A study on equity analysis of banking and financial sector

A Project Submitted to
University of Mumbai for partial completion of the post graduation degree of
Masters in Commerce (Advanced Accountancy)
Under the Faculty of Commerce

BY
NANDINI RAJU KALE
ROLL NO 9035

Under the Guidance of

PROF. CA ASHOK GUJAR

D.G. RUPAREL COLLEGE OF ARTS, SCIENCE & COMMERCE,

MAHIM , MUMBAI 400016
MAY 2023

1
 CERTIFICATE

This is to certify that MS. NANDINI RAJU KALE has worked and duly completed her Project
For the degree of Masters in Commerce (Advanced Accountancy) under the Faculty of Commerce
and her project is entitled “A STUDY ON EQUITY ANALYSIS OF BANKING AND FINANCIAL
SECTOR ” under my supervision. I further certify that the entire work has been done by the learner under
my guidance and that no part of it has been submitted previously for any Post Graduation Degree or
Diploma of any University. It is her own work and facts reported by her personal findings and
investigations.

______________________ _____________________

Coordinator Guiding Teacher

______________________ _______________________

External Examiner Internal Examiner

______________________ ________________________

Principal College seal

Date of submission:

2
 DECLARATION

I undersigned Ms. NANDINI RAJU KALE hereby, declare that the work embodied in this project
work titled “A STUDY ON EQUITY ANALYSIS OF BANKING AND FINANCIAL SECTOR”,
forms my own contribution to the my research work carried out under the guidance of our
PROF. CA ASHOK GUJAR is a result of my own research work and has not been ever submitted to
any other University for any other Post Graduation Degree/Diploma to neither this nor any other University.
Wherever reference has been made to previous works of others, it has been clearly indicated as such
and included in bibliography.
I, here by further declare that all the information of this document has been obtained and presented in
Accordance with academic rules and ethical conduct.

________________________
NANDINI RAJU KALE
ROLL NO 9035

3
 Acknowledgment

To list who all have helped me in difficult because they are so numerous and the depth is so enormous.
I would like to acknowledge the following as being idealistic channels and fresh dimensions in the
completion
of this project.I take this opportunity to thanks the University of Mumbai for giving me chance to do this
project. I would like to thank my Principal, Dr.Dilip Maske for providing the necessary facilities required
for completion of this project.
I take this opportunity to thank our coordinator Dr. Ravindra Netawate for the moral support and guidance.
I would also like to express my sincere gratitude towards my project guide PROF. CA ASHOK GUJAR
whose guidance and care made the project successful.
I would like to thank my College Library, for having provided various reference books and magazines
related to my project.
Lastly, I would like to thank each and every person who directly or indirectly helped me in the completion
of the project especially my parents and peers who supported me throughout my project.

4
 PREFACE

It was a pleasurable experience for me to work on this project report

“A STUDY ON EQUITY ANALYSIS OF BANKING AND FINANCIAL SECTOR” It has not
only helped me to enhance my knowledge about various strategies followed by
the company but also reviewed my knowledge. In this project report every
possible effort has been made to highlight the major aspects related to the topic
by a comprehensive study of literature and by secondary information.

To make it easier different tabular and diagrammatic approach has been used
which help in understanding the theme. It gives brands, a market image as well
as depicts phase of their life cycle to understand the company value in a better
way. Secondary data is an important document and contains information that can
be used to find out what are the findings of the research. I have tried my best to
explore the truth in my project reality regarding the ratio analysis and
understanding practical way of working.

5
 INDEX

Sr. Sub Page

CONTENTS
No. Sr.
No.
1. INTRODUCTION 7
2. 2.1 RESEARCH METHODOLOGY 15
2.2 OBJECTIVES OF THE PROJECT 15
2.3 SCOPE OF THE PROJECT 16
2.4 SIGNIFICANCE OF THE STUDY 17
2.5 COLLECTION OF THE DATA 17
3. REVIEW OF LITERATURE 18
4. THEROTICAL BACKGROUND 22
5. SWOT ANALYSIS OF BANKING SECTOR 54
6. DETAILED ANALYSIS OF BANKS 63

7. DATA INTERPRATATION 63
8. FINDINGS 87
9. SUGGESTIONS 88
10. CONCLUSION 89
11. BIBLIOGRAPHY 90

Chapter 1: Introduction
6
1. General introduction

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

financial markets especially on equities to get high returns, and to save tax in honest
way. Equities are playing a major role in contribution of capital to the business from
the beginning.

Since the introduction of shares concept, large numbers of investors are showing
interest to invest in stock market. The cost of a security speaks to an agreement. It is
the cost at which one individual consents to purchase and consents to sell. The cost at
which a speculator is eager to purchase or sell relies principally upon his desires. On
the off chance that he anticipates that the security's cost should raise, he will get it;
if the financial specialist anticipates that the cost should fall, he will sell it. These
straightforward explanations are the reason for a significant test in determining
security costs, since they allude to human desires. As we as a whole know firsthand
people desires are neither effectively quantifiable nor unsurprising.

On the off chance that costs depend on financial specialist desires, at that point
comprehending what a security should sell for (i.e., central investigation) turns out to
be less significant than recognizing what different speculators anticipate that it should
sell for. Saying this doesn't imply that that realizing what a security should sell for isn't
significant - it is. In any case, there is typically a genuinely solid accord of a stock's
future profit that the normal financial specialist can't invalidate. Essential investigation
and specialized examination can exist together in harmony and supplement one
another. Since all the speculators in the financial exchange need to make the most
extreme benefits conceivable, they just can't stand to overlook either basic or
specialized investigation.

India is one of the emerging economies, which have witnessed significant

development in the stock markets during the liberalization policy initiated by the
government. And Indian stock market is largely integrated with the world markets. In
that Context financial crisis of 2007-09 was a glass case of large spill over’s from

7
one bank to another bank heightening risk. It is clear that the investing in banking
shares include high risk at the same time it earns extremely negative return which is
revealed by the performance analyses on selected banking shares.

Investing in stocks is a risky business. There are some risks which can control over
and others that can only guard against. Most of these risks affect the market or the
economy and require investors to adjust portfolios or ride out the storm. In this paper
In author analyze the risk and return in banking equity with non banking equity in
Banks. The study compare the banking equity performance with two major effected
sector (Real, IT). The hypothesis taken is there is significant difference in return in
banking and non banking equity. The statistical tools which were used for analyzing
the hypothesis were descriptive analysis and T-test. The author has given some
suggestion to improvise the market condition from the global recession.

