Transcript
A STUDY ON TECHNICAL ANALYSIS ON EQUITY SHARES
IN
INTER CONNECTED STOCK EXCHANGE
A Project report submitted to Jawaharlal Nehru Technological University,
Hyderabad, in partial fulfillment of the requirements for the award of the
degree of
MASTER OF BUSINESS ADMINISTRATION
By
K.RADHIKA DEVI
Reg. No. 10241E0021
Under the Guidance of
Dr.P.B.APPA RAO
Professor
Department of Management Studies
Gokaraju Rangaraju Institute of Engineering & Technology
(Affiliated to Jawaharlal Technological University, Hyderabad)
Hyderabad
2010-2012
CERTIFICATE
This is to certify that the project entitled “A STUDY ON TECHNICAL
ANALYSIS ON EQUITY SHARES” has been submitted by Ms. K.RADHIKA DEVI
(Reg. No. 10241E0021) in partial fulfillment of the requirements for the award of the
Degree of Master of Business Administration from Jawaharlal Nehru Technological
University, Hyderabad. The result embodied in the project has not been submitted to any
other University or Institution for the award of any other Degree or Diploma.
Internal guide Head of Department
Dr.P.B.APPA RAO K.V.S. RAJU
Professor Professor & HOD
Department of Management Studies Department of Management Studies
GRIET GRIET
S. RAVINDRA CHARY
Project Coordinator
Associate Professor
Department of Management Studies
GRIET
DECLARATION
I hereby declare that the project entitled “A study on T TE EC CH HN NI IC CA AL L A AN NA AL LY YS SI IS S
O ON N E EQ QU UI IT TY Y S SH HA AR RE ES S” submitted in partial fulfillment of the requirements for award
of the degree of MBA at Gokaraju Rangaraju Institute of Engineering and
Technology, affiliated to Jawaharlal Nehru Technological University, Hyderabad, is an
authentic work and has not been submitted to any other University/Institute for award of
any degree/diploma.
K.RADHIKA DEVI
(10241E0021)
MBA, GRIET
HYDERABAD
ACKNOWLEDGEMENTS
Firstly I would like to express our immense gratitude towards our institution
Gokaraju Rangaraju Institute of Engineering & Technology, which created a great
platform to attain profound technical skills in the field of MBA, thereby fulfilling our
most cherished goal.
I would thank all employees of INTER CONNECTAD STOCK EXCHANGE and
Ms. SIRISHA, for guiding and helping me in successful completion of the project.
I sincerely express my gratitude to the principal Dr. J. N. MURTHY and for his
inspiration and timely support in successful completion of my project work.
I am very much thankful to Dr. P.B.APPA RAO, Professor of Management
Studies, for extending his guidance and cooperation in doing this project.
I am also thankful to our project coordinator Mr. S. Ravindra Chary for
extending his cooperation in completion of Project.
I convey my thanks to my beloved parents, friends and my faculty who helped
me directly or indirectly in bringing this project successfully.
K. RADHIKA DEVI
(10241E0021)
CONTENTS
LIST OF TABLES i
LIST OF FIGURES ii
CHAPTERS PARTICULARS PAGE NO.
1
INTRODUCTION
1.1 INTRODUCTION TO THE TOPIC
1.2 OBJECTIVES OF THE STUDY
1.3 SCOPE AND LIMITATION OF THE STUDY
1.4 RESEARCH METHODOLOGY
1.5 DATA COLLECTION
2 SUBJECT LITERATURE
3 INDUSTRY PROFILE
4 COMPANY PROFILE
5 DATA ANALYSIS AND INTERPRETATION
6 FINDINGS, SUGGESTIONS & CONCLUSION
5.1 FINDINGS
5.2 SUGGESTIONS
5.3 CONCLUSION
BIBLIOGRAPHY
LIST OF FIGURES
S.NO PARTICULARS PAGE
NO.
1 MONTH-WISE MARKET PRICES FROM JANUARY
2012 TO MARCH-2012
2 MONTH-WISE MARKET PRICES FROM JANUARY
2012 TO MARCH-2012
3 MONTH-WISE SBI PRICES FROM JANUARY 2012 TO
MARCH-2012
4 MONTH-WISE SBI PRICES FROM APRIL-2012 TO
JUNE-2012
5 MONTH-WISE ICICI PRICES FROM JANUARY -2012
TO MARCH-2012
6 MONTH-WISE ICICI PRICES FROM APRIL-2012 TO
JUNE-2012
7 MONTH-WISE HDFC PRICES FROM JANUARY-2012
TO MARCH-2012
8 MONTH-WISE HDFC PRICES FROM APRIL-2012 TO
JUNE-2012
9,10 CALCULATION OF CO-RELATION BETWEEN SBI
AND MARKET RETURNS
11,12 CALCULATION OF CO-RELATION BETWEEN ICICI
AND MARKET RETURNS
13,14 CALCULATION OF CO-RELATION BETWEEN HDFC
AND MARKET RETURNS
15 CALCULATION OF BETA
LIST OF FIGURES
SNO
PARTICULARS PAGE NO.
1.
BANK-WISE HALF-YEARLY AVERAGE RETURNS
AND STANDARD DEVIATION
2.
CO-RELELATION BETWEEN
BANKS(SBI,ICICI,HDFC) AND MARKET
3.
BETA VALUES OF SBI ,ICICI, HDFC BANKS
CHAPTER - 1
INTRODUCTION
INTRODUCTION OF THE STUDY:
The methods used to analyze securities and make investment decisions fall
into two very broad categories: fundamental analysis and technical analysis. Fundamental
analysis involves analyzing the characteristics of a company in order to estimate its value.
Technical analysis takes a completely different approach; it doesn’t care one bit about the
‘value” of a company or a commodity. Technicians (sometimes called chartists) are only
interested in the price movements in the market.
Despite all the fancy and exotic tools it employs, technical analysis really
just studies supply and demand in a market in an attempt to determine what direction, or
trend, will continue in the future. In other words, technical analysis attempts to
understand the emotions in the market by studying the market itself, as opposed to its
components. If you understand the benefits and limitations of technical analysis, it can
give you a new set or skills that will enable you to be a better trader or investor.
Technical analysis is a method of evaluating securities by analyzing the
statistics generalized by market activity, such as past prices and volume. Technical
analysis does not attempt to measure a security’s intrinsic value, but instead use charts
and other tools to identify patterns that can suggest future activity.
Just as there are many investment styles on the fundamental side, there are
also many different types of technical traders. Some rely on chart patterns; others use
technical indicators and oscillators, and most use some combination of the two. In any
case, technical analyst’s exclusive use of historical price and volume data is what
separates them from their fundamental counterparts. Unlike fundamental analysis,
technical analysts don’t care whether a stock is undervalued – the only thing that matters
is a security’s past trading data and what information this data can provide about where
the society might move in the future.
The field of technical analysis is based on three assumptions:
• The market discounts everything.
• Price moves in trends.
• History tends to repeat itself.
OBJECTIVES OF THE STUDY:
• To analyze the price movements of shares of SBI, ICICI, and HDFC interpret the
corrections and trends by using Technical Analysis tools.
• To forecast the future trends and provide suitable suggestions to the investors.
• To calculate the risk associated with the Investment
• To find out systematic risk of securities
SCOPE OF THE STUDY:
• The study covers a period of six months from January 2012 to June 2012.
• The study helps to find out the future trends in the prices of SBI, ICICI, HDFC equity
shares. Valuable hints can be identified by the investors for their future buying and
selling.
LIMITATIONS OF THE STUDY:
• One of the most important limitations for most technical analysis methods is the fact
that there are so many people using the basic technical analysis methods already, and the
number is increasing every day, making it harder for a single trader to make money on
the market with the methods.
• Because of these methods are so widely spread and there is so much money riding on
the methods, some also claim that technical analysis has become self-fulfilling prophecy,
as people trend to enter the market and put their stops on the same places, increasing the
volatility towards the technical analysis method being correct.
• Technical analysis systems usually do not take into account correlation between
different markets. If you are analyzing several markets and they all give similar signals,
they may have close correlations, meaning that the risk profile for each is very similar,
and that the prices of the assets move in close steps with each other.
Research Methodology:
Research methodology is a way to systematically solve the research problem. It
may be understood as a science of studying how research is done scientifically. The
various steps that are generally adopted by a researcher in studying research problem
along with the logic behind them. It is necessary for the researcher to know not only the
research methods/ techniques but also the methodology.
Analytical Research:
Research Design was based on analytical research, on the other hand, the
researcher has to use facts or information already available, and analyze these
to make these to make a critical evaluation of the material.
Sources of Data:
The main sources of data are collected through website, various
Publication books, magazines, newspaper and reports prepared by research
Scholars etc.
Data Collection:
Data required for the purpose of the study have been collected from the
Websites of the banks concerned.
Data Analysis:
The data required so collected have been analyzed by using MS-EXCEL.
In the process of analysis – Average rate of return, Standard deviation,
Co-efficient of correlation, Covariance and beta values have been collected
Research tools used:
Returns:
A major purpose of investment is to set a return or income on the funds invested. On a
bond an investor expects to receive interest. On a stock, dividends may be anticipated.
The investor may expect capital gains from some investments and rental income from
house property return may take several forms
Returns for the collected data is calculated using the following formula
P
t
= current price
P
o
= previous price
Average of the Returns calculated as follows:
Standard Deviation:
1. A measure of the dispersion of a set of data from its mean. The more spread apart the
data, the higher the deviation. Standard deviation is calculated as the square root of
variance.
2. In finance, standard deviation is applied to the annual rate of return of an investment to
measure the investment's volatility. Standard deviation is also known as historical
volatility and is used by investors as a gauge for the amount of expected volatility.
Standard deviation is a statistical measurement that sheds light on historical volatility.
For example, a volatile stock will have a high standard deviation while the deviation of a
stable blue chip stock will be lower. A large dispersion tells us how much the return on
the fund is deviating from the expected normal returns.
Risk is calculated as follows:
D = deviation; N =No. of days
Beta:
Measures volatility or systemic risk compared to the market or the benchmark index
Beta Value Calculated as follows:
BETA= COVARIANCE OF MARKET AND SBI / VARIANCE OF MARKET
CHAPTER - 2
REVIEW OF LITERATURE
EQUITY SHARES
Equity represents an ownership position in a corporation. It is residual claim in
the sense that creditors and preference shareholders must be paid as scheduled before
equity shareholders can receive payment. In bankruptcy equity holders are principle
entitled only to assets remaining after all prior claimants has been satisfied. Thus risk is
highest with equity shares and so must be its expected return. When investors buy equity
shares, they receive certificates of ownership as proof of their being part owners of the
company. The certificate states the number of shares purchased and their par value. The
attitude towards equity shares varied from extreme pessimism to optimism from time to
time.
• The main advantages of equity shares are listed below:
• Potential for Profit : The potential for profit is greater in equity shares than in any
other investment security. Current dividends yield may be low but potential of
capital gains is great. The total yield or yields to maturity may be substantial over
a period of time.
• Limited Liability: In corporate form of organization, its owners have, generally,
limited liability. An equity share is usually fully paid. Shareholders may lose their
investments, but no more. They are not further liable for any failure in the part of
corporation of meet its obligation.
