PNB established an alliance with Everest Bank in Nepal that permits

Migrants to transfer funds easily between India and Everest Bank’s 12

Branches in Nepal.

2005: PNB opened a representative office in Dubai. 2007: PNB established PNBIL-Punjab National Bank (International)-in the

UK, with two offices, one in London, and one in South Hall. Since then it has opened a third branch in Leicester, and in planning a fourth in Birmingham.

2008: PNB opened a branch in Hong Kong. 2009: PNB opened a representative office in Oslo, Norway, and a second

branch in Hong Kong. this in Kowloon 2010: PNB received permission to upgrade its representative office in the

Dubai International Centre to a branch. Punjab National Bank was ranked #26 in the Fortune India 500 ranking of

2011. Punjab National Bank was ranked #1234 in Forbes Global 2000.

YEAR RETURN2007-08 83.552008-09 -87.152009-10 6072010-11 196.82011-12 -254.5

PNB METLIFE

Punjab National Bank has entered into a strategic alliance with Metlife India Insurance, headquartered in Bangalore and Gurgaon, which has operated in India since 2001 and is an affiliate of Metlife. The new entity, PNB Metlife markets insurance products through PNB’s branches. Through this alliance, Metlife, which is one of the world’s largest Insurance companies retails its products through 5600 branches of PNB and has got a much needed brand recognition in smaller towns in India.

BANK OF INDIA

Bank of India (BOI) (BSE:BOI) is a state-owned commercial bank with headquarters in Mumbai. Government-owned since nationalization in 1969, it is India’s 4th largest PSU bank, after State Bank of India, Punjab National Bank and Bank of Baroda. It has 4157 branches as on 21/04/2012, including 29 branches outside India, and about 1679 ATMs. BOI is a founder member of SWIFT (Society for Worldwide Inter Bank Financial Telecommunications), which facilitates provision of cost-effective financial processing and communication services. The bank completed its first one hundred years of operation on 7th September 2006.

HISTORY

Previous banks that used the name Bank of India

At least three banks having the name Bank of India had preceded the setting up of the present Bank of India.

1. A person named Ramakishen Dutta set up the first Bank of India in Calcutta (now Kolkata) in 1828, but nothing more is known about this bank.

2. The second Bank of India was incorporated in London in the year 1836 as an Anglo-Indian bank.

3. The third bank named Bank of India was registered in Bombay (now Mumbai) in the year 1864

YEAR RETURN2007-08 992008-09 -44.72009-10 119.952010-11 128.952011-12 -117.5

The Current Bank

The earlier holders of the Bank of India name had failed and were no longer in existence by the time a diverse group Hindus, Muslims, Parsees and Jews helped establish the present Bank of India in 1906. It was the first in India promoted by Indian interests to serve all the communities of India. At the time, banks in India were either owned by Europeans and served mainly the interests of the European merchant houses or by different communities and served the banking needs of their own community.

The promoters incorporated the Bank of India on 7th September 1906 under Act VI of 1882, with an authorized capital of Rs. 1 crore divided into 100,000 shares each of Rs. 100. The promoters placed 55,000 shares privately and issued 45,000 to the public by way of IPO on 3rd October 1906; the bank commenced operations on 1st

November 1906.

The lead promoter of the Bank of India was Sir Sassoon J. David (1849-1926). He was a member of the Sassoons, who in turn were part of a Bombay community of Baghdadi Jews, which was notable for its history of social service. Sir David was a prudent banker and remained the Chief Executive of the bank from its founding in 1906 until his death in 1926.

1906: BOI founded with Head Office in Bombay. 1921: BOI entered into an agreement with the Bombay Stock Exchange to

manage its clearing house. 1946:BOI opened a branch in London, the first Indian bank to do so. This

was also the first post-WWII overseas branch of any Indian bank. 1950: BOI opened branches in Tokyo and Osaka 1951: BOI opened a branch in Singapore 1953: BOI opened a branch in Kenya and another in Uganda 1953 or 54: BOI opened a branch in Aden 1955: BOI opened a branch in Tanganyika 1960: BOI opened a branch in Hong Kong 1962: BOI opened a branch in Nigeria 1967: The Government of Tanzania nationalized BOI’s operations in

Tanzania and folded them into the government-owned National Commerce Bank, together with those of Bank of Baroda and several other foreign banks.