In finance, equity is ownership of assets that may have debts or other liabilities
attached to them. Equity is measured for accounting purposes by subtracting liabilities
from the value of the assets. Equity analysis is to provide information to the investors
in the markets. An efficient market relies on information. In today’s scenario, most
investors are tending to invest in stock market. The main aim of this project is to
equity analysis on banking sector and to find out the opportunities of investment in
these sectors where returns can be maximised. As companies grow their shareholders
are benefited with good dividend and capital appreciation on investment in equity
shares of such companies. Number of companies listed in stock exchange
(BSE&NSE) has been increasing every year with new IPOs coming in the market.
This report starts from the fundamental analysis where EIC (Economy, Industry, and
Company) analysis of the five banks (SBI, BANK OF BARODA, AXIS Bank, ICICI
Bank, HDFC Bank).

8
‘’]]

Fundamental analysis is a method of measuring a security's intrinsic value by

examining related economic and financial factors. Fundamental analysts study
anything that can affect the security's value, from macroeconomic factors such as
the state of the economy and industry conditions to microeconomic factors like the
effectiveness of the company's management. Then the technical analysis is of the top
banks has been done. Technical analysis is used to study stock chart pattern of these
banks. The observed patterns are tested with various oscillators and decision about
particular stock is made. Based on these factors, a trend of a particular stock is
observed. Then the participation of selected banks in share market and comparing the
performance of selected banks in the share market.

A stock or any other security representing an ownership interest. On a company

balance sheet funds contributed by the owners and the retained earnings also refereed
as equity. In terms of investment strategies equity is one of the principal assets. In
finance the equity as ownership in any asset after all bets associated with the asset are
paid off. In Indian stock market has returned about 17% to investors on an average in
terms of increase in share prices or capital appreciation annually. Besides that on an
average, stocks have paid 1.5 % dividend annually. Dividend is a percentage of the
face value of a share that a company returns to its shareholders from its annual profits.
Comparing the most other forms of investments investing in equity shares offers the
highest rate of returns if invested over a long duration. Banks are the major part of any
economic system. They provide a strong base to Indian economy as well. Even in the
share markets, the performance of banks shares is of great importance. Thus, the
performance of the share market, the rise and the fall of market is greatly affected by
the performance of the banking sector shares and this study revolves around all
factors, their understanding and a theoretical and technical analysis.

9
Each investment alternative has its own strengths and weaknesses. Some options seek
to achieve superior returns (like equity), but with corresponding higher risk. Some of
the events affect economy as a whole, while some events are sector specific. Even in
one particular sector, some companies or major market player are more sensitive to the
event. So, the new investors taking exposure in the market should be well aware
about the maximum potential loss, i.e. Value at risk.

An analysis of securities and the organization and operation of their markets. The
determination of the risk reward structure of equity and debt securities and their
valuation. Technical analysis is a method of predicting price movements and future
market trends by studying charts of past market action which take into account price
of instruments, volume of trading and, where applicable, open interest in the
instruments. Fundamental analysis is a method of forecasting the future price
movements of a financial instrument based on economic, political, environmental
and other relevant factors and statistics that will affect the basic supply and demand of
whatever underlies the financial instrument.

Stock analysis is a term that refers to the evaluation of a particular trading instrument,
an investment sector or the market as a whole. Stock analysts attempt to determine the
future activity of an instrument, sector or market. There are two basic types of stock
analysis: fundamental analysis and technical analysis. Fundamental analysis
concentrates on data from sources including financial records, economic reports,
company assets and market share. Technical analysis focuses on the study of past
market action to predict future price movement. Equity is the ownership interest of
investors in a business firm. Investors can own equity shares in a firm in the form of
common stock or preferred stock. Equity ownership in the firm means that the original
business owner no longer owns 100% of the firm but shares ownership with others. On
a company's balance sheet, equity is represented by the following accounts: common
stock, preferred stock, paid-in capital, and retained earnings. Equity can be calculated
by subtracting total liabilities from total assets.

10
Equity analysis is to provide information to the investors in the markets. An efficient
market relies on information. In today’s scenario, most investors are tending to invest
in stock market.The main aim of this project is to equity analysis on banking sector
and to find out the opportunities of investment in these sectors where returns can be
maximised. As companies grow their shareholders are benefited with good dividend
and capital appreciation on investment in equity shares of such companies. Number of
companies listed in stock exchange (BSE&NSE) has been increasing every year with
new IPOs coming in the market. This report starts from the fundamental analysis
where EIC (Economy, Industry, and Company) analysis of the six banks (SBI, BANK
OF BARODA, CANARA Bank, AXIS Bank ICICI Bank, HDFC Bank). Fundamental
analysis is a method of measuring a security's intrinsic value by examining related
economic and financial factors. Fundamental analysts study anything that can affect
the security's value, from macroeconomic factors such as the state of the economy and
industry conditions to microeconomic factors like the effectiveness of the company's
management.

Then the technical analysis is of the top banks has been done. Technical analysis is
used to study stock chart pattern of these banks. The observed patterns are tested with
various oscillators and decision about particular stock is made. Based on these factors,
a trend of a particular stock is observed. Then the participation of selected banks in
share market and comparing the performance of selected banks in the share market

Equity analysis is the process of analysing sectors and companies to give advice to
professional fund managers and private clients on which shares to buy. Sell-side
analysts work for brokers who sell shares to the investors mainly for private clients.
Buy-side analysts work for fund management firms. Equity analysis is to provide
information to the investors in the markets.Fundamental Analysis Fundamental
analysis is a method of measuring a security's intrinsic value by examining related
economic and financial factors. Fundamental analysts study anything that can affect
the security's value, from macroeconomic factors such as the state of the economy and

11
 industry conditions to microeconomic factors like the effectiveness of the company's
management.

Technical Analysis: Technical analysis is a trading discipline employed to evaluate

investments and identify trading opportunities by analyzing statistical trends gathered
from trading activity, such as price movement and volume. Unlike fundamental
analysts, who attempt to evaluate a security's intrinsic value, technical analysts focus
on patterns of price movements, trading signals and various other analytical charting
tools to evaluate a security's strength or weakness. Generally speaking,stocks and
shares refer to financial equities securities that give an investor a slice of ownership in
a public business.

But wait, what does equity mean?

Equity is basically the ownership of a business. A business is divided into pieces called shares and are
divided among people based on their monetary or sometimes non-cash contribution to the company. So,
when you heard your uncle mention – “I own 10% shares of Prabhat Inc.,” it simply means he owns 10% of
the business.
These shares are nothing but the equity ownership of the company.