• Hedge against Inflation: The equity share is good hedge against inflation though it
does not fully compensate for the declining purchasing power as it is subject to
money-rate risk. But when interest rates are high, shares tend to be less attractive,
and prices tend to be depressed.
• Share in Growth: A share is its ability to The major advantage of investment in
equity increase in value by sharing in the growth of company profits over the long
run.
• Tax Advantage: Equity shares also offers tax advantage to the investors. The
larger yield on equity shares results from an increase in principal of capital gains,
which are taxed at lower rate than other incomes in most of the countries.
EQUITY CAPITAL TERMINOLOGY:
The important terms used in equity capital are listed below:
• Authorized Capital: The authorized capital is the maximum number of shares
of each type that may be issued by the company. To change this number, or
provision of any class of shares, the company requires the formal approval of
shareholders.
• Issued Capital: Issued capital is the part of the authorized capital that has been
issued for cash, property, or service.
• Paid up Capital: Fully paid shares are those shares for which the corporation
has received full payment up to the par-value, or up to the amount established
as the selling price of no-par-shares. Partly paid shares are those shares that
have been issued for less than par-value or the agreed subscription.
NATURE OF EQUITY SHARES:
Equity shares represent an ownership of a corporation. It is true that the equity shares
must bear first impact of any adversity, but it is also true that the equity shares is the only
class of securities privileged to enjoy maximum participation in an extensive growth of
the company. The risk of the one may be regarded as price. In fact, the investor is vitally
concerned with the yield earned over the commensurate with the opportunity of the other.
Evidence of Ownership: When investor buys equity shares, they receive certificates
of ownership as a proof of their part as owners of the company. This certificates state the
number of shares purchased, their par value, if any, and usually the transfer agent. When
equity shares are purchased on the market (that when it is not a new issue which is
purchased from the company).
Maturity of Equity Shares: Equity shares have no maturity date. Their life is limited
by the length of time stated in the corporate charter know as “Memorandum of
Association”. The corporate life might be for stated or limited period, or it might be
perpetual. Most corporations have a perpetual character. The date on which the equity is
sold by the investor is the maturity date, and the price at which the equity is sold is called
the maturity period that the equity is owned.
Par Value: Par value is the face value of the share. Equity shares have par value, a
nominal stated value. The par value of an equity shares indicates the amount of capital
originally subscribed by the shareholders. New shares cannot be sold less than par value.
If the equity shares are sold for more than par, the excess is transferred to ‘Share
Premium Account’.
Net Asset Value and Book Value: Distrust of present value formulae, the quest for
objectivity and perhaps even nostalgia lead some analyst to place greater emphasis on the
asset value factor when evaluating investment worth of a company’s equity shares. Net
assets or net worth can be calculated from either the asset of liability side of balance
sheet.
Financial Analysis and Accounting Data: The historical numbers that analyst uses
to prepare rates and forecasting equations are generally based on figures that have been
taken from the published financial statements of the firm being analyzed. Although these
statements may have been prepared “according to generally accept accounting
principles”, there may be significant variation in real economic meaning of financial
reports.
INVESTMENT PROCESS IN EQUITY SHARES:
Investment process describes how an investor should go about making decisions with
regard to what marketable securities to invest in, how extensive the investment should be
and when the investment should be made. An eight-step procedure for making these
decisions forms the basis for the investment process.
1. What is Investment
2. Understanding Shares
3. Finding a Broker
4. Evaluation of Shares
5. Research Tools
6. Investing Strategy
7. Investing Technique
8. What Moves the Market
Step 1: What is Investment?
Investment in broad sense means the sacrifice of current rupees for further rupees.
Investing is making your money work for you without taking any more risks than
necessary for your comfort.
• Investing is the proactive use of your money to make more money.
• How to calculate Risk Premium?
• Risk premium is what a stock should return over a “risk-free” investment. It is
your reward for taking a risk with your money.
• Weak demand is the important factor in stock pricing:
• Despite high crude oil prices, its weak demand for gasoline that holds back oil
stock prices. Supply and demand is an important factor in determining price of
stocks. Corrections is natural part of stock market cycle.
Step 2: Understanding Shares
• Bull and Bear stock market are the two sides of same coin: Bull and bear
markets go together and are necessary for an efficient market.
• Poll results show confidence in stocks: The results of a poll on where the sensex
be at the end of 2009 show stock investors are positive.
Step 3: Finding a Broker
• To decide which type of broker is right for you, you need to use these resources to
find the brokerage arrangement that best fits your needs.
• Thirteen of the top online stock trading sites offer investors a wide variety of
services including research and advice.
• Brokers offer different levels of service. A broker fills in the gaps in knowledge
and experience.
• Stock prices are driven by the relationship between buyers and sellers. Attractive
stocks have more buyers than sellers, which drives up prices, while less attractive
stocks feel the reverse effect.
Step 4: Evaluating Stocks for Investment
Fundamental analysis relies on several tools to give investors an accurate picture
of the financial health of a company and how the market values the stock. The following
are the most popular tools of fundamental analysis. They focus on earnings, growth, and
value in the market.
a) Earnings Per Share – EPS
b) Price to Earnings Ratio – P/E
c) Projected Earnings Growth – PEG
d) Price to Sales – P/S
e) Price to Book – P/B
f) Dividend Payout Ratio
g) Dividend Yield
h) Book Value
i) Return on Equity
Step 5: Research Tools
The internet is a gold mine of information, but you’ll need some tools to get to the
nuggets. Research tools make the job easier if you know where to find them and how to
use them.
• The better stock screens offer similar characteristics that give you greater
flexibility when looking for investment candidates and eliminate other
companies.
• Stock screens will save time and help to build a thoughtful portfolio by
focusing on those companies that meet your investing requirements.
• Stock screens can help any investor make better stock selections by reducing
the number of companies to research.
• Dividend ratios can tell much about a stock and its future payout prospects.
• One of the best sources of information on companies is free and as near as
your computer.
Step 6: Investing Strategies
What strategy to use as an investor? The different investment strategies and how to
develop personal investment strategy is explained below:
• When and how to sell a winning stock?
o Knowing when and how to sell a winning stock is as important as
knowing when to sell a losing stock.
• Don’t be too conservative with stocks:
o Following a too conservative investment strategy in retirement may not
protect you from outliving your money.
Step 7: Investing Techniques
Investing techniques offer powerful ways for investors to execute their strategies. These
techniques provide a structure for investing.
• After-hours trading of stocks may seem like a great idea, but it is full of risks
for the average investor.
• Diversify stocks by industry to avoid across-the-board losses on bad economic
news. Investments should not be correlated to achieve diversity.
• Investing with expectations of high returns is not investing but gambling.
Don’t try to double or triple your money quickly in the stock market – you’ll
be disappointed and perhaps poorer.
Step 8: What Moves the Market?
What makes the market rise or fall? Sometimes it seems to have a mind of its own that
reacts poorly to good news and with enthusiasm to bad news. One should learn the
factors that are the major influences on the markets and how to use this information.
Major economic and political factors shape the market, but most of all the market hates
uncertainty.
Technical Analysis
Technical analysis is a security analysis discipline for forecasting the future
direction of prices through the study of past market data, primarily price and volume.
History
The principles of technical analysis derive from the observation of financial
markets over hundreds of years. The oldest known hints of technical analysis appear in
Joseph de la Vega's accounts of the Dutch markets in the 17th century. In Asia, the oldest
example of technical analysis is thought to be a method developed by Homma Munehisa
during early 18th century which evolved into the use of candlestick techniques, and is
today a main charting tool.
Dow Theory is based on the collected writings of Dow Jones co-founder and
Editor Charles Dow, and inspired the use and development of modern technical analysis
from the end of the 19th century. Other pioneers of analysis techniques include Ralph
Nelson Elliott and William Delbert Gann who developed their respective techniques in
the early 20th century.
Many more technical tools and theories have been developed and enhanced in
recent decades, with an increasing emphasis on computer-assisted techniques.
General Description
Technical analysts seek to identify price patterns and trends in financial markets
and attempt to exploit those patterns. While technicians use various methods and tools,
the study of price charts is primary.
Technicians especially search for archetypal patterns, such as the well-known head and
shoulders or double top reversal patterns, study indicators such as moving averages, and
look for forms such as lines of support, resistance, channels, and more obscure
formations such as flags, pennants or balance days.
Technical analysts also extensively use indicators, which are typically
mathematical transformations of price or volume. These indicators are used to help
determine whether an asset is trending, and if it is, its price direction. Technicians also
look for relationships between price, volume and, in the case of futures, open interest.
Examples include the relative strength index, and MACD. Other avenues of study include
correlations between changes in options (implied volatility) and put/call ratios with price.
Other technicians include sentiment indicators, such as Put/Call ratios and Implied
Volatility in their analysis.
Technicians seek to forecast price movements such that large gains from
successful trades exceed more numerous but smaller losing trades, producing positive
returns in the long run through proper risk control and money management.
There are several schools of technical analysis. Adherents of different schools (for
example, candlestick charting, Dow Theory, and Elliott wave theory) may ignore the
other approaches, yet many traders combine elements from more than one school. Some
technical analysts use subjective judgment to decide which pattern a particular instrument
reflects at a given time, and what the interpretation of that pattern should be. Some
technical analysts also employ a strictly mechanical or systematic approach to pattern
identification and interpretation.
Technical analysis is frequently contrasted with fundamental analysis, the study
of economic factors that influence prices in financial markets. Technical analysis holds
that prices already reflect all such influences before investors are aware of them, hence
the study of price action alone. Some traders use technical or fundamental analysis
exclusively, while others use both types to make trading decisions.
Users of technical analysis are most often called technicians or market
technicians. Some prefer the term technical market analyst or simply market analyst. An
older term, chartist, is sometimes used, but as the discipline has expanded and
modernized the use of the term chartist has become less popular.
Characteristics
Technical analysis employs models and trading rules based on price and volume
transformations, such as the relative strength index, moving averages, regressions, inter-
market and intra-market price correlations, cycles or, classically, through recognition of
chart patterns.
Technical analysis stands in contrast to the fundamental analysis approach to
security and stock analysis. Technical analysis "ignores" the actual nature of the
company, market, currency or commodity and is based solely on "the charts," that is to
say price and volume information, whereas fundamental analysis does look at the actual
facts of the company, market, currency or commodity. For example, any large brokerage,
trading group, or financial institution will typically have both a technical analysis and
fundamental analysis team.
Technical analysis is widely used among traders and financial professionals, and
is very often used by active day traders, market makers, and pit traders. In the 1960s and
1970s it was widely dismissed by academics. In a recent review, Irwin and Park reported
that 56 of 95 modern studies found it produces positive results, but noted that many of the
positive results were rendered dubious by issues such as data snooping so that the
evidence in support of technical analysis was inconclusive; it is still considered by many
academics to be pseudoscience. Academics such as Eugene Fama say the evidence for
technical analysis is sparse and is inconsistent with the weak form of the efficient market
hypothesis. Users hold that even if technical analysis cannot predict the future, it helps to
identify trading opportunities.