1969: The Government if India nationalized the 14 top banks, including Bank of India. In the same year, the People’s Democratic Republic of Yemen nationalized BOI’s branch in Aden and the Nigerian and Ugandan government forced BOI to incorporate its branches in those countries.

1970: National Bank of Southern Yemen incorporated BOI’s branch in Yemen, together with those of all the other banks in the country; this is now National Bank of Yemen. BOI was the only Indian bank in the country.

1972: BOI sold its Uganda operation to Bank of Baroda 1973: BOI opened a rep in Jakarta. 1974: BOI opened a branch in Paris. This was the first branch of Indian bank

in Europe. 1976: The Nigerian government acquired 60% of the shares in Bank of India

(Nigeria). 1978: BOI opened a branch in New York. 1970: BOI opened an agency in San Francisco. 1980: Bank of India (Nigeria) Ltd, changed its name to Allied Bank of

Nigeria. 1986: BOI took over the three UK branches of Central Bank of India (CBI).

CBI had been caught up in the Sethia fraud and default and the Reserve Bank of India required it to transfer its branches.

2003: BOI opened a representative office in Shenzhen. 2005: BOI opened a representative office in Vietnam. 2006: BOI plans to upgrade the Shenzhen and Vietnam representative

offices to branches, and to open representative offices in Beijing, Doha and Johannesburg. In addition BOI plans to establish a branch in Antwerpand a subsidiary in Dar-es-Salaam marking its return to Tanzania after 37 years.

2007: BOI acquired 76% of Indonesia based PT Bank Swedesi 2011: BOI opened a fully owned Subsidiary in Auckland, New Zealand on 6 th

October, 2011 (Bank of India (New Zealand) Ltd.)

UNION BANK

Union Bank of India (UBI) (BSE:532477) is one of India’s largest public sector bank (the government owns 55.43% of its share capital remains public, private organizations and foreign companies), is listed on the Forbes 2000. It has assets of USD 13.45 billion and all the bank’s branches have been networked with its 3025 ATMs. Its online Telebanking facility are available to all its Core Banking Customers – individual as well as corporate. It has representative offices in Abu

Dhabi, United Arab Emirates, and Shanghai, Peoples Republic of Chaina, and a branch in Hong Kong.

HISTORY

Union Bank of India (UBI) was registered on 11th November 1919 as a limited company in Mumbai and was inaugurated by Mahatma Gandhi. At the time of independence in 1947, UBI still only had four branches – three in Mumbai and one in Saurashtra, all concentrated in key trade centres. After Independence UBI accelerated its growth and by the time the government nationalized it in 1969, it had grown to 240 branches in 28 states. Shortly after nationalization, UBI merged in Belgaum Bank, a private sector bank established in 1930 that had itself merged in a bank in 1964, the Shri Jadeya Shankarling Bank, Then in 1985 UBI merged in Miraj State Bank, which had been established in1929. In 1999 the Reserve Bank of India requested that UBI acquire Sikkim Bank in a rescue after extensive irregularities had been discovered at the non-scheduled bank. Sikkim Bank had eight branches located in the North-East, which was attractive to UBI.

In California, the bank’s roots are woven into the fabric of the state’s emerging centers of commerce: in San Francisco, The Bank of California, founded in 1864; in San Diego, First National bank of San Diego, formed in1883; and in Los Angeles, Kaspare Cohn Commercial and Saving Bank, established in 1914.