For example:
Let's say, you joined hands with three of your friends to start a new company. Each one of you invests Rs.
2.5 crore to get the business rolling, i.e. invested a total sum of Rs. 10 crore. When it's time to register your
company, you divide the business into 1 crore shares of Rs. 10 each. This means that value of the share in
the books of the company is Rs.10. Since it's a joint partnership with three of your friends, each of you
receives 25 lakh shares equally — 25% of the ownership or equity. To raise the capital for business
expansion, all the owners of the business unanimously decide to surrender an equal number of shares — 10
lakh. Your friends and you as equal owners, give up a specific portion of your shares in order to allow other
investors to purchase in return for funds. That means, the company announces its decision of selling 40% of
its total shares to the public to raise the money as needed. But these stocks are sold at a higher price known
as the market value let’s say Rs. 100. So, an investor who wants to invest in your company will have to pay
a premium of Rs. 90 to purchase the share worth Rs. 10. This basically means that their ownership in the

12
business would be equivalent to Rs. 10 only.So, now that you and your friends own only 60% and the public
own the remaining 40% here's how the updated share ownership will appear.

Now, if an investor purchases one lakh shares of your company, they become the shareholder of your
company with 1% equity ownership in your business.

Hence, simply put:

Purchasing a stake in a company means investing in that company, making it an equity investment.
Therefore, any investor who purchases shares or a stake in a firm owns partial ownership of that firm.

Importance of equity investment

Equity investments are more likely to help you achieve your financial goals and beat inflation as well as
address taxes in the long-term. That’s why, if you invest entirely in conservative investment avenues like
fixed deposits, it may not be enough to protect your money from inflation and taxes.
And not just that, historical data proves that investing in equities has demonstrated the potential to
outperform returns offered by most asset classes like gold, debt, real estate, etc. Quite simply, it means that
over the long term, no other type of investment may perform better than equities due to its high potential
returns.

Here’s an example to understand the difference:

Let’s say that you invest Rs. 1 lakh in a Fixed Deposit (FD) that offers you 6% returns at 30% taxation. In
this case, your post-tax return in hand will be 6%*(1 - 0.3) = 4.2%.
But what if you invested the same amount in an equity instrument? In that case, if you assume equity post-
tax return as 10% p.a., then after 20 years, the value of the Rs. 1 lakh would be Rs. 6.73 lakh. As against
only Rs. 2.28 lakh in the FD investment!
Here, you can see how your equity investment value is more than double the return of the FD investment.

But how can you find the right balance between equity and debt in your portfolio?
Here’s a common thumb rule that you can use for indicative asset allocation. However, asset allocation may
vary from person to person depending on their risk appetite, financial goals, income, age, etc.
13
14
  Banking Sector:

As per the Reserve Bank of India (RBI), India’s banking sector is sufficiently
capitalized and well-regulated. The financial and economic conditions in the country
are far superior to any other country in the world. Indian banking industry is expected
to witness better growth prospects in 2015 as a sense of optimism stems from the
Government’s measures towards revitalizing the industrial growth in the country.

In addition, RBI’s new measures may go a long way in helping the restructuring of
the domestic banking industry. Indian banks are increasingly focusing on adopting
integrated approach to risk management. Banks have already embraced the
international banking supervision accord of Basel II. According to RBI, majority of
the banks already meet capital requirements of Basel III, which has a deadline of
March 31, 2019.

Most of the banks have put in place the framework for asset-liability match, credit
and derivatives risk management. All rights reserved 1041 Rising incomes are
expected to enhance the need for banking services in rural areas and therefore drive
the growth of the sector; programmes like MNREGA have helped in increasing Ural
income aided by the recent Jan Dhan Yojana. The Reserve Bank of India (RBI) has
relaxed its branch licensing policy, thereby allowing banks (which meet certain
financial parameters) to set-up new branches in tier-2 to tier- 6 centers, without prior
approval from RBI.
It has emphasized the need to focus on spreading the reach of banking services to the
un-banked population of India. Equity: Equity is the interest of investors in the business
firm. The investors can own equity shares in a firm in the form of common stock or preferred stock. On
a company’s balance sheet equity is represented by common stock, preferred stock, paid in capital and
retained earnings. The equity can be calculated by subtracting total liabilities from total assets. Equity
Analysis: Equity or stock analysis is a term that refers to the evaluation of particular trading instrument
in the investment sector or market as a whole. There are two types of equity analysis.

15
16
 CHAPTER 2

RESEARCH METHODOLOGY

 OBJECTIVES OF THE PROJECT:

1. Equity analysis of selected stocks listed in NSE.

2. It aims at analyzing the tools of technical analysis used for forecasting
stock prices and interpreting whether to buy or sell them.
3. To know the movements (upward or downward) of stock prices of
selected company stocks through Technical analysis using Relative
Strength Index (RSI) & Moving Average Convergence and Divergence
(MACD).
4. To analyse the performance of the stocks using financial ratios
5. To analyse equity stocks using Fundamental and Technical analysis of selected banks.
6. To find risk involved in equity stocks in selected banks
7. To study the fundamental analysis of selected banks.
8. To understand the technical analysis of selected banks.
9. To understand the participation of the selected banks in the share market.
10. To observe and compare the performance of the selected banks in share market.
11. To study the fundamental analysis of selected banks.
12. To understand the technical analysis of selected banks.
13. To understand the participation of the selected banks in the share market.
14. To observe and compare the performance of the selected banks in sha

17
 SCOPE OF THE PROJECT:

Scope of the study is wider covers the banking sectors in India. There is a huge
emerging issue of financial condition of banking sector in India. But, study is
only going to cover selected nationalize three private banks and three public
banks in India. Foreign Banks have been excluded from the study. As the
policies and regulations of Foreign Banks are different from other Commercial
Banks they are excluded. The time period is limited from Aril 2017 to march
2021 as it will give exact impact financial and equity performance of banks.
The scope of the project is limited to understanding the basics of fundamental
analysis and technical analysis and applies it to take a decision of investing in
banking sector.

The study is mainly limited to the Equity Analysis of banks like SBI, BANK
OF BARODA, AXIS Bank, ICICI Bank, HDFC Bank with the help of tools
and risk and relationship involved in share prices of the banks tested. Further
has covered five years time period. The study is helping to identify volatility
of selected banks.

18
  SIGNIFICANCE OF THE STUDY:

Most of the investors invest in share market with no idea or clarity on performing the
shares and even they don’t have any knowledge about fundamental and technical
analysis. The study of my project is fundamental analysis and technical analysis on
selected banks and comparing the performance of the selected banks. The shareholders
are the owners of the company they have to pay regular interest and principal at the end.
Stock/shares are playing a major role in acquiring capital to the business in return
investors are paid dividends to the shares they won. The more shares you own the more
dividends you receive. The role of equity analysis is to provide information to the market.
An efficient market relies on information a lack of information creates in efficiencies that
results in stocks being misrepresented. This study fills information gaps so that each
individual investor not needs to analyse every stock thereby making the markets more
efficient. The study is need to the performance of stocks through analysis in order to
know the trend of a share, which helps in deciding whether to invest or not to invest in
the security. The research studies provided that investments in some shares with a longer
tenure of investment have yielded far superior returns than any other investment.
However this does not mean all equity investments would guarantee similar high returns.
Equities are high risk investments. One needs to study them carefully before investing.