In the foreign exchange markets, its use may be more widespread than
fundamental analysis. While some isolated studies have indicated that technical trading
rules might lead to consistent returns in the period prior to 1987, most academic work has
focused on the nature of the anomalous position of the foreign exchange market. It is
speculated that this anomaly is due to central bank intervention.
Recent research suggests
that combining various trading signals into a Combined Signal Approach may be able to
increase profitability and reduce dependence on any single rule.
Principles
Technicians say that a market's price reflects all relevant information, so their
analysis looks at the history of a security's trading pattern rather than external drivers
such as economic, fundamental and news events. Price action also tends to repeat itself
because investors collectively tend toward patterned behavior – hence technicians' focus
on identifiable trends and conditions.
Market action discounts everything
Based on the premise that all relevant information is already reflected by prices,
pure technical analysts believe it is redundant to do fundamental analysis – they say news
and news events do not significantly influence price, and cite supporting research such as
the study by Cutler, Poterba, and Summers titled "What Moves Stock Prices?"
On most of the sizable return days [large market moves]...the information that the
press cites as the cause of the market move is not particularly important. Press reports on
adjacent days also fail to reveal any convincing accounts of why future profits or discount
rates might have changed. Our inability to identify the fundamental shocks that accounted
for these significant market moves is difficult to reconcile with the view that such shocks
account for most of the variation in stock returns.
Prices move in trends
Technical analysts believe that prices trend directionally, i.e., up, down, or
sideways (flat) or some combination. The basic definition of a price trend was originally
put forward by Dow Theory.
An example of a security that had an apparent trend is AOL from November 2001
through August 2002. A technical analyst or trend follower recognizing this trend would
look for opportunities to sell this security. AOL consistently moves downward in price.
Each time the stock rose, sellers would enter the market and sell the stock; hence the
"zig-zag" movement in the price. The series of "lower highs" and "lower lows" is a tell
tale sign of a stock in a down trend. In other words, each time the stock moved lower, it
fell below its previous relative low price. Each time the stock moved higher, it could not
reach the level of its previous relative high price.
Note that the sequence of lower lows and lower highs did not begin until August.
Then AOL makes a low price that doesn't pierce the relative low set earlier in the month.
Later in the same month, the stock makes a relative high equal to the most recent relative
high. In this a technician sees strong indications that the down trend is at least pausing
and possibly ending, and would likely stop actively selling the stock at that point.
History tends to repeat itself
Technical analysts believe that investors collectively repeat the behavior of the
investors that preceded them. "Everyone wants in on the next Microsoft," "If this stock
ever gets to $50 again, I will buy it," "This company's technology will revolutionize its
industry, therefore this stock will skyrocket" – these are all examples of investor
sentiment repeating itself. To a technician, the emotions in the market may be irrational,
but they exist. Because investor behavior repeats itself so often, technicians believe that
recognizable (and predictable) price patterns will develop on a chart.
Technical analysis is not limited to charting, but it always considers price trends.
For example, many technicians monitor surveys of investor sentiment. These surveys
gauge the attitude of market participants, specifically whether they are bearish or bullish.
Technicians use these surveys to help determine whether a trend will continue or if a
reversal could develop; they are most likely to anticipate a change when the surveys
report extreme investor sentiment. Surveys that show overwhelming bullishness, for
example, are evidence that an uptrend may reverse – the premise being that if most
investors are bullish they have already bought the market (anticipating higher prices).
And because most investors are bullish and invested, one assumes that few buyers
remain. This leaves more potential sellers than buyers, despite the bullish sentiment. This
suggests that prices will trend down, and is an example of contrarian trading.
CHAPTER 3
INDUSTRY PROFILE
STOCK MARKETS IN INDIA
Stock exchanges are the perfect type of market for securities whether of
government and semi-government bodies or other public bodies as also for shares and
debentures issued by the joint-stock companies. In the stock market, purchases and sales
of shares are affected in conditions of free competition. Government securities are traded
outside the trading ring in the form of over the counter sales or purchase. The bargains
that are struck in the trading ring by the members of the stock exchanges are at the fairest
prices determined by the basic laws of supply and demand.
Definition of a stock exchange:
“Stock exchange means anybody or individuals whether incorporated or not,
constituted for the purpose of assisting, regulating or controlling the business of buying,
selling or dealing in securities.” The securities include:
Shares of public company.
Government securities.
Bonds
Functions of Stock Exchanges:
Stock exchanges provide liquidity to the listed companies. By giving quotations to
the listed companies, they help trading and raise funds from the market. Over the hundred
and twenty years during which the stock exchanges have existed in this country and
through their medium, the central and state government have raised crores of rupees by
floating public loans. Municipal corporations, trust and local bodies have obtained from
the public their financial requirements, and industry, trade and commerce- the backbone
of the country’s economy-have secured capital of crores or rupees through the issue of
stocks, shares and debentures for financing their day-to-day activities, organizing new
ventures and completing projects of expansion, diversification and modernization. By
obtaining the listing and trading facilities, public investment is increased and companies
were able to raise more funds. The quoted companies with wide public interest have
enjoyed some benefits and assets valuation has become easier for tax and other purposes.
Various Stock Exchanges in India:
At present there are 23 stock exchanges recognized under the securities contracts
(regulation), Act, 1956. Major of them:
• Ahmadabad Stock Exchange Association Ltd.
• Bombay stock Exchange
• Bangalore Stock Exchange
• Calcutta Stock Exchange
• Cochin Stock Exchange Ltd.
• Coimbatore Stock Exchange
• Delhi Stock Exchange Association
• Guwahati Stock Exchange Ltd
• Hyderabad Stock Exchange Ltd.
• Jaipur Stock Exchange Ltd
• Kanara Stock Exchange Ltd
• Madras Stock Exchange
• Madhya Pradesh Stock Exchange Ltd.
• Meerut Stock Exchange Ltd.
• National Stock Exchange of India
• Pune Stock Exchange Ltd.
• Uttar Pradesh Stock Exchange Association
• Vadodara Stock Exchange Ltd.
Out of these major stock exchanges were:
National Stock Exchange (NSE):
The National Stock Exchange of India Limited has genesis in the report of the
High Powered Study Group on Establishment of New Stock Exchanges, which
recommended promotion of a National Stock Exchange by financial institutions (FI’s) to
provide access to investors from all across the country on an equal footing. Based on the
recommendations, NSE was promoted by leading Financial Institutions at the behest of
the Government of India and was incorporated in November 1992 as a tax-paying
company unlike other stock exchanges in the country. On its recognition as a stock
exchange under the Securities Contracts (Regulation) Act, 1956 in April 1993, NSE
commenced operations in the Wholesale Debt Market (WDM) segment in June 1994.
The Capital Market (Equities) segment commenced operations in November 1994 and
operations in Derivatives segment commenced in June 2000.
NSE's mission is setting the agenda for change in the securities markets in India. The
NSE was set-up with the main objectives of:
• Establishing a nation-wide trading facility for equities and debt instruments.
• Ensuring equal access to investors all over the country through an appropriate
communication network.
• Providing a fair, efficient and transparent securities market to investors using
electronic trading systems.
• Enabling shorter settlement cycles and book entry settlements systems, and
• Meeting the current international standards of securities markets.
The standards set by NSE in terms of market practices and technology, have become
industry benchmarks and are being emulated by other market participants. NSE is more
than a mere market facilitator. It's that force which is guiding the industry towards new
horizons and greater opportunities.
Bombay Stock Exchange (BSE):
The Stock Exchange, Mumbai, popularly known as "BSE" was established in
1875 as "The Native Share and Stock Brokers Association". It is the oldest one in Asia,
even older than the Tokyo Stock Exchange, which was established in 1878. It is a
voluntary non-profit making Association of Persons (AOP) and is currently engaged in
the process of converting itself into demutualised and corporate entity. It has evolved
over the years into its present status as the premier Stock Exchange in the country. It is
the first Stock Exchange in the Country to have obtained permanent recognition in 1956
from the Govt. of India under the Securities Contracts (Regulation) Act 1956.The
Exchange, while providing an efficient and transparent market for trading in securities,
debt and derivatives upholds the interests of the investors and ensures redresses of their
grievances whether against the companies or its own member-brokers. It also strives to
educate and enlighten the investors by conducting investor education programmers and
making available to them necessary informative inputs.
A Governing Board having 20 directors is the apex body, which decides the
policies and regulates the affairs of the Exchange. The Governing Board consists of 9
elected directors, who are from the broking community (one third of them retire ever year
by rotation), three SEBI nominees, six public representatives and an Executive Director
& Chief Executive Officer and a Chief Operating Officer.
The Executive Director as the Chief Executive Officer is responsible for the day-
to-day administration of the Exchange and the Chief Operating Officer and other Heads
of Department assist him.
The Exchange has inserted new Rule No.126 A in its Rules, Byelaws pertaining
to constitution of the Executive Committee of the Exchange. Accordingly, an Executive
Committee, consisting of three elected directors, three SEBI nominees or public
representatives, Executive Director & CEO and Chief Operating Officer has been
constituted. The Committee considers judicial & quasi matters in which the Governing
Board has powers as an Appellate Authority, matters regarding annulment of
transactions, admission, continuance and suspension of member-brokers, declaration of a
member-broker as defaulter, norms, procedures and other matters relating to arbitration,
fees, deposits, margins and other monies payable by the member-brokers to the
Exchange, etc.
REGULATORY FRAME WORK OF STOCK EXCHANGE:
A comprehensive legal framework was provided by the “Securities Contract
Regulation Act, 1956” and “Securities Exchange Board of India 1952”. Three tier
regulatory structure comprising
Ministry of finance
The Securities And Exchange Board of India
Governing body
Members of the stock exchange:
The securities contract regulation act 1956 has provided uniform regulation for
the admission of members in the stock exchanges. The qualifications for becoming a
member of a recognized stock exchange are given below:
The minimum age prescribed for the members is 21 years.
He should be an Indian citizen.
He should be neither a bankrupt nor compound with the creditors.
He should not be convicted for fraud or dishonesty.
He should not be engaged in any other business connected with a company.
He should not be a defaulter of any other stock exchange.
The minimum required education is a pass in 12
th
standard examination.
SECURITIES AND EXCHANGE BOARD OF INDIA (SEBI):
The securities and exchange board of India was constituted in 1988 under a
resolution of government of India. It was later made statutory body by the SEBI act
1992.according to this act, the SEBI shall constitute of a chairman and four other
members appointed by the central government. With the coming into effect of the
securities and exchange board of India act, 1992 some of the powers and functions
exercised by the central government, in respect of the regulation of stock exchange were
transferred to the SEBI.
OBJECTIVES AND FUNCTIONS OF SEBI:
To protect the interest of investors in securities.
Regulating the business in stock exchanges and any other securities market.
Registering and regulating the working of intermediaries associated with
securities market as well as working of mutual funds.
Promoting and regulating self-regulatory organizations.
Regulating substantial acquisition of shares and takeover of companies.
SEBI GUIDELINES TO SECONDARY MARKETS: (STOCK
EXCHANGES):
Board of Directors of Stock Exchange has to be reconstituted so as to include
non-members, public representatives and government representatives to the extent of
50% of total number of members.
• Capital adequacy norms have been laid down for the members of various
stock exchanges depending upon their turnover of trade and other factors.