Each institution helped fund projects that contributed to the state’s early development. Over time the banks evolved, and in some cases changed their names. Kaspare Chon’s bank was renamed Union Bank & Trust Co. of Los Angeles, and later shortened to Union Bank; First National Bank ultimately adopted the name Southern California First National as it reached beyond San Diego. In 1984, The Mitsubishi Bank, Ltd., acquired The Bank of California. Four years later in 1988, Mitsubishi merged The Bank of California and The Mitsubishi Bank of California, which retained The Bank of California Name.

The modern Union Bank was formed in 1996 when The Bank of California and Union Bank combined to create Union Bank of California as part of the merger of The Mitsubishi Bank Ltd and The Bank of Tokyo Ltd. Which created the world’s largest bank, The Bank of Tokyo-Mitsubishi Ltd. In 2008, Union Bank of California

shortened its name to Union Bank, signaling both its strategic plan to expand its national brand recognition, and a new era in its banking history.

In 2010 Union Bank acquired San Rafael, California-based Tamalpais Bank and Everett, Washington-based Frontier Bank. Through Purchase and assumption agreements with the Federal Deposit Insurance Corporation, Union Bank added 57 additional banking offices.

YEAR RETURN2007-08 44.72008-09 5.82009-10 145.052010-11 44032011-12 -108.15

OTHER SERVICES

Mobile Banking NEFT/RTGS Online Tax Payments Online Bill Payments Railway Tickets

Online Donations ATM locator

INDIAN OVERSEAS BANK

Indian Overseas Bank (IOB) (BSE:532388) is a major bank based in Chennai (Madras), with more than 2650 domestic branches, 3 extension counters and six branches overseas as of 31/03/2012. Indian Overseas Bank has an ISO certified in-house information Technology department, which has developed the software that 2650 branches use to provide online banking to customers; the bank has achieved 100% networking status as well as 100% CBS status for its branches. IOB also has a network of about 1433 ATMs all over India and IOB’s International VISA Debit Card is accepted at all ATMs belonging to the Cash Tree and NFS networks. IOB offers internet banking (E-See Banking) & Mobile Banking and is one of the banks that the Govt. of India has approved for online payment of taxes. The bank’s business more than doubled in the last four years.

The net profit for the year ended March 31, 2012 stood at Rs1,050.13 crore. Total income stood at Rs 19,578.13 crore as against Rs13,326.56 crore registered during the same period last financial year. For the full year, the total business grew by 24% to Rs3,21,707 crore from Rs 2,59,020 crore. IOB has planned to achive total business of Rs 3,85,000 crore to Rs 4,00,000 crore this fiscal.

HISTORY

In 1937 Thiru. M. CT.M.Chidambaram Chettyar establishes the Indian Overses Bank (IOB) to encourage overseas banking and foreign exchange operations. IOB started up simultaneously at three branches, one each in Karaikudi, Madras, (Chennai) and Rangoon (Yangon) It then quickly opened a branch in Penang and another in Singapore. The bank served the Nattukottai Chettiars, who were a mercantile class that at the time had spread from Chettinad in Tamilnadu stateto Ceylon (SriLanka), Burma (Myanmar), Malaya, Singapore, Java, Sumatra and Saigon. As a result, from the beginning IOB specialized in foreign exchange and overseas banking (see below).

In 1960s, the banking sector in India was consolidating by the merger of weak private sector banks with the stronger ones; IOB absorbed five banks, including

Kulitali Bank(est.1933). Then in 1969 the Government of India nationalized IOB. At one point, probably before nationalization, IOB had twenty of its eighty branches located overseas. After nationalization it, like all the nationalized banks, turned inward, emphasizing the opening of branches in rural India.

In1988-89, IOB acquired Bank of Tamil Nadu in a rescue.

The new millennium.

In 2000, IOB engaged in an initial public offering (IPO) that brought the government’s share in the bank’s equity down to 75%. In 2001 it acquired the Mumbai-based Adarsha Janata Sahakari Bank, which was founded in 1969 and had its head office in Pune. ShreeSuvarna Sahakari Bank has been in administration since 2006. It had nine branches in Pune, two in Mumbai and one in Shirpur. The total employee strength was estimated to be little over 100.