 COLLECTION OF THE DATA:

The collection of the data based on secondary data:

1. Internet
2. Advertisement
3. Magazines
4. In House journals
5. News Paper
6. Book Reference, etc.

19
 CHAPTER 3
REVIEW OF LITERATURE

1. K.S.Nemavathi & Dr. V.R Nedunchezhian, (2012) in their Study Technical

Analysis the researchers finds that the selected securities had high fluctuations
during the period to accomplish the objectives set out for this research, the
effective tools are used.

2. Dr. Sreemoyee Guha Roy (2013) in her study Equity Research:

Fundamental and Technical Analysis, examines the economic environment,
industry performance and company performance before making an investment
decision. The study arrived at a conclusion about the decision making
behaviour of the investors.

3. Mrs.J.Nithya & Dr.G.Thamizhchelvan (2014) has found in their study The

Effectiveness of Technical Analysis in Banking Sector of Equity Market,
aimed at undertaking technical analysis of selected companies included in the
CNX Nifty. The purpose of the study demonstrates how technical analysis can
be of valuable use for the investors in making their investment decisions.
Various analyze tools of technical analysis have been used for forecasting
stock prices.

4. P. Devika & Dr. S. Poornima (2015) found in their study of Fundamental

Analysis as a Method of Share Valuation in Comparison with Technical
Analysis, envisages on different trends of the stock market and it relates the
trends towards the usage of Fundamental and Technical analysis.

5. Darshan Shivanand Gadag & Manas Mayur (2016) has founded in their
study, Understanding Technical Analysis: A Conceptual Framework, the stock
market indicators would help the investor to identify major market turning
points. The indicators like Moving averages and MACD is a significant
technical analysis tool on any index or stock which helps to understand the
price behavior of the shares.

20
6. Grewal S.S & Navjot Grewall (1984) revealed some basic investment rules
they warned the investors not to buy unlisted shares, as stock exchanges do
not permit trading in unlisted shares. All rights reserved 1043 according to
them is not buy shares in closely held companies because these shares tend to
do less active than the widely held ones since they have few number of share
holders. Preethi Singh (1986) disclosed the basic rule for selecting the
company to invest in the stocks. The opinion and understanding that measures
the return and risk is fundamental to the investment process.

Most of the investors are risk aware and to get more returns the investors has
to face greater risk. She concludes that the risk is fundamental to the process of
investment. The investor should evaluate the financial statements with special
references to solvency, profitability, EPS and efficiency of the company. R.
Thamaraiselvi, Anupama (2008) studied in their paper that the equity market at
present is booming, and with the Bull Run in our market and with FII's pouring
money into our market with Industrial expansion and Retail participants
increasing, everything seems to be set right for an "EQUITY BOOM" in India.
So an individual who wants to earn superior return with substantial amount of
risk has to necessarily participate in equity market to get superior returns in the
short span of time. Therefore this project is all about guiding those investors
who would like to invest in NIFTY 50 with some useful insights about the
Banking sector in the Indian market and some company specific information
which would help them in selecting their stock and also it would help them in
identifying the timing of the purchase, so that one can improve his odd of
making money. Hence, the study is an attempt to analyze, the stock price
movements based on the fundamental and technical approach in the banking
sector over a period of three years and indicate the impact of various factors
that affects the stock price. The fundamental analysis basically throws light on
the company on a broad scale, its management, its performance over the years,
its growth and its future prospects. Through the technical analysis tools like
Moving average, MACD and through various trends, it is possible to suggest
21
the short and long term trend of each stock.

To conclude, some suggestions can be recommended based on the findings for

an easy and profitable investment experience in the current complex investors'
world. S.P. Kothari and Jay Shanken and Sloan (1995) shows that beta
significantly explains cross sectional variation in average returns, but that size
also has incremental explanatory power. The findings shown that statistically
significant, the incremental benefit of size given beta is surprisingly small
economically. Sahil Jain (july-aug. 2012) analysed equity based mutual funds
in India. An attempt has been made to analyze the performance of equity based
mutual funds. A total of 45 schemes offered by 2 private sector companies and
2 public sector companies, have been studied over the period april 1997 to april
2012(15 years).

The analysis has been made using the risk return relationship and capital asset
pricing model (CAPM). The overall analysis found that HDFC and ICICI have
been the best performance. UTI an average performer and LIC the worst
performance which gave below expected returns on the risk return relationship.
M.S. Annapoorna and Pradeepk gupta (Oct 2013) made a comparative analysis
of returns of mutual funds scheme ranked 1 by CRISIL. The main aim was to
evaluate the performance of mutual fund schemes ranked 1 by CRISIL and to
compare these returns with SBI domestic term deposit rates. All rights reserved
1044 cases the mutual fund schemes have failed even to provide the return of
SBI domestic term deposits. T. Naryanaswamy & A.P. Muthulakshmi (2014)
examined the relative efficiency of all the private sector banks in India form
2008 to 2013 data envelopment analysis methodology.

22
SBI, BANK OF BARODA, AXIS Bank, ICICI Bank, HDFC Bank was
relatively efficient in terms of technical efficiency, pure technical efficiency,
and scale efficiency. The average (overall) technical inefficiency score during
the study period was found to be 6%. In terms of pure technical efficiency,
apart from the above three banks, HDFC Bank and National Bank were also
relatively efficient. The average (overall) pure technical inefficiency score
during the study period was found to be 5%. Positive correlation ranging from
0.7 to 0.95 was observed between return on assets and different types of
efficiencies during the study period (except for the year 2008-09). Negative
correlation ranging from -0.3 to 0.5 was observed between non - performing
assets ratio and different types of efficiencies during the study period (except
for the year 2008-09). Hanumantha Rao P, Subhendu Dutta (2014) observed
that the last 5-6 years have been very volatile for not only the Indian economy,
but also for the entire world economy. Lots of investors have lost their money
as the stock prices have fallen flat all over the world during this period. The
banking sector has always been one of the important sectors for investment. In
the time of uncertainty, when some are arguing that the economies are in the
process of recovery, and while others are opining that the world is set for
another recession soon, the present article attempted to study the fundamentals
of the banking sector in India. Their article considered the variables like net
operating margin (OPM), net profit margin (NPM), return on equity (RoE),
earnings per share (EPS), price earnings ratio (PER), dividends per share
(DPS), and dividend payout ratio (DPR) for a period of 6 years from 2006-07
to 2011- 12 for three major banks in India - SBI, ICICI Bank, and HDFC Bank.
The paper also compared the fundamentals of SBI, ICICI Bank, and HDFC
Bank. Shalini Shukla (2015) conducted a study on performance of the banking
industry in India on the bases of financial parameters. The study is conducted
on 46 commercial banks public and private banks sectors were in included on
the size, growth, profitability and soundness and suggested eleven financial
performance indicators. The findings highlighted that public and private sector

23
 banks were not very much different in terms of size and growth parameters.