• All recognized stock exchanges will have to inform about transactions within
24 hrs.
Buying and selling shares:
To buy and sell the shares the investor has to locate register broker or sub broker
who render prompt and efficient service to him. The order to buy or sell specifying the
number of shares of the company of investors’ choice is placed with the broker. The
order may be of any type. After receiving the order the broker tries to execute the order in
his computer terminal. Once matching order is found, the order is executed. The broker
then delivers the contract note to the investor. It gives the details regarding the name of
the company, number of shares bought, price, brokerage, and the date of delivery of
share. In this physical trading form, once the broker gets the share certificate through the
clearing houses he delivers the share certificate along with transfer deed to the investor.
The investor has to fill the transfer deed and stamp it. The stamp duty is one of the
percentage considerations, the investor should lodge the share certificate and transfer
deed to the register or transfer agent of the company. If it is bought in the DEMAT form,
the broker has to give a matching instruction to his depository participant to transfer
shares bought to the investors account. The investor should be account holder in any of
the depository participant. In the case of sale of shares on receiving payment from the
purchasing broker, the broker effects the payment to the investor.
Share groups:
The scripts traded on the BSE have been classified into ‘A’,’B1’,’B2’,’C’,’F’ and
‘Z’ groups. The ‘A’ group represents those, which are in the carry forward system. The
‘F’ group represents the debt market segment (fixed income securities). The Z group
scripts are of the blacklisted companies. The ‘C’ group covers the odd lot securities in
‘A’, ‘B1’&’B2’ groups.
ROLLING SETTLEMENT SYSTEM:
Under rolling settlement system, the settlement takes place n days (usually 1, 2, 3
or 5days) after the trading day. The shares bought and sold are paid in for n days after the
trading day of the particular transaction. Share settlement is likely to be completed much
sooner after the transaction than under the fixed settlement system.
The rolling settlement system is noted by T+N i.e. the settlement period is n days
after the trading day. A rolling period which offers a large number of days negates the
advantages of the system. Generally longer settlement periods are shortened gradually.
SEBI made RS compulsory for trading in 10 securities selected on the basis of the
criteria that they were in compulsory demats list and had daily turnover of about Rs.1
crore or more. Then it was extended to “A” stocks in Modified Carry Forward Scheme,
Automated Lending and Borrowing Mechanism (ALBM) and Borrowing and lending
Securities Scheme (BELSS) with effect from Dec 31, 2001.
SEBI has introduced T+5 rolling settlement in equity market from July 2001 and
subsequently shortened the cycle to T+3 from April 2002. After the T+3 rolling
settlement experience it was further reduced to T+2 to reduce the risk in the market and
to protect the interest of the investors from 1
st
April 2003.
Activities on T+1:
Conformation of the institutional trades by the custodian is sent to the stock
exchange by 11.00 am. A provision of an exception window would be available for late
confirmation. The time limit and the additional changes for the exception window are
dedicated by the exchange.
The exchanges/clearing house/ clearing corporation would process and download the
obligation files to the broker’s terminals late by 1.30 p.m on T+1. Depository participants
accept the instructions for pay in securities by investors in physical form up to 4 p.m and
in electronic form up to 6 p.m. the depositories accept from other DPs till 8p.m for same
day processing.
Activities on T+2:
The depository permits the download of the paying in files of securities and funds
till 10.30 am on T+2 from the brokers’ pool accounts. The depository processes the pay
in requests and transfers the consolidated pay in files to clearing House/clearing
Corporation by 11.00am/on T+2. The exchange/clearing house/clearing corporation
executes the pay-out of securities and funds latest by 1.30 p.m on T+2 to the depositories
and clearing banks. In the Demat mode net basis settlement is allowed. The buy and sale
positions in the same scrip can be settled and net quantity has to be settled
The analysis makes a separation between operating and financing items in the
financial statements. This is inspired by the Modigliani and Miller notion that it is the
operating activities that generate value, not the (zero net-present-value) financing
activities. The separation also arises from an appreciation that financial assets and
liabilities are typically close to market value in the balance sheet and thus are already
valued, but not so the operating assets and liabilities.
The distinction is a feature of the accounting-based valuation model in Feltham
and Ohlson (1995) and of “economic profit” versions of the residual income model.
Recent FASB statements have required many financial assets to be marked to market.
But, correspondingly, unrealized gains and losses are now recognized in comprehensive
income and these, like all income line items, have to be considered in a ratio analysis.
Our structured approach to identifying ratios contrasts to the purely empirical
approach in Ou and Penman (1989). That paper identified ratios that predicted earnings
changes in the data.
No thought was given to the identification; indeed there was no justification that
earnings changes are the appropriate attribute to forecast for valuation. The approach here
also contrasts to that in Lev and Thiagarajan (1993) who defer to “expert judgment” and
identify ratios that analysts actually use in practice.
1. Sauda details
A. Cash segments:
In this reports client will get transaction statement for settlement and exchange wise. First
select the date of transactions then exchange by doing drop down and then “GO” to get
the reports.
B. Derivatives segments:
In this reports client will get transaction statement for the day and exchange. First select
the date of transactions then exchange by doing drop down and then “GO” to get the
Reports.
2. Delivery details:
A. Delivery information:
In this reports client will get pay in or payout for all the scrip. Whether it’s NSDL, CDSL
or PHYSICAL entry.
B. Delivery + shares details:
In this reports client will get the inward (pay in), outward (payout). Actual inward shows
you the pay in done from client actual BO id. Actual outward shows the payout from the
client actual BO id and mismatch position.
3. Demats details:
In this reports client will get the Demat confirmation. We have also defined the meaning
and colour description on header.
4. Client’s bills:
A. Cash Segment:
In this reports client will get the bill confirmation for cash segments. First select the date
of transactions then exchange by doing drop down and then “GO” to get the reports.
While zooming in this report, client can get the cash transaction for that particular bill.
B. Derivatives Segment:
In this reports client will get the bill confirmation for Derivatives segments. First select
the date of transactions then exchange by doing drop down and then go to get the reports.
While zooming in these reports, client can get the Derivatives transaction for that
particular bill.
5. Financial statement:
In this reports client will get the financial statement for the entire year. Client can get the
statement date wise, exchange wise, including margin, across the company after selecting
start and end date, selecting exchange, clicking on include margin, ignore firm number
respectively. While zooming client can get the details for that particular bills, receipt,
payment and voucher. Green highlights show u the entry is unreconcile on that bank.
BSE started trading in the equities segment (Capital Market segment) on
November 3, 1994 and within a short span of 1 year became the largest exchange in India
in terms of volumes transacted. Trading volumes in the equity segment have grown
rapidly with average daily turnover increasing from Rs.17 crores during 1994-95 to
Rs.6,253 crores during 2005-06. During the year 2005-06, BSE reported a turnover of
Rs.1,569,556 crores in the equities segment. The Equities section provides you with an
insight into the equities segment of BSE and also provides real-time quotes and statistics
of the equities market. In-depth information regarding listing of securities, trading
systems & processes, clearing and settlement, risk management, trading statistics etc are
available.
CHAPTER - 4
COMPANY PROFILE
COMPANY PROFILE
Inter-connected stock exchange of India limited [ISE] has been promoted by 14
Regional stock exchanges to provide cost-effective trading linkage/connectivity to all the
members of the participating Exchanges, with the objective of widening the market for
the securities listed on these Exchanges. ISE aims to address the needs of small
companies and retail investors with the guiding principle of optimizing the existing
infrastructure and harnessing the potential of regional markets, so as to transform these
into a liquid and vibrant market through the use of state-of-the-art technology and
networking.
The participating Exchanges of ISE in all about 4500 stock brokers, out of which
more than 200 have been currently registered as traders on ISE. In order to leverage its
infrastructure and to expand its nationwide reach, ISE has also appointed around 450
Dealers across 70 cities other than the participating Exchange centers. These dealers are
administratively supported through the regional offices of ISE at Delhi [north], kolkata
[east], Coimbatore, Hyderabad [south] and Nagpur [central], besides Mumbai.
ISE has also floated a wholly-owned subsidiary, ISE securities and services
limited [ISS], which has taken up corporate membership of the National Stock Exchange
of India Ltd. [NSE] in both the Capital Market and Futures and Options segments and
The Stock Exchange, Mumbai In the Equities segment, so that the traders and dealers of
ISE can access other markets in addition to the ISE markets and their local market. ISE
thus provides the investors in smaller cities a one-stop solution for cost-effective and
efficient trading and settlement in securities.
With the objective of broad basing the range of its services, ISE has
started offering the full suite of DP facilities to its Traders, Dealers and their clients.
OBJECTIVES OF THE COMPANY:
• Create a single integrated national level solution with access to multiple
markets for providing high cost-effective service to millions of investors
across the country.
• Create a liquid and vibrant national level market for all listed companies in
general and small capital companies in particular.
• Optimally utilize the existing infrastructure and other resources of
participating Stock Exchanges, which are under-utilized now.
• Provide a level playing field to small Traders and Dealers by offering an
opportunity to participate in a national markets having investment-oriented
business.
• Reduce transaction cost.
• Provide clearing and settlement facilities to the Traders and Dealers across the
Country at their doorstep in a decentralized mode.
• Spread de-mat trading across the country
SAILENT FEATURES
Network of intermediaries:
As at the beginning of the financial year 2003-04, 548 intermediaries (207
Traders and 341 Dealers) are registered on ISE. A broad of members forms the bedrock
for any Exchange, and in this respect, ISE has a large pool of registered intermediaries
who can be tapped for any new line of business.
Robust Operational Systems:
The trading, settlement and funds transfer operations of ISE and ISS are
completely automated and state-of-the-art systems have been deployed. The
communication network of ISE, which has connectivity with over 400 trading members
and is spread across46 cities, is also used for supporting the operations of ISS. The
trading software and settlement software, as well as the electronic funds transfer
arrangement established with HDFC Bank and ICICI Bank, gives ISE and ISS the
required operational efficiency and flexibility to not only handle the secondary market
functions effectively, but also by leveraging them for new ventures.
Skilled and experienced manpower:
ISE and ISS have experienced and professional staff, who have wide experience
in Stock Exchanges/ capital market institutions, with in some cases, the experience going
up to nearly twenty years in this industry. The staff has the skill-set required to perform a
wide range of functions, depending upon the requirements from time to time.
Aggressive pricing policy:
The philosophy of ISE is to have an aggressive pricing policy for the various
products and services offered by it. The aim is to penetrate the retail market and
strengthen the position, so that a wide variety of products and services having appeal for
the retail market can be offered using a common distribution channel. The aggressive
pricing policy also ensures that the intermediaries have sufficient financial incentives for
offering these products and services to the end-clients.
Trading, Risk Management and Settlement Software Systems:
The ORBIT (Online Regional Bourses Inter-connected Trading) and
AXIS (Automated Exchange Integrated Settlement) software developed on the Microsoft
NT platform, with consultancy assistance from Microsoft, are the most contemporary of
the trading and settlement software introduced in the country. The applications have been
built on a technology platform, which offers low cost of ownership, facilitates simple
maintenance and supports easy up gradation and enhancement. The soft wares are so
designed that the transaction processing capacity depends on the hardware used; capacity
can be added by just adding inexpensive hardware, without any additional software work.