International Expansion

As mentioned above, IOB was international from its inception with branches in Rangon, Penang and Singapore. In 1941, IOB opened a branch in Malaya that presumably closed almost immediately because of the war.

In 1946, after the war, IOB opened a branch in Ceylon. More overseas branches followed quickly. In 1947, IOB opened a branch in Bangkok and re-opened others. In 1948 United Commercial Bank opened a branch an Malaya. In 1949, IOB opened a branch in Bangkok.

Then in 1963, The Burmese government nationalized IOB’s branch in Rangoon. In 1973, IOB, Indian Bank and United Commercial Bank established United Asian Bank Berhad in Malaysia. (Indian Bank had been operating in Malaysia since 1941 and United Commercial Bank Ltd. had been operating there since 1948). The banks set up United Asian to comply with the Banking Law in Malaysia, which prohibited foreign government banks from operating in the country. Also IOB and six Indian private banks established Bharat Overseas Bank as a Chennai-based private bank to take over IOB’s Bangkok branch.

In 1977 IOB opened a branch in Seoul. Two year later, IOB opened Foreign Currency Banking Unit in Colombo, Sri Lanka.

International expansion slowed thereafter, for a while. In 1992 Bank of Commerce (BOC), a Malaysian bank, acquired United Asian Bank (UAB).

In the new millennium, international expansion picked up once again. In 2007, IOB took over Bharat Overseas Bank. Three years later, Malaysia awarded a commercial banking license to a locally incorporated bank to be jointly owned by Bank of Baroda, Indian Overseas Bank and Andhra Bank. The new bank, India International Bank (Malaysia) will reside in Kuala Lumpur, which has a large population of Indians. Andhra Bank will hold a 25% stake in the joint-venture, Bank of Baroda will own 40% and IOB the remaining 35%.

CHAPTER 4

DATA ANALYSIS

DATA ANALYSIS

Sources of Data- Generally the data may be collected from two sources,

1. Primary Data and2. Secondary Data

I have collected the data from secondary sources i.e. from the website of NSE

Population size: - 10 companies

Sample size: - 5 companies from one sector i.e. banking sector

Method of sample: - Random Sampling

I took 5 sector namely Automobile, Banking, FMCG, Telecom and Power sector, from these I have selected Banking sector, because there is a major impact in the economy by the banking sector. Banking sector plays an important role in the development of the country. From the banking sector 10 banks like – SBI, PNB, BOI, UB, IOB, UCO,BOB, ICICI and IDBI have been selected and finally from the above 10 banks only 5 nationalized banks have selected for my analysis.

Taking these 5 banks calculation of risk and analysis of risk have made & determine that the bank is the best possible for investment and maximum return.

Today’s Market return = (Today’s price – yesterday’s price)/ yesterday’s price*100

Today’s stock return = (Today’s index – yesterday’s index)/ yesterday’s index*100

Like daily returns, weekly returns can be calculated by using this week’s and last week’s prices listed of today’s and yesterday’s prices in the above mentioned formula. Monthly returns also can be calculated.

To calculate the Beta, the returns have to be calculated. Then using the formula of beta alpha co-efficient can be calculated

β = {n ∑xy-(∑x)(∑y) }/ n∑x-(∑x)

α = y – βx

Where n = no of observation

X = market return

Y = stock return

Beta is the systematic risk

Alpha is the unsystematic risk

X = ∑x/no of day observation

Y = ∑y/no of day observation

BANK 2011-12 2010-11∑X ∑Y ∑XX ∑XY ∑X ∑Y ∑XX ∑XY

SBIN -7.46 -19.76 416.75 528.81 11.35 32.13 316.57 365.12PNB -7.46 -19.27 416.75 389.31 11.35 20.75 316.57 268.30BOI -7.46 -20.09 416.75 499.33 11.35 38.15 316.57 339.42UNION -7.46 -29.07 416.75 463.50 11.35 18.59 316.57 342.29IOB -7.46 37.86 416.75 426.28 11.35 51.04 316.57 361.82