CHAPTER 4
THEROTICAL BACKGROUND

Introduction to equity:

In accounting and finance, equity is the residual claim or interest of the

most junior class of investors in assets, after all liabilities are paid. If
valuations placed on assets do not exceed liabilities, negative equity exists.
In an accounting context, Shareholders' equity (or stockholders' equity,
shareholders' funds, shareholders' capital or similar terms) represents the
remaining interest in assets of a company, spread among individual
shareholders of common or preferred stock.

At the start of a business, owners put some funding into the business to
finance assets. This creates liability on the business in the shape of
capital as the business is a separate entity from its owners. Businesses can
be considered to be, for accounting purposes, sums of liabilities and
assets; this is the accounting equation. After liabilities have been
accounted for, the positive remainder is deemed the owner's interest in the
business.

This definition is helpful to understand the liquidation process in case of

bankruptcy. At first, all the secured creditors are paid against proceeds
from assets. Afterward, a series of creditors, ranked in priority sequence,
have the next claim/right on the residual proceeds. Ownership equity is the
last or residual claim against assets, paid only after all other creditors are
paid. In such cases where even creditors could not get enough money to
pay their bills, nothing is left over to reimburse owners' equity. Thus
24
 owners' equity is reduced to zero. Ownership equity is also known as risk
capital, liable capital and equity.

There are two types of equity shares:

1. Fundamental Analysis
2. Technical Analysis

1. Fundamental Analysis: Fundamental Analysis is the analysis of different

forces that affect the health of the economy in the industry groups and companies.
The fundamental analysis main goal is to drive forecast and profit from future
price movements and it may involve examination of financial data, management,
business concept and competition. For the national economy fundamental
analysis might focus on economic data to assess the present and future growth of
the economy to forecast future stock prices, future value, and stocks value. The
fundamental analysis look into capitalize on perceived prices, concentrates on data
from sources including financial records, economic records, company assets and
market shares. Fundamental analysis is a method of measuring a security's intrinsic
value by examining related economic and financial factors. Fundamental analysts
study anything that can affect the security's value, from macroeconomic factors
such as the state of the economy and industry conditions to microeconomic factors
like the effectiveness of the company's management. Fundamental analysis of a
business involves analyzing its financial statements and health, its management
and competitive advantages, and its competitors and markets. Fundamental
analysis is performed on historical and present data, but with the goal of making
financial forecasts. A fundamental analyst believes that analyzing strategy,
management, product, financial stats and many other readily and not-so-readily
quantifiable numbers will help choose stocks that will outperform the market.

25
Fundamental analysis (FA) measures a security's intrinsic value by
examining related economic and financial factors. Intrinsic value is the
value of an investment based on the issuing company's financial situation
and current market and economic conditions.

Fundamental analysts study anything that can affect the security's value,
from macroeconomic factors such as the state of the economy and
industry conditions to microeconomic factors like the effectiveness of the
company's management. The end goal is to determine a number that an
investor can compare with a security's current price to see whether the
security is undervalued or overvalued by other investors.

26
 Understanding Fundamental Analysis

Fundamental analysis is usually done from a macro to micro perspective to

identify securities that are not correctly priced by the market.

Analysts typically study, in order:

□ To conduct a company stock valuation and predict its probable price evolution,
□ To make a projection on its business performance,
□ To evaluate its management and make internal business decisions,
□ To calculate its credit risk.

Fundamental analysis serves to answer questions, such as:

□ Is the company’s revenue growing?
□ Is it actually making a profit?
□ Is it in a strong-enough position to beat out its competitors in the future?
□ Is it able to repay its debts?
□ Is management trying to "cook the books"?

Sources for Fundamental Analysis

Fundamental analysis uses publicly available financial data to evaluate the value of an
investment. The data is recorded on financial statements such as quarterly and annual
reports and filings like the 10-Q (quarterly) or 10-K (annual). The 8-K is also informative
because public companies must file it any time a reportable event occurs, like an acquisition
or upper-level management change.

27
For example, you might perform a fundamental analysis of a bond's value by looking at
economic factors such as interest rates and the overall state of the economy. Then, you'd
evaluate the bond market and use financial data from similar bond issuers. Finally, you'd
analyze the financial data from the issuing company, including external factors such as
potential changes in its credit rating. You could also read through the 8-K, 10-Q, 10-K, and
the issuer's annual reports to find out what they are doing, their goals, or other issues.
Fundamental analysis uses a company's revenues, earnings, future growth, return on equity,
profit margins, and other data to determine a company's underlying value and potential for
future growth.

28
Intrinsic Value

One of the primary assumptions behind fundamental analysis is that a stock's current price often
does not fully reflect the value of the company when compared to publicly available financial data.
A second assumption is that the value reflected from the company's fundamental data is more likely
to be closer to the true value of the stock.

For example, say that a company's stock was trading at $20, and after extensive research on the
company, an analyst determines that it ought to be worth $24. Another analyst does equal research
but decides it should be worth $26.

Many investors will consider the average of these estimates and assume that the stock's intrinsic
value may be near $25. Often investors consider these estimates highly relevant because they want
to buy stocks trading at prices significantly below these intrinsic values.

This leads to a third major assumption of fundamental analysis: In the long run, the stock market
will reflect the fundamentals. The problem is, no one knows how long "the long run" really is.
It could be days or years.

This is what fundamental analysis is all about. By focusing on a particular business, an investor
can estimate the intrinsic value of a firm and find opportunities to buy at a discount or sell at a
premium. The investment will pay off when the market catches up to the fundamentals.

29
Fundamentals: Quantitative and Qualitative:
As mentioned in the introduction, fundamentals can include anything
related to the economic well-being of a company. Obvious items include
things like revenue and profit, but fundamentals also include everything
from a company’s market share to the quality of its management.

The various fundamental factors can be grouped into two categories:

quantitative and qualitative.
 Qualitative – related to or based on the quality or character of
something, often as opposed to its size or quantity.
 Quantitative – capable of being measured or expressed in numerical terms.