Vibrant Subsidiary Operations:
ISS, the wholly owned subsidiary of ISE, is one of the biggest Exchange
subsidiaries in the country. On any given day, more than 250 registered intermediaries of
ISS traded from 46 cities across the length and breadth of the country.
Name of the Board of directors
1. Prof. P. V. Narasimham Public Interest Director
2. Shri V. Shankar Managing Director
3. Dr. S. D. Israni Public Interest Director
4. Dr. M. Y. Khan Public Interest Director
5. Mr. P. J. Mathew Shareholder Director
6. M. C. Rodrigues Shareholder Director
7. Mr. M. K. Ananda Kumar Shareholder Director
8. Mr. T.N.T Nayar Shareholder Director
9. Mr. K. D. Gupta Shareholder Director
10. Mr. V. R. Bhaskar Reddy Shareholder Director
11. Mr. Jambu Kumar Jain Trading Member Director
State Bank of India (SBI) is the largest bank in India.
The bank traces its ancestry back through the Imperial Bank of India to the
founding in 1806 of the Bank of Calcutta, making it the oldest commercial bank in the
Indian Subcontinent. The Government of India nationalized the Imperial Bank of India in
1955, with the Reserve Bank of India taking a 60% stake, and renamed it the State Bank
of India. In 2008, the Government took over the stake held by the Reserve Bank of India.
SBI provides a range of banking products through its vast network in India and overseas,
including products aimed at NRIs. The State Bank Group, with over 16000 branches, has
the largest branch network in India. With an asset base of $250 billion and $195 billion in
deposits, it is a regional banking behemoth. It has a market share among Indian
commercial banks of about 20% in deposits and advances, and SBI accounts for almost
one-fifth of the nation’s loans.
SBI has tried to reduce its over-staffing through computerizing operations and Golden
handshake schemes that led to a flight of its best and brightest managers. These managers
took the retirement allowances and then went on the become senior managers at new
private sector banks.
The State bank of India is 29th most reputable company in the world according to Forbes.
History:
The roots of the State Bank of India rest in the first decade of 19th century, when
the Bank of Calcutta, later renamed the Bank of Bengal, was established on 2 June 1806.
The Bank of Bengal and two other Presidency banks, namely, the Bank of Bombay
(incorporated on 15 April 1840) and the Bank of Madras (incorporated on 1 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 reorganized
banking entity took as its name Imperial Bank of India. The Imperial Bank of India
continued to remain a joint stock company.
Pursuant to the provisions of the State Bank of India Act (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 Govt. 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
Branches
The corporate center of SBI is located in Mumbai. In order to cater to different functions,
there are several other establishments in and outside Mumbai, apart from the corporate
center. The bank boasts of having as many as 14 local head offices and 57 Zonal Offices,
located at major cities throughout India. It is recorded that SBI has about 10000 branches;
well networked to cater to its customers.
ATM Services
SBI provides easy access to money to its customers through more than 8500
ATMs in India. The Bank also facilitates the free transaction of money at the ATMs of
State Bank Group, which includes the ATMs of State Bank of India as well as the
Associate Banks – State Bank of Bikaner & Jaipur, State Bank of hyd, State Bank of
Indore, etc. You may also transact money through SBI Commercial and International
Bank Ltd by using the ATM-cum-Debit(Cash+Plus)card.
Subsidiaries
The State Bank Group includes a network of eight banking subsidiaries and
several non-banking subsidiaries. Through the establishments, it offers various services
including merchant banking services, fund management, factoring services, primary
dealership in govt securities, credit cards and insurance.
The eight banking subsidiaries are:
State Bank of Bikaner and Jaipur (SBBJ)
State Bank of Hyderabad (SBH)
State Bank of India (SBI)
State Bank of Indore (SBIR)
State Bank of Mysore (SBM)
State Bank of Patiala (SBP)
State Bank of Saurashtra (SBS)
State Bank of Travancore (SBT)
Products and Services
Personal Banking
SBI Term Deposits SBI Loan For Pensioners
SBI Recurring Deposits Loan Against Mortgage Of Property
SBI Housing Loan Loan Against Shares & Debentures
SBI Car Loan Rent Plus Scheme
SBI Educational Loan Medi-Plus Scheme
Other Services
Agriculture/Rural Banking
NRI Services
ATM Services
Demat Services
Corporate Banking
Internet Banking
History
ICICI Bank was originally promoted in 1994 by ICICI Limited, an Indian
financial institution, and was its wholly-owned subsidiary. ICICI's shareholding in ICICI
Bank was reduced to 46% through a public offering of shares in India in fiscal 1998, an
equity offering in the form of ADRs listed on the NYSE in fiscal 2000, ICICI Bank's
acquisition of Bank of Madura Limited in an all-stock amalgamation in fiscal 2001, and
secondary market sales by ICICI to institutional investors in fiscal 2001 and fiscal 2002.
ICICI was formed in 1955 at the initiative of the World Bank, the Government of India
and representatives of Indian industry.
The principal objective was to create a development financial institution for
providing medium-term and long-term project financing to Indian businesses.
In the 1990s, ICICI transformed its business from a development financial institution
offering only project finance to a diversified financial services group offering a wide
variety of products and services, both directly and through a number of subsidiaries and
affiliates like ICICI Bank. In 1999, ICICI become the first Indian company and the first
bank or financial institution from non-Japan Asia to be listed on the NYSE.
After consideration of various corporate structuring alternatives in the context of the
emerging competitive scenario in the Indian banking industry, and the move towards
universal banking, the managements of ICICI and ICICI Bank formed the view that the
merger of ICICI with ICICI Bank would be the optimal strategic alternative for both
entities, and would create the optimal legal structure for the ICICI group's universal
banking strategy.
The merger would enhance value for ICICI shareholders through the merged
entity's access to low-cost deposits, greater opportunities for earning fee-based income
and the ability to participate in the payments system and provide transaction-banking
services.
The merger would enhance value for ICICI Bank shareholders through a large
capital base and scale of operations, seamless access to Icecap’s strong corporate
relationships built up over five decades, entry into new business segments, higher market
share in various business segments, particularly fee-based services, and access to the vast
talent pool of ICICI and its subsidiaries.
In October 2001, the Boards of Directors of ICICI and ICICI Bank approved the
merger of ICICI and two of its wholly-owned retail finance subsidiaries, ICICI Personal
Financial Services Limited and ICICI Capital Services Limited, with ICICI Bank. The
merger was approved by shareholders of ICICI and ICICI Bank in January 2002, by the
High Court of Gujarat at Ahmadabad in March 2002, and by the High Court of
Judicature at Mumbai and the Reserve Bank of India in April 2002. Consequent to the
merger, the ICICI group's financing and banking operations, both wholesale and retail,
have been integrated in a single entity. ICICI Bank has formulated a Code of Business
Conduct and Ethics for its directors and employees
History
Housing Development Finance Corporation Limited, more popularly known as
HDFC Bank Ltd, was established in the year 1994, as a part of the liberalization of the
Indian Banking Industry by Reserve Bank of India (RBI). It was one of the first banks to
receive an 'in principle' approval from RBI, for setting up a bank in the private sector.
The bank was incorporated with the name 'HDFC Bank Limited', with its registered
office in Mumbai. The following year, it started its operations as a Scheduled
Commercial Bank. Today, the bank boasts of as many as 1412 branches and over 3275
ATMs across India.
Amalgamations
In 2002, HDFC Bank witnessed its merger with Times Bank Limited (a private
sector bank promoted by Bennett, Coleman & Co. / Times Group). With this, HDFC and
Times became the first two private banks in the New Generation Private Sector Banks to
have gone through a merger. In 2008, RBI approved the amalgamation of Centurion
Bank of Punjab with HDFC Bank. With this, the Deposits of the merged entity became
Rs. 1,22,000 crore, while the Advances were Rs. 89,000 crore and Balance Sheet size
was Rs. 1,63,000 crore.
Tech-Savvy
HDFC Bank has always prided itself on a highly automated environment, be it in
terms of information technology or communication systems. All the braches of the bank
boast of online connectivity with the other, ensuring speedy funds transfer for the clients.
At the same time, the bank's branch network and Automated Teller Machines (ATMs)
allow multi-branch access to retail clients. The bank makes use of its up-to-date
technology, along with market position and expertise, to create a competitive advantage
and build market share.
Capital Structure
At present, HDFC Bank boasts of an authorized capital of Rs 550 crore (Rs5.5
billion), of this the paid-up amount is Rs 424.6 crore (Rs.4.2 billion). In terms of equity
share, the HDFC Group holds 19.4%. Foreign Institutional Investors (FIIs) have around
28% of the equity and about 17.6% is held by the ADS Depository (in respect of the
bank's American Depository Shares (ADS) Issue). The bank has about 570,000
shareholders. Its shares find a listing on the Stock Exchange, Mumbai and National Stock
Exchange, while its American Depository Shares are listed on the New York Stock
Exchange (NYSE), under the symbol 'HDB'.