From the above data taking we calculate the risk using the beta & alpha

β = {n ∑xy-(∑x)(∑y) }/ n∑x-(∑x)

α = y – βx

BANK 2011-12 RETURN 2010-11 RETURNALP BETA ALP BETA

SBIN -0.04 1.268 2.55 0.076 1.150 -6.36PNB -0.05 0.93 2.00 0.046 0.84 -4.35BOI -0.04 1.19 3.77 0.104 1.06 -2.55UNION -0.08 1.10 -1.42 0.026 1.080 0.69IOB 0.182 1.026 5.32 0.143 1.137 -1.94

BETA

Beta is the slope characteristic regression line. Beta describes the relationship between the stock’s return and the index returns.

1) β = +1.0

One percent change in market index return causes exactly one change in the stock return. It indicates that the stock moves in tandem with the market.

2) Β = +0.5

One percent change in market index return causes 0.5 percent change in the stock return. The stock is less volatile compared to the market.

3) Negative beta value indicates that the stock return moves in the opposite direction to the market return. A stock with a negative beta of -1 would provide a return of 10%, if the market return declines by 10% and vice versa.

Stocks with negative beta resist the decline in the market return, but stocks with negative returns are very rare.

ALPHA

The intercept of the characteristic regression line in alpha, i.e the distance between the intersection and the horizontal axis. It indicates that the stock return is independent of the market return. A positive value of alpha is a healthy sign.

Positive alpha values would yield profitable return. According to the portfolio theory, in a well diversified portfolio the average value of alpha of all stocks turns out to be zero.

CHAPTER 5

ANALYSIS

&

CONCLUSION

ANALYSIS

From the analysis we observed that except the IOB stock all other stocks have a negative alpha, which indicates a negative profitable return. Alpha positive would yield profitable return. In 2010-11 almost all banking stocks have positive return due to all stocks have positive alpha. But in 2011-12 only IOB have the positive alpha. In 2011-12 expect PNB stock all other stocks is having the positive Beta, which indicates stock is more volatile than market. As the PNB stock beta is less than 1, it leads that the PNB stock is less volatile in comparison to the market.

We observed that PNB stock is less volatile in both the years’ i.e 2010 – 11 and 2011-12. In compare to 2010, all stocks have a better return yields in 2011. The market moves in a reverse direction from 2010. In 2011 amongst all stocks have a negative market return, but IOB has a less return in compare to all other banking stocks.

Conclusion

Investors can use both alpha and bête to judge a manager’s performance. If the manager has had a high alpha, but also a high beta, investors might not find that acceptable, because of the chance they might have to withdraw their money when the investment is doing poorly.

It’s important for investors to make the distinction between short-term risk where beta and price volatility are useful and longer-term, fundamental risk, where big-picture risk factors are more telling. High betas may mean price volatility over the near term, but they don’t always rule out long-term opportunities.

Alpha relates to factors affecting the performance of an individual stock or the manager’s skill in selecting a particular stock. Whereas, beta relates to market risks, or more specifically, the relative behavior of stocks.

Beta is therefore a measure of how sensitive the price of a specific stock is to changes in the price of the stock market. Thus a beta-neutral portfolio should be insensitive to swing in the stock market; it would be hedged.

Ideally, alternative investment strategies will not only minimize downside risk, they will also aim to achieve low levels of volatility.

If you are a fundamental investor, consider some practical recommendations offered by Benjamin Graham and his modern adherents. Try to spot well-run

companies with a “margin of safety”—that is, an ability to withstand unpleasant surprises. Some elements of safety come from the balance sheet, like having a low ratio of debt to total capital. Some come from consistency of growth, in earning or dividends. An important one comes from not overpaying. Stocks trading at multiples of their earning are safer than stocks at high multiple.

BIBLOGRAPHY

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