In this context, quantitative fundamentals are hard numbers. They are the measurable
characteristics of a business. That's why the biggest source of quantitative data is their
financial statements. Revenue, profit, assets, and more can be accurately measured.

The qualitative fundamentals are less tangible. They might include the quality of a company's
key executives, brand-name recognition, patents, and proprietary technology.

Neither qualitative nor quantitative analysis is inherently better. Many analysts consider
them together.

30
Qualitative Fundamentals to Consider
There are five key fundamentals that analysts always consider when regarding a company. All are
qualitative rather than quantitative. They include:

1.The Business Model

What exactly does the company do? This isn't as straightforward as it seems. If a company's business
model is based on selling fast-food chicken, is it making its money that way? Or is it just coasting on royalty
and franchise fees?

2.Competitive Advantage
A company's long-term success is primarily driven by its ability to maintain a competitive advantage—and
keep it. Powerful competitive advantages, such as Coca-Cola's brand name and Microsoft's domination of
the personal computer operating system, create a moat around a business allowing it to keep competitors
at bay and enjoy growth and profits. When a company can achieve a competitive advantage, its
shareholders can be well rewarded for decades.

3.Management
Some believe management is the most important criterion for investing in a company. It makes sense:
Even the best business model is doomed if the company's leaders fail to execute the plan properly. While
it's hard for retail investors to meet and truly evaluate managers, you can look at the corporate website
and check the resumes of the top brass and the board members. How well did they perform in previous
jobs? Have they been unloading a lot of their stock shares lately?

4.Corporate Governance
Corporate governance describes the policies in place within an organization denoting the relationships and
31
responsibilities between management, directors, and stakeholders. These policies are defined and
determined in the company charter, its bylaws, and corporate laws and regulations. You want to do
business with a company that is run ethically, fairly, transparently, and efficiently. Particularly note
whether management respects shareholder rights and shareholder interests.
Make sure their communications to shareholders are transparent, clear, and understandable. If you don't
get it, it's probably because they don't want you to.

5.Industry
It's also important to consider a company's industry: its customer base, market share among firms,
industry-wide growth, competition, regulation, and business cycles. Learning how the industry works will

give an investor a deeper understanding of a company's financial health .

Quantitative Fundamentals to Consider: Financial Statements

Financial statements are the medium by which a company discloses information concerning its financial
performance. Followers of fundamental analysis use quantitative information from financial statements to
make investment decisions.
The three most important financial statements are:

income statements, balance sheets, and cash flow statements.

The Balance Sheet

The balance sheet represents a record of a company's assets, liabilities, and equity at a particular point in
time. It is called a balance sheet because the three sections—assets, liabilities, and shareholders' equity—
must balance using the formula:
Assets = Liabilities + Shareholders' Equity

32
Assets represent the resources the business owns or controls at a given time. This includes items such as
cash, inventory, machinery, and buildings. The other side of the equation represents the total financing
value the company has used to acquire those assets.

Financing comes as a result of liabilities or equity. Liabilities represent debts or obligations that must be
paid. In contrast, equity represents the total value of money that the owners have contributed to the
business—including retained earnings, which is the profit left after paying all current obligations, dividends,

and taxes.

The Income Statement

While the balance sheet takes a snapshot approach in examining a business, the income statement
measures a company's performance over a specific time frame. Technically, you could have a balance sheet
for a month or even a day, but you'll only see public companies report quarterly and annually.

The income statement presents revenues, expenses, and profit generated from the business' operations
for that period.

Statement of Cash Flows

The statement of cash flows represents a record of a business' cash inflows and outflows over a period of
time. Typically, a statement of cash flows focuses on the following cash-related activities:

1.Cash from investing (CFI): Cash used for investing in assets, as well as the proceeds from the sale of other
businesses, equipment, or long-term assets.

2.Cash from financing (CFF): Cash paid or received from the issuing and borrowing of funds
33
3.Operating Cash Flow (OCF): Cash generated from day-to-day business operations

The cash flow statement is important because it's challenging for a business to manipulate its cash
situation. There is plenty that aggressive accountants can do to manipulate earnings, but it's tough to fake
cash in the bank. For this reason, some investors use the cash flow statement as a more conservative
measure of a company's performance.

Example of Fundamental Analysis

The Coca-Cola Company is a prime example that can be used in fundamental analysis. To begin, an analyst
would examine the economy using some published metrics:
 Consumer price index (inflation measure)
 Gross domestic product growth
 Exports/imports
 Purchasing manager's index
 Interest rates

Then, the sector and industry would be examined using statistics and metrics from various reports and
competitor companies. Lastly, the analysts would gather the reports from Coca-Cola or the Security and
Exchange Commission's Edgar filings database.1
Analysts might also use data gathered by another firm, such as CSIMarket. CSIMarket provides
fundamental analysis data for investors, so you could begin by assessing the value of Coca-Cola's assets,
income streams, debts, and liabilities. You might find comparisons of objective metrics such as revenue,
profits, and growth, especially in the context of the broader beverage industry.
Using CSIMarket's analysis, the analyst could compare growth rates to the industry and sector Coca-Cola
operates in, along with the other information provided, to see if the company is valued correctly. For
example, as of August 2022, for the trailing twelve months (TTM), Coca-Cola had (using only a few of the

34
possible ratios and metrics):

Coca-Cola Industry Sector

Y/Y Revenue Growth 13.48% 10.86% 16.18%

P/E Ratio 29.12 25.16 18.68

Price to Free Cash Flow 24 7.45 4.23

Debt to Equity (TTM) 1.57 0.14 0.11

Quick Ratio (TTM) 0.16 0.24 0.2

Return on Equity (TTM) 13.14% 30.21% 23.16%

Return on Assets (TTM) 11.5% 8.69% 7.91%

Return on Investment (TTM) 13.14% 19.76% 15.84%

Revenue per Employee (TTM) $111,578 $55,015 $66,896

35
One factor not shown in an analysis of ratios and numbers is how long a company has been around and the
conditions they have weathered. Coca-Cola was founded in 1892 in Atlanta, Georgia.3 It has stayed in
business through several wars, depressions, recessions, epidemics, pandemics, stock market crashes, and a
global financial crisis. Not many companies can claim a history like that. So, an analyst can combine brand,
longevity, growth above that of the beverages manufacturing industry, an above average price-to-earnings
ratio, and good return on investment.