Products & Services
Personal Banking
• Savings Accounts
• Salary Accounts
• Current Accounts
• Fixed Deposits
• Demat Account
• Safe Deposit Lockers
• Loans
• Credit Cards
• Debit Cards
• Prepaid Cards
• Investments & Insurance
• Forex Services
• Payment Services
• NetBanking
• InstaAlerts
• MobileBanking
• InstaQuery
• ATM
• PhoneBanking
NRI Banking
• Rupee Savings Accounts
• Rupee Current Accounts
• Rupee Fixed Deposits
• Foreign Currency Deposits
• Accounts for Returning Indians
• Quickremit (North America, UK, Europe, Southeast Asia)
• IndiaLink (Middle East, Africa)
• Cheque LockBox
• Telegraphic / Wire Transfer
• Funds Transfer through Cheques / DDs / TCs
• Mutual Funds
• Private Banking
• Portfolio Investment Schemes
CHAPTER 5
DATA ANALYSIS
AND
INTERPRETATION
Table: 01
Month-Wise Market Prices
January 2012
February 2012
March 2012
Date
Closing
Price
Return Date
Closing
Price
Return Date
Closing
Price
Return
02
5785.83 2.5484
01
6605 0.8503
01
6809.48 -0.6971
03
5942.39 2.7059
02
6650.48 0.6886
02
6836.27 0.3934
04
5934.43 -0.134
03
6717.47 1.0073
03
6826.9 -0.1371
05
5934.77 0.0057
06
6779.41 0.9221
05
6807.03 -0.2911
06
5934.4 -0.0062
07
6738.02 -0.6105
06
6697.43 -1.6101
07
5942.19 0.1313
08
6788.91 0.7553
07
6635.39 -0.9263
09
5947.54 0.09
09
6847.44 0.8621
09
6730.09 1.4272
10
6080.88 2.2419
10
6825.15 -0.3255
12
6838.04 1.604
11
6110.26 0.4832
13
6839.78 0.2144
13
6887.91 0.7293
12
6097.16 -0.2144
14
6878.82 0.5708
14
6997.7 1.594
13
6146.5 0.8092
15
7023.11 2.0976
15
6953.12 -0.6371
16
6155.78 0.151
16
7032.08 0.1277
16
6866.66 -1.2435
17
6258.4 1.6671
17
7076.99 0.6386
19
6796.42 -1.0229
18
6227.93 -0.4869
21
7129.67 0.7444
20
6698.24 -1.4446
19
6311.34 1.3393
22
6960.61 -2.3712
21
6722.51 0.3623
20
6344.09 0.5189
23
6933.15 -0.3945
22
6842.24 1.781
23
6346.06 0.0311
24
6871.91 -0.8833
23
6708.88 -1.9491
24
6444.56 1.5521
27
6678.83 -2.8097
26
6729.12 0.3017
25
6497.43 0.8204
28
6831.83 2.2908
27
6683.31 -0.6808
27
6554.58 0.8796
29
6857.28 0.3725
28
6660.81 -0.3367
30
6417.22 -2.0956
29-
6575.18 -1.2856
31
6549.31 2.0584
30
6647.77 1.104
Table: 02
Month-Wise Market Prices
Half-yearly average rate of returns of a Market = 0.1393
Variance of a Market = 1.2098
Standard deviation of a Market = 1.0999
April 2012
May 2012
June 2012
Date
Closing
Price
Return
Date
Closing
Price
Return
Date
Closing
Price
Return
02
6806.09 2.3816
02
6687.94 -0.1578
01
6177.22 -1.6373
03 6864.24 0.8544 03 6622.15 -0.9837 04 6178.64 0.023
04 6835.13 -0.4241 04 6496.99 -1.89 05 6194.73 0.2604
09 6730.78 -1.5267 07 6534.95 0.5843 06 6345.26 2.43
10 6734.03 0.0483 08 6406.07 -1.9722 07 6406.54 0.9658
11 6707.13 -0.3995 09 6358.22 -0.7469 08 6429.05 0.3514
12 6760.98 0.8029 10 6348.82 -0.1478 11 6407.76 -0.3312
13 6689.94 -1.0507 11 6300.73 -0.7575 12 6476.48 1.0724
16 6718.82 0.4317 14 6262.7 -0.6036 13 6481.45 0.0767
17 6788.99 1.0444 15 6306.76 0.7035 14 6399.89 -1.2584
18 6806.86 0.2632 16 6214.37 -1.4649 15 6487.13 1.3631
19 6833.46 0.3908 17 6222.92 0.1376 18 6396.6 -1.3955
20 6777.81 -0.8144 18 6241.2 0.2938 19 6440.74 0.6901
23 6662.83 -1.6964 21 6263.56 0.3583 20 6474.67 0.5268
24 6679.96 0.2571 22 6209.65 -0.8607 21 6530.9 0.8685
25 6650.58 -0.4398 23 6176.39 -0.5356 22 6513.78 -0.2621
26 6629.67 -0.3144 24 6263.39 1.4086 25 6483.63 -0.4629
27 6622.89 -0.1023 25 6272.97 0.153 26 6500.12 0.2543
28 6650.25 0.4131 28 6350.89 1.2422 27 6525.5 0.3905
30 6698.51 0.7257 29 6352.29 0.022 28 6530.99 0.0841
30 6290.01 -0.9804 29 6682.47 2.3194
31 6280.04 -0.1585
Table: 03
Month-Wise SBI Prices
January 2012
February 2012
March 2012
Date
Closing
Price
Return Date
Closing
Price
Return
Date
Closing
Price
Return
02
1629.65 0.6267
01
2077.1 0.7787
01
2219.75
-
1.0542
03
1706.5 4.7157
02
2072.65 -0.2142
02
2245.7 1.1691
04
1695.15
-
0.6651
03
2103.1 1.4691
03
2250.75 0.2249
05
1691.7
-
0.2035
06
2163.05 2.8506
05
2174.15
-
3.4033
06
1676.15
-
0.9192
07
2152.05 -0.5085
06
2151
-
1.0648
07
1669.75
-
0.3818
08
2175.4 1.085
07
2141.05
-
0.4626
09
1637.75
-
1.9165
09
2181.95 0.3011
09
2222.3 3.7949
10
1702.05 3.9261
10
2172.5 -0.4331
12
2310.25 3.9576
11
1725.75 1.3924
13
2129 -2.0023
13
2327.65 0.7532
12
1760.7 2.0252
14
2198.45 3.2621
14
2351.5 1.0246
13
1777.15 0.9343
15
2250.5 2.3676
15
2299.45
-
2.2135
16
1816.65 2.2227
16
2349.05 4.379
16
2227.95
-
3.1094
17
1842.85 1.4422
17
2416.75 2.882
19
2159.65
-
3.0656
18
1863.6 1.126
21
2451.75 1.4482
20
2184.15 1.1344
19
1883.7 1.0786
22
2257.8 -7.9107
21
2233.55 2.2617
20
1931.8 2.5535
23
2261.25 0.1528
22
2160.6
-
3.2661
23
1940.65 0.4581
24
2206.8 -2.408
23
2165.25 0.2152
24
2041.3 5.1864
27
2125.1 -3.7022
26
2118.3
-
2.1683
25
2056.6 0.7495
28
2229.55 4.9151
27
2129.8 0.5429
27
2042.6
-
0.6807
29
2243.4 0.6212
28
2081.15
-
2.2843
30
1990.7
-
2.5409
29-
2061.6
-
0.9394
31
2061.05 3.5339
30
2095 1.6201
Table: 04
Month-Wise SBI Prices
Half-yearly average rate of returns of a SBI =0.2525
Variance of a SBI = 5.1858
Standard deviation of a SBI = 2.2772
April 2012
May 2012
June 2012
Date
Closing
Price
Return
Date
Closing
Price
Return
Date
Closing
Price
Return
02
2129.4 1.642
02
2139.45 0.0702
01
2026.2 -1.4302
03
2170.9 1.9489
03
2085.2 -2.5357
04
2046.2 0.9871
04
2164.3 -0.304
04
1993.6 -4.3929
05
2080.25 1.6641
09
2101.3 -2.9109
07
2026.15 1.6327
06
2159.45 3.8072
10
2151 2.3652
08
1958.95 -3.3166
07
2167.85 0.389
11
2160.3 0.4324
09
1887.6 -3.6423
08
2180.05 0.5628
12 2224.1 2.9533 10 1843.75 -2.3231 11 2164.55 -0.711
13
2211.45 -0.5688
11
1852.2 0.4583
12
2206.9 1.9565
16
2265.4 2.4396
14
1840.2 -0.6479
13
2222.25 0.6955
17
2299.95 1.5251
15
1859.95 1.0733
14
2154.25 -3.06
18 2289.6 -0.45 16 1829.2 -1.6533 15 2182.8 1.3253
19
2271.3 -0.7993
17
1848.1 1.0332
18
2087.65 -4.3591
20
2260.45 -0.4777
18
1942 5.0809
19
2103.1 0.7401
23
2192.1 -3.0237
21
2007.4 3.3677
20
2116.7 0.6467
24
2188.45 -0.1665
22
1938.5 -3.4323
21
2177.95 2.8937
25 2171.7 -0.7654 23 1956.45 0.926 22 2156.75 -0.9734
26
2159.2 -0.5756
24
1970.8 0.7335
25
2114.9 -1.9404
27 2125.7 -1.5515 25 2005 1.7353 26 2116.1 0.0567
28
2131.05 0.2517
28
2100.35 4.7556
27
2113.4 -0.1276
30
2137.95 0.3238
29
2120.3 0.9498
28
2095.45 -0.8493
30
2097.5 -1.0753
29
2159.15 3.0399
31
2055.6 -1.9976
Table: 05
Month-Wise ICICI Prices
January 2012
February 2012
March 2012
Date
Closing
Price
Return Date
Closing
Price
Return
Date
Closing
Price
Return
02
696.45 1.7309
01
888.2
-
1.5299
01
884.35
-
2.4435
03
725.4 4.1568
02
902.1 1.565
02
902.75 2.0806
04
743 2.4262
03
914.8 1.4078
03
905.55 0.3102
05
747.25 0.572
06
927.85 1.4265
05
870.45
-
3.8761
06
751.35 0.5487
07
936.9 0.9754
06
853.2
-
1.9817
07
745.45
-
0.7853
08
919.95
-
1.8092
07
861.1 0.9259
09
745.75 0.0402
09
939.6 2.136
09
914.7 6.2246
10
774.45 3.8485
10
928.2
-
1.2133
12
929.65 1.6344
11
779.6 0.665
13
934.6 0.6895
13
929.6
-
0.0054
12
781.55 0.2501
14
942.15 0.8078
14
953.85 2.6086
13
789.65 1.0364
15
980.1 4.028
15
930.25
-
2.4742
16
791.55 0.2406
16
968.85
-
1.1478
16
917
-
1.4243
17
785.6
-
0.7517
17
981.55 1.3108
19
908.6 -0.916
18
769.35
-
2.0685
21
991.05 0.9679
20
907.55
-
0.1156
19
796.35 3.5095
22
957.15
-
3.4206
21
935.4 3.0687
20
842.65 5.814
23
943.8
-
1.3948
22
899.45
-
3.8433
23
857.8 1.7979
24
931.6
-
1.2926
23
911 1.2841
24
886.15 3.305
27
886.9
-
4.7982
26
871.85
-
4.2975
25
878.6 -0.852
28
910.75 2.6891
27
876 0.476
27
888.1 1.0813
29
906.5
-
0.4666
28
859.1
-
1.9292
30
851.95
-
4.0705
29-
856.05 -0.355
31
902 5.8748
30
887.25 3.6446
Table: 06
Month-Wise ICICI Prices
Half-yearly average rate of returns of a ICICI = 0.2388
Variance of a Market = 4.7498
Standard deviation of a Market = 2.1793
April 2012
May 2012
June 2012
Date
Closing
Price
Return
Date
Closing
Price
Return
Date
Closing
Price
Return
02
890.85 0.4057
02
881.7 0.0284
01
781.7 -0.3315
03 907.55 1.8746 03 857.55 -2.739 04 790.3 1.1002
04
890.45 -1.8842
04
833.95 -2.752
05
790.25 -0.0063
09 870.05 -2.291 07 847.7 1.6488 06 807.1 2.1322
10
864.45 -0.6436
08
830.3 -2.0526
07
829.95 2.8311
11
864.9 0.0521