Coca-Cola has more debt than equity, but it also generates more returns using its assets than the rest of
the industry. The company doesn't have as much liquidity as other companies, but it seems the industry
hovers on pretty low quick ratios. More than 1.0 means a company can pay its short-term obligations
quickly—so in general, most of the industry is low, but Coca-Cola has more than $1 billion in net cash
flows, which gives it a lot of wriggle room.4 An interesting measurement is how much revenue one
employee generates. Coca-Cola employees generate about twice as much revenue as employees for
comparative companies. This might warrant a deeper investigation into what Coca-Cola is doing differently.
They may have invested in new technology or have much more efficient systems. Looking over press
releases and reading company reports can provide insights into what the company is doing. It might also
be that Coca-Cola simply sells more products than its competitors, so it's important to review any reports
and releases and conduct a fundamental analysis carefully.

The Bottom Line

Fundamental analysis is a valuation tool used by stock analysts to determine whether a stock is over- or
undervalued by the market. It considers the economic, market, industry, and sector conditions a company
operates in and its financial performance. Financial ratios generated from financial reports and
government industry and economic reports are used to valuate a company. Not every analyst uses the
same tools or views stocks similarly—you might determine a stock is valued differently than another
analyst. What's important is that the stock you analyze meets your criteria for value and that your analysis
creates actionable information for you.

36
1. Technical Analysis:

Technical Analysis refers to the study of market generated data like prices & volume
to determine the future direction of prices movements. Technical analysis mainly
seeks to predict the short term price travels. The focus of technical analysis is mainly
on the internal market data, i.e. prices & volume data. It appeals mainly to short term
traders. It is the oldest approach to equity investment dating back to the late 19th
century. Financial Ratios from the statements of an organization provide useful
information on the performance of the company. Technical analysis helps to predict
trend of the share prices. Financial ratio analysis is a tool of financial statement, it
simplifies the financial statements. Ratio Analysis explains relationship between past
and present information.
Equity analysis is the process of analyzing sectors and companies to give advice to
professional fund managers and private clients on which shares to buy. Sell-side
analysts work for brokers who sell shares to the investors mainly for private clients.
Buy-side analysts work for fund management firms. Equity analysis is to provide
information to the investors in the markets. Technical analysis is a trading discipline
employed to evaluate investments and identify trading opportunities by analyzing
statistical trends gathered from trading activity, such as price movement and volume.
Unlike fundamental analysts, who attempt to evaluate a security's intrinsic value,
technical analysts focus on patterns of price movements, trading signals and various
other analytical charting tools to evaluate a security's strength or weakness. As per
the Reserve Bank of India (RBI), India’s banking sector is sufficiently capitalized and
well-regulated. The financial and economic conditions in the country are far superior
to any other country in the world. Credit, market and liquidity risk studies suggest that
Indian banks are generally resilient and have withstood the global downturn well.
Indian banking industry has recently witnessed the roll out of innovative banking
models like payments and small finance banks. RBI’s new measures may go a long
way in helping the restructuring of the domestic banking industry. The digital
payments system in India has evolved the most among 25 countries with India’s
Immediate Payment Service (IMPS) being the only system at level five in the Faster

37
 Payments Innovation Index (FPII). The banking sector is a good choice for value
investors. Value investors look for stocks that trade for less than their intrinsic value.
The banking sector pays dividends, which demonstrates a great history and provides
investors with a share in profits. Value investors are drawn to bank stocks, which are
the most susceptible to emotional short-term forces given the leverage and nature of
the business.

Using Technical Analysis

Professional analysts often use technical analysis in conjunction with other forms of research. Retail
traders may make decisions based solely on the price charts of a security and similar statistics, but
practicing equity analysts rarely limit their research to fundamental or technical analysis alone.

Technical analysis can be applied to any security with historical trading data. This includes
stocks, futures, commodities, fixed-income, currencies, and other securities. In fact, technical analysis is
far more prevalent in commodities and forex markets where traders focus on short-term price
movements.

Technical analysis attempts to forecast the price movement of virtually any tradable instrument that is
generally subject to forces of supply and demand, including stocks, bonds, futures, and currency pairs.
In fact, some view technical analysis as simply the study of supply and demand forces as reflected in the
market price movements of a security.

Technical analysis most commonly applies to price changes, but some analysts track numbers other than
just price, such as trading volume or open interest figures.

38
Technical Analysis Indicators

Across the industry, there are hundreds of patterns and signals that have been developed by researchers
to support technical analysis trading. Technical analysts have also developed numerous types of trading
systems to help them forecast and trade on price movements.

Some indicators are focused primarily on identifying the current market trend, including support and
resistance areas, while others are focused on determining the strength of a trend and the likelihood of its
continuation. Commonly used technical indicators and charting patterns include trendlines, channels,
moving averages, and momentum indicators.

In general, technical analysts look at the following broad types of indicators:

 Price trends
 Chart patterns
 Volume and momentum indicators
 Oscillators
 Moving averages
 Support and resistance levels

Underlying Assumptions of Technical Analysis

There are two primary methods used to analyze securities and make investment decisions:
fundamental analysis and technical analysis.

Fundamental analysis involves analyzing a company’s financial statements to determine the fair value of the
business, while technical analysis assumes that a security's price already reflects all publicly available
information and instead focuses on the statistical analysis of price movements.

Technical analysis attempts to understand the market sentiment behind price trends by looking for patterns
and trends rather than analyzing a security's fundamental attributes.

Charles Dow released a series of editorials discussing technical analysis theory. His writings included two
basic assumptions that have continued to form the framework for technical analysis trading.
1.Markets are efficient with values representing factors that influence a security's price, but
2.Even random market price movements appear to move in identifiable patterns and trends that tend to
repeat over time.
39
Today the field of technical analysis builds on Dow's work. Professional analysts typically accept three
general assumptions for the discipline:
1. The market discounts everything:
Technical analysts believe that everything from a company's fundamentals to broad market factors
to market psychology is already priced into the stock. This point of view is congruent with the Efficient
Markets Hypothesis (EMH) which assumes a similar conclusion about prices. The only thing remaining is
the analysis of price movements, which technical analysts view as the product of supply and demand for a
particular stock in the market.

2. Price moves in trends:

Technical analysts expect that prices, even in random market movements, will exhibit trends regardless of
the time frame being observed. In other words, a stock price is more likely to continue a past trend than
move erratically. Most technical trading strategies are based on this assumption.

3.History tends to repeat itself: Technical analysts believe that history tends to repeat itself. The
repetitive nature of price movements is often attributed to market psychology, which tends to be very
predictable based on emotions like fear or excitement. Technical analysis uses chart patterns to analyze these
emotions and subsequent market movements to understand trends. While many forms of technical analysis
have been used for more than 100 years, they are still believed to be relevant because they illustrate patterns
in price movements that often repeat themselves.

3. Price moves in trends:

Technical analysts expect that prices, even in random market movements, will exhibit trends regardless of
the time frame being observed. In other words, a stock price is more likely to continue a past trend than
move erratically. Most technical trading strategies are based on this assumption.

3.History tends to repeat itself: Technical analysts believe that history tends to repeat itself. The
repetitive nature of price movements is often attributed to market psychology, which tends to be very
predictable based on emotions like fear or excitement. Technical analysis uses chart patterns to analyze these
emotions and subsequent market movements to understand trends. While many forms of technical analysis
40
have been used for more than 100 years, they are still believed to be relevant because they illustrate patterns
in price movements that often repeat themselves.

x investors believe the stocks they choose are undervalued by the market. They often
aggressively buy stocks at the same time that others sell—during times of bad news,
poor performance, or weak economic conditions.

Value investors are focused on long term goals rather than the short-term. Distress in
the broader market or on an individual stock basis is what creates opportunities for
value investors to buy at appealing discounts. The banking sector is quite sensitive to
the economic cycle, so it is susceptible to extremes in price and valuations that attract
value investors.

41
 THE INDIAN BANKING SECTOR
The banking or financial sector comprises companies that provide consumers with
financial services. This includes retail banks, insurance companies, and investments
services firms. This sector has a great impact on the economy. The stronger it is, the
stronger the economy becomes. But as the sector weakens—as evidenced by the
events leading up to the Great Depression—the economy begins to trail. So a healthy,
stable economy requires a strong financial and banking sector.

Many of the stocks in this sector pay dividends, which many value investors believe
is a good sign of a company's quality. The longer the dividend history, the better it is
for the investor, as it demonstrates a good track record of success. It also shows that
the company has a history of providing investors with a share of the profits.

 At the Bottom of the Economic Cycle

Fear runs rampant at the bottom of the cycle. This is the climate in which emotions drive
price rather than fundamentals. Banking sector stocks are hit particularly hard because
they have massive amounts of leverage and are intimately connected to the economy.
Bank balance sheets typically operate at leverage in the double digits, so a small loss in
asset value can turn banks insolvent. This augments irrational extremes that are typically
found at market lows.

When banks make loans that need to be paid back, the risk of default is much higher.
And new lending becomes difficult, as the economy makes everyone unwilling or
unable to take on significant risk. Compounding these issues are lowered interest rates,
which make banking less profitable. This, though, is helpful for asset prices that help
repair bank balance sheets.

42
  Short-Term vs. Long-Term Investing
The perspective of a value investor can be better understood through Benjamin Graham's
description of the stock market as a voting machine in the short term, but a weighing
machine in the long term.1 the meaning of this metaphor is in the near term, stock prices
are determined by the emotions and opinions of market participants. But in the long
term, the price is driven by the actual performance of the business.

Graham is considered the father of value investing, emphasizing a focus on a stock's

long-term fundamentals. Since bank stocks are perhaps the most susceptible to these
emotional short-term forces given the leverage and nature of the business, it is natural
that value investors are drawn to this sector.

Value investors seek stocks with low price-earnings (P/E) ratios. Sometimes, if a
company is really struggling, it may be losing money, so this metric is less useful
than sales or gross margins. Another measure of value is the price-to-book (P/B)
ratio. The book value of the company reflects the accounting value of the company
after accounting for all types of liabilities.

The Indian banking system consists of

public sector banks, private sector banks, foreign banks, regional
rural banks, urban cooperative banks and rural cooperative
banks, in addition to cooperative credit institutions.

India's Credit-to-Gross Domestic Product (GDP) ratio is 56%,

lower than most advanced economies or even China where it is in
the range of 150-200%. However, demand for credit has surged over the past
decade, aided by strong economic growth, rising disposable incomes, increasing
consumerism & easier access to credit.

43
Indian banks are increasingly focusing on adopting integrated approach to risk
management. Banks have already embraced the international banking supervision
accord of Basel II, and majority of the banks already meet capital requirements of
Basel III.

The increasingly dynamic business scenario and financial sophistication has increased
the need for customized exotic financial products. Banks are developing

innovative financial products and advanced risk management

methods to capture market share.

Access to the banking system has improved over the years due to
persistent effort from the Government to promote banking technology and
promote expansion in unbanked and metropolitan regions. The Ministry of Finance
launched the Jan Dhan Yojana in 2014, a financial inclusion program to expand
affordable access to financial services such as bank accounts, credit, insurance and
pensions in all parts of India.

Digital influence in the Indian banking sector has also grown due to
rising digital footprint. Real Time Gross Settlement (RTGS) and National Electronic
Funds Transfer (NEFT) have been implemented by Indian Banks for fund
transactions. The market regulator has included both these payments systems to the
existing list of methods that a company can use for payment of dividends or other
cash benefits to their shareholders and investors.

The Reserve Bank of India (RBI) has taken several steps to enable
mobile payments, which forms an important part of mobile banking. The
National Payments Corporation of India has developed the Unified Payments
Interface (UPI), an instant real-time payment system that works by instantly
transferring funds between two bank accounts on a mobile platform.

44
 Without a sound and effective banking system in India it cannot have a
healthy economy. The banking system of India should not only be hassle
free but it should be able to meet new challenges posed by the technology
and any other external and internal factors.
For the past three decades India's banking system has several outstanding
achievements to its credit. It is no longer confined to only metropolitans or
cosmopolitans in India; in fact, Indian banking system has reached even
to the remote corners of the country. This is one of the main reasons of
India's growth process. The government's regular policy for Indian bank
since 1969 has paid rich dividends with the nationalization of 14 major
private banks of India. Not long ago, an account holder had to wait for
hours at the bank counters for getting a draft or for withdrawing his own
money. Today, he has a choice. Gone are days when the most efficient
bank transferred money from one branch to other in two days. Now it is
simple as instant messaging or dials a pizza. Money has become the order
of the day.

 Post Independence:

1. In 1948, the Reserve Bank of India, India's central banking authority, was
nationalized, and it became an institution owned by the Government of India.
2. In 1949, the Banking Regulation Act was enacted which empowered the
Reserve Bank of India (RBI) "to regulate, control, and inspect the banks in
India."
3. The Banking Regulation Act also provided that no new bank or branch of
an existing bank may be opened without a license from the RBI, and no two
banks could have common directors.

45
  Liberalisation:
The new policy shook the Banking sector in India completely. Bankers, till this time,

were used to the 4-6-4 method (Borrow at 4%; Lend at 6%; Go home at 4) of
functioning. In the early 1990s the then Narsimha Rao government
embarked on a policy of liberalization and gave licenses to a small number
of private banks, which came to be known as New Generation tech-savvy
banks, which included banks such as Global Trust Bank (the first of such
new generation banks to be set up) which later amalgamated with Oriental
Bank of Commerce, UTI Bank (now re-named as Axis Bank), ICICI Bank
and HDFC Bank.

 Recent Development in