09
821.8 -1.0237
08
829 -0.1145
12
878.15 1.532
10
812.8 -1.0952
11
825.5 -0.4222
13
864.65 -1.5373
11
812.95 0.0185
12
838.8 1.6111
16 873.45 1.0178 14 799.1 -1.7037 13 849.1 1.2279
17
885.65 1.3968
15
816.7 2.2025
14
819.4 -3.4978
18
882.15 -0.3952
16
794.1 -2.7672
15
844.9 3.112
19
877.8 -0.4931
17
787.25 -0.8626
18
816.7 -3.3377
20
860.5 -1.9708
18
805.05 2.261
19
826.4 1.1877
23 843.45 -1.9814 21 810.8 0.7142 20 833.3 0.8349
24
847.5 0.4802
22
800.85 -1.2272
21
850.55 2.0701
25
838.65 -1.0442
23
795.7 -0.6431
22
852.05 0.1764
26
841.55 0.3458
24
819.9 3.0413
25
847.35 -0.5516
27
860.75 2.2815
25
815.9 -0.4879
26
845.45 -0.2242
28
868.9 0.9468
28
834.55 2.2858
27
852.45 0.828
30
881.45 1.4444
29
838.95 0.5272
28
856.5 0.4751
30
817 -2.6164
29
899.6 5.0321
31
784.3 -4.0024
Table: 07
Month-Wise HDFC Prices
January 2012
February 2012
March 2012
Date
Closing
Price
Return Date
Closing
Price
Return
Date
Closing
Price
Return
02
427.2 0.0351
01
496.7 1.1815
01
514.15
-
0.7049
03
439.15 2.7973
02
497.8 0.2215
02
518.3 0.8072
04
443.25 0.9336
03
506.35 1.7176
03
518.9 0.1158
05
442.55
-
0.1579
06
506.7 0.0691
05
511.3
-
1.4646
06
452.5 2.2483
07
509.65 0.5822
06
507.6
-
0.7236
07
451.1
-
0.3094
08
508 -0.3238
07
515.3 1.5169
09
454.9 0.8424
09
522.15 2.7854
09
522.85 1.4652
10
459.45 1.0002
10
516.2 -1.1395
12
519.85
-
0.5738
11
462.25 0.6094
13
522 1.1236
13
524.8 0.9522
12
466.6 0.941
14
517.7 -0.8238
14
527.05 0.4287
13
469.3 0.5787
15
532.95 2.9457
15
510.95
-
3.0547
16
461.15
-
1.7366
16
526.2 -1.2665
16
507.7
-
0.6361
17
467.25 1.3228
17
527.55 0.2566
19
498.65
-
1.7825
18
480.3 2.7929
21
531.1 0.6729
20
504.85 1.2434
19
485 0.9786
22
531.75 0.1224
21
515.4 2.0897
20
488.7 0.7629
23
531.8 0.0094
22
502.6
-
2.4835
23
483.9
-
0.9822
24
524.5 -1.3727
23
513.85 2.2384
24
488.5 0.9506
27
513.3 -2.1354
26
510.55
-
0.6422
25
490.1 0.3275
28
530.2 3.2924
27
518.05 1.469
27
483.6
-
1.3263
29
517.8 -2.3387
28
513.3
-
0.9169
30
479.05
-
0.9409
29-
510.7
-
0.5065
31
490.9 2.4736
30
520.05 1.8308
Table: 08
Month-Wise HDFC Prices
Half-yearly average rate of returns of a HDFC bank = 0.2290
Variance of a HDFC bank =2.1141
Standard deviation of a HDFC bank = 1.4539
April 2012
May 2012
June 2012
Date
Closing
Price
Return
Date
Closing
Price
Return
Date
Closing
Price
Return
02
527.1 1.3556
02
549.8 1.4017
01
491.45 -2.8659
03 529.8 0.5122 03 552.55 0.5002 04 496.8 1.0886
04
526.6 -0.604
04
536.75 -2.8595
05
501.8 1.0064
09 522.95 -0.6931 07 532.15 -0.857 06 519.35 3.4974
10
524.5 0.2964
08
515.45 -3.1382
07
537.25 3.4466
11
526.25 0.3337
09
512.45 -0.582
08
538.3 0.1954
12
530.4 0.7886
10
516.75 0.8391
11
539.55 0.2322
13
530.25 -0.0283
11
510.8 -1.1514
12
549.55 1.8534
16 529.6 -0.1226 14 500.5 -2.0164 13 542.7 -1.2465
17
530.85 0.236
15
499.05 -0.2897
14
534.4 -1.5294
18
536.9 1.1397
16
495.15 -0.7815
15
547.85 2.5168
19
554.2 3.2222
17
497.35 0.4443
18
533 -2.7106
20
551.1 -0.5594
18
500.45 0.6233
19
537.1 0.7692
23 544.9 -1.125 21 497.45 -0.5995 20 534.5 -0.4841
24
541.7 -0.5873
22
489.05 -1.6886
21
543 1.5903
25
546.9 0.9599
23
487 -0.4192
22
544.15 0.2118
26
540.55 -1.1611
24
499.05 2.4743
25
537.25 -1.268
27
540.55 0
25
500.35 0.2605
26
544.1 1.275
28
543.15 0.481
28
507.95 1.5189
27
548.7 0.8454
30
542.2 -0.1749
29
504.6 -0.6595
28
547 -0.3098
30
500.65 -0.7828
29
563.5 3.0165
31
505.95 1.0586
0
0.5
1
1.5
2
2.5
SBI ICICI HDFC
AVG RETURNS
STANDARD DEVIATION
Fig: 1 Bank – wise half yearly average rate of return and standard deviation
INTERPRETATION:
• An average rate of return of SBI bank ltd is 0.25. Where as the risk (i.e. standard
deviation) is 2.28. The risk is higher than that of the returns.
• An average rate of return of ICICI bank ltd is 0.24. Where as the risk (i.e.
standard deviation) is 2.08. The risk is higher than that of the returns.
• An average rate of return of SBI bank ltd is 0.23. Where as the risk (i.e. standard
deviation) is 1.45. The risk is higher than that of the returns.
BANKS AVG
RETURNS
STANDARD
DEVIATION
SBI 0.2525 2.28
ICICI 0.2388 2.18
HDFC 0.2290 1.45
CALCULATION OF CO-RELATION BETWEEN
BANKS AND MARKET
Table: 09
Month-Wise SBI Bank and Market Returns
January 2012
February 2012
March 2012
Date
SBI
Return
MRK
Return
Date
SBI
Return
MRK
Return
Date
SBI
Return
MRK
Return
02 0.6267 0.1237 1 0.7787 0.8503 1 -1.0542 -0.697
03 4.7157 2.7059 2 -0.214 0.6886 2 1.16905 0.3934
04 -0.665 -0.134 3 1.4691 1.0073 3 0.22487 -0.137
05 -0.204 0.0057 6 2.8506 0.9221 5 -3.4033 -0.291
06 -0.919 -0.006 7 -0.509 -0.611 6 -1.0648 -1.610
07 -0.382 0.1313 8 1.085 0.7553 7 -0.4626 -0.926
09 -1.916 0.09 9 0.3011 0.8621 9 3.79487 1.4272
10 3.9261 2.2419 10 -0.433 -0.326 12 3.95761 1.604
11 1.3924 0.4832 13 -2.002 0.2144 13 0.75317 0.7293
12 2.0252 -0.214 14 3.2621 0.5708 14 1.0246 1.594
13 0.9343 0.8092 15 2.3676 2.0976 15 -2.2135 -0.637
16 2.2227 0.151 16 4.379 0.1277 16 -3.1094 -1.243
17 1.4422 1.6671 17 2.882 0.6386 19 -3.0656 -1.022
18 1.126 -0.486 21 1.4482 0.7444 20 1.13444 -1.444
19 1.0786 1.3393 22 -7.911 -2.371 21 2.26175 0.3623
20 2.5535 0.5189 23 0.1528 -0.395 22 -3.2661 1.781
23 0.4581 0.0311 24 -2.408 -0.883 23 0.21522 -1.949
24 5.1864 1.5521 27 -3.702 -2.81 26 -2.1683 0.3017
25 0.7495 0.8204 28 4.9151 2.2908 27 0.54289 -0.680
27 -0.681 0.8796 29 0.6212 0.3725 28 -2.2843 -0.336
30 -2.541 -2.095 29- -0.9394 -1.285
31 3.5339 2.0584 30 1.6201 1.104
Table: 10
Month-Wise SBI Bank and Market Returns
April 2012
May 2012
June 2012
Date
SBI
Return
MRK
Return
Date
SBI
Return
MRK
Return
Date
SBI
Return
MRK
Return
02 1.642 2.3816 02 0.0702 -0.157 01 -1.43 -1.637
03 1.9489 0.8544 03 -2.536 -0.983 04 0.9871 0.023
04 -0.304 -0.424 04 -4.393 -1.89 05 1.6641 0.2604
09 -2.910 -1.527 07 1.6327 0.5843 06 3.8072 2.43
10 2.3652 0.0483 08 -3.317 -1.972 07 0.389 0.9658
11 0.4324 -0.399 09 -3.642 -0.746 08 0.5628 0.3514
12 2.9533 0.8029 10 -2.323 -0.147 11 -0.711 -0.331
13 -0.568 -1.051 11 0.4583 -0.757 12 1.9565 1.0724
16 2.4396 0.4317 14 -0.648 -0.603 13 0.6955 0.0767
17 1.5251 1.0444 15 1.0733 0.7035 14 -3.06 -1.258
18 -0.45 0.2632 16 -1.653 -1.464 15 1.3253 1.3631
19 -0.799 0.3908 17 1.0332 0.1376 18 -4.359 -1.396
20 -0.477 -0.814 18 5.0809 0.2938 19 0.7401 0.6901
23 -3.023 -1.696 21 3.3677 0.3583 20 0.6467 0.5268
24 -0.166 0.2571 22 -3.432 -0.860 21 2.8937 0.8685
25 -0.765 -0.44 23 0.926 -0.535 22 -0.973 -0.262
26 -0.575 -0.314 24 0.7335 1.4086 25 -1.94 -0.463
27 -1.551 -0.102 25 1.7353 0.153 26 0.0567 0.2543
28 0.2517 0.4131 28 4.7556 1.2422 27 -0.128 0.3905
30 0.3238 0.7257 29 0.9498 0.022 28 -0.849 0.0841
30 -1.075 -0.980 29 3.0399 2.3194
31 -1.998 -0.158
Table: 11
Month-Wise ICICI Bank and Market Returns
January 2012
February 2012
March 2012
Date
ICICI
Return
MRK
Return
Date
ICICI
Return
MRK
Return
Date
ICICI
Return
MRK
Return
02 1.7309 0.1237 01 -1.53 0.8503 01 -2.4435 -0.697
03 4.1568 2.7059 02 1.565 0.6886 02 2.08062 0.3934
04 2.4262 -0.134 03 1.4078 1.0073 03 0.31016 -0.137
05 0.572 0.0057 06 1.4265 0.9221 05 -3.8761 -0.291
06 0.5487 -0.006 07 0.9754 -0.611 06 -1.9817 -1.610
07 -0.785 0.1313 08 -1.809 0.7553 07 0.92593 -0.926
09 0.0402 0.09 09 2.136 0.8621 09 6.2246 1.4272
10 3.8485 2.2419 10 -1.213 -0.326 12 1.63442 1.604
11 0.665 0.4832 13 0.6895 0.2144 13 -0.0054 0.7293
12 0.2501 -0.214 14 0.8078 0.5708 14 2.60865 1.594
13 1.0364 0.8092 15 4.028 2.0976 15 -2.4742 -0.637
16 0.2406 0.151 16 -1.148 0.1277 16 -1.4243 -1.243
17 -0.752 1.6671 17 1.3108 0.6386 19 -0.916 -1.022
18 -2.068 -0.486 21 0.9679 0.7444 20 -0.1156 -1.444
19 3.5095 1.3393 22 -3.421 -2.371 21 3.0687 0.3623
20 5.814 0.5189 23 -1.395 -0.395 22 -3.8433 1.781
23 1.7979 0.0311 24 -1.293 -0.883 23 1.28412 -1.949
24 3.305 1.5521 27 -4.798 -2.81 26 -4.2975 0.3017
25 -0.852 0.8204 28 2.6891 2.2908 27 0.476 -0.680
27 1.0813 0.8796 29 -0.467 0.3725 28 -1.9292 -0.336
30 -4.07 -2.095 29- -0.355 -1.285
31 5.8748 2.0584 30 3.64465 1.104
Table: 12
Month-Wise ICICI Bank and Market Returns
April 2012
May 2012
June 2012
Date
ICICI
Return
MRK
Return
Date
ICICI
Return
MRK
Return
Date
ICICI
Return
MRK
Return
02 0.4057 2.3816 02 0.0284 -0.157 01 -0.332 -1.637
03 1.8746 0.8544 03 -2.739 -0.983 04 1.1002 0.023
04 -1.884 -0.424 04 -2.752 -1.89 05 -0.006 0.2604
09 -2.291 -1.527 07 1.6488 0.5843 06 2.1322 2.43
10 -0.643 0.0483 08 -2.053 -1.972 07 2.8311 0.9658
11 0.0521 -0.399 09 -1.024 -0.746 08 -0.114 0.3514
12 1.532 0.8029 10 -1.095 -0.147 11 -0.422 -0.331
13 -1.537 -1.051 11 0.0185 -0.757 12 1.6111 1.0724
16 1.0178 0.4317 14 -1.704 -0.603 13 1.2279 0.0767
17 1.3968 1.0444 15 2.2025 0.7035 14 -3.498 -1.258
18 -0.395 0.2632 16 -2.767 -1.464 15 3.112 1.3631
19 -0.493 0.3908 17 -0.863 0.1376 18 -3.338 -1.396
20 -1.970 -0.814 18 2.261 0.2938 19 1.1877 0.6901
23 -1.981 -1.696 21 0.7142 0.3583 20 0.8349 0.5268
24 0.4802 0.2571 22 -1.227 -0.860 21 2.0701 0.8685
25 -1.044 -0.44 23 -0.643 -0.535 22 0.1764 -0.262
26 0.3458 -0.314 24 3.0413 1.4086 25 -0.552 -0.463
27 2.2815 -0.102 25 -0.488 0.153 26 -0.224 0.2543
28 0.9468 0.4131 28 2.2858 1.2422 27 0.828 0.3905
30 1.4444 0.7257 29 0.5272 0.022 28 0.4751 0.0841
30 -2.616 -0.980 29 5.0321 2.3194
31 -4.002 -0.158
Table: 13
Month-Wise HDFC Bank and Market Returns
January 2012
February 2012
March 2012
Date
HDFC
Return
MRK
Return
Date
HDFC
Return
MRK
Return
Date
HDFC
Return
MRK
Ret
02 0.0351 0.1237 01 1.1815 0.8503 01 -0.7049 -0.697
03 2.7973 2.7059 02 0.2215 0.6886 02 0.8071 0.3934
04 0.9336 -0.134 03 1.7176 1.0073 03 0.1157 -0.137
05 -0.158 0.0057 06 0.0691 0.9221 05 -1.4646 -0.291
06 2.2483 -0.006 07 0.5822 -0.611 06 -0.7236 -1.610
07 -0.309 0.1313 08 -0.324 0.7553 07 1.5169 -0.926
09 0.8424 0.09 09 2.7854 0.8621 09 1.4651 1.4272
10 1.0002 2.2419 10 -1.14 -0.326 12 -0.5738 1.604
11 0.6094 0.4832 13 1.1236 0.2144 13 0.9522 0.7293
12 0.941 -0.214 14 -0.824 0.5708 14 0.4287 1.594
13 0.5787 0.8092 15 2.9457 2.0976 15 -3.0547 -0.637
16 -1.737 0.151 16 -1.267 0.1277 16 -0.6361 -1.243
17 1.3228 1.6671 17 0.2566 0.6386 19 -1.7825 -1.022
18 2.7929 -0.486 21 0.6729 0.7444 20 1.2433 -1.444
19 0.9786 1.3393 22 0.1224 -2.371 21 2.0897 0.3623
20 0.7629 0.5189 23 0.0094 -0.395 22 -2.4835 1.781
23 -0.982 0.0311 24 -1.373 -0.883 23 2.2383 -1.949
24 0.9506 1.5521 27 -2.135 -2.81 26 -0.6422 0.3017
25 0.3275 0.8204 28 3.2924 2.2908 27 1.469 -0.680
27 -1.326 0.8796 29 -2.339 0.3725 28 -0.9169 -0.336
30 -0.941 -2.095 29 -0.5065 -1.285
31 2.4736 2.0584 30 1.83082 1.104
Table: 14
Month-Wise HDFC Bank and Market Returns
April 2012
May 2012
June 2012
Date
HDFC
Return
MRK
Return
Date
HDFC
Return
MRK
Return
Date
HDFC
Return
MRK
Return
02 1.3556 2.3816 02 1.4017 -0.157 01 -2.866 -1.637
03 0.5122 0.8544 03 0.5002 -0.983 04 1.0886 0.023
04 -0.604 -0.424 04 -2.859 -1.89 05 1.0064 0.2604
09 -0.693 -1.527 07 -0.857 0.5843 06 3.4974 2.43
10 0.2964 0.0483 08 -3.138 -1.972 07 3.4466 0.9658
11 0.3337 -0.399 09 -0.582 -0.746 08 0.1954 0.3514
12 0.7886 0.8029 10 0.8391 -0.147 11 0.2322 -0.331
13 -0.028 -1.051 11 -1.151 -0.757 12 1.8534 1.0724
16 -0.122 0.4317 14 -2.016 -0.603 13 -1.246 0.0767
17 0.236 1.0444 15 -0.29 0.7035 14 -1.529 -1.258
18 1.1397 0.2632 16 -0.781 -1.464 15 2.5168 1.3631
19 3.2222 0.3908 17 0.4443 0.1376 18 -2.711 -1.396
20
-0.559 -0.814
18
0.6233 0.2938
19
0.7692 0.6901
23 -1.125 -1.696 21 -0.599 0.3583 20 -0.484 0.5268
24 -0.587 0.2571 22 -1.689 -0.860 21 1.5903 0.8685
25 0.9599 -0.44 23 -0.419 -0.535 22 0.2118 -0.262
26 -1.161 -0.314 24 2.4743 1.4086 25 -1.268 -0.463
27 0 -0.102 25 0.2605 0.153 26 1.275 0.2543
28
0.481 0.4131
28
1.5189 1.2422
27
0.8454 0.3905
30 -0.174 0.7257 29 -0.66 0.022 28 -0.31 0.0841
30 -0.783 -0.980 29 3.0165 2.3194
31 1.0586 -0.158
CORRELATION BETWEEN BANKS AND MARKET
SBI-MARKET ICICI-MARKET HDFC-MARKET
0.7232 0.6898 0.599
Correlation between banks and market
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
SBI-MRK ICICI-MRK HDFC-MRK
Series1
Fig: 2 Half yearly Correlation between banks and market
INTERPRETATION:
From the above graph it is observed that all the banks i.e., SBI, ICICI, HDFC
Showing positive values and they are positively correlated. This means that,
If one bank prices increases than automatically other bank prices also increases.
If one bank prices decreases than other bank prices also decreases.
COVARINCE OF THREE BANKS AND MARKET
SBI-MARKET ICICI-MARKET HDFC-MARKET
1.7232 1.6087 0.8698
CALCULATION OF BETA
Beta: Measures volatility or systemic risk compared to the market
BETA= COVARIANCE OF MARKET AND SBI / VARIANCE OF MARKET
VARIANCE OF A MARKET = 1.2098
CO-VARIANCE OF MARKET AND SBI = 1.7621
BETA = 1.7621/1.2098 = 1.46
CO-VARIANCE OF MARKET AND ICICI = 1.6085
BETA = 1.6085/1.2098 = 1.33
CO-VARIANCE OF MARKET AND HDFC = 0.8697
BETA = 0.8697/1.2098 = 0.60
BANKS BETA
SBI 1.46
ICICI 1.33
HDFC 0.60
BETA
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
SBI ICICI HDFC
BANKS
BETA
Fig: 3 Beta values of SBI, ICICI, HDFC Banks.
INTERPRETATION:
Beta of 1 Indicates that the securities price will move with the market .A beta less
than 1 means that the security will be less volatile than the market .A beta of greater
than 1 indicates that the securities price will be more volatile than the market.
From the above graph it is clearly showing that SBI and ICICI prices are more
Volatile than the market and HDFC prices are less volatile than the market.
High beta stocks are supposed to be riskier but provide a potential for higher return
And low beta stocks poses less risk but also lower returns.
CHAPTER 6
FINDINGS, SUGGESTIONS AND CONCLUSION
6.1 FINDINGS
The following facts were found out during the project work
• It observed that an average rate of return of SBI Bank is 0.25, and ICICI Bank is
0.24. Where as the risk (i.e. standard deviation) is 0.28 and 0.24 .That means the
risk is higher and the returns are low. Where as HDFC bank has an average rate
of return of 0.23 and the risk is 1.45. When compare to three banks HDFC bank
having low risk.
• As far as risk factor is considered SBI Bank is having maximum risk(standard
deviation )of 2.28 at the same time it gives the high returns of 0.25 when
compare to ICICI, HDFC Banks.
• All the banks i.e., SBI, ICICI, HDFC are positively correlated, which means if
prices of one bank increases means other banks prices also increases and vice
versa.
• Beta values of SBI bank is 1.44 and ICICI bank is 1.33 which is more
volatile than the market and they are riskier but they provide a high returns.
Where as Beta value of HDFC bank is 0.60 which is less volatile than the
market, and they are less risky with less return.
6.2 SUGGESTIONS
• When we want the high returns, we have to bear high risk. But if we bear high
risk it is meaningless to invest our hard earned income. In this present project the
highest earned income is obtained by the bank SBI which is 0.25
• But it is posing this degree of risk of 2.28. So in order to get the more returns
from minimum risk we have to analysis the factor like company back ground
,performance, market value and historical data. It is suggested to all investors to
analyze fundamental as well as technical.
• But among all the securities, HDFC Ltd is best with its minimum returns and low
risk as compared to SBI and ICICI Bank Ltd.
6.3 CONCLUSION
Investment is financial asset require a great concentration since they are involved
a great volatility. Risk is uncertainty in the future returns when one invests in financial
assets. To reduce this risk component in the returns one has to be careful enough in
estimating the future of their investment returns. This project has been undertaken to
study the returns of securities listed on stock exchanges. These equities are analyzed in
terms of risk and return. The present study reveals the process of expecting the returns
which the investor can use investment process.
BIBLIOGRAPHY
BOOKS:
• Security Analysis And Portfolio Management
-V.A.Avadhani
• Financial Management
-Prasanna chandra
• Indian Financial System
-M.Y.Khan
WEBSITES:
• www.nseindia.com
• www.bseindia.com
• www.hdfc.com
• www.icici.com
• www.sbi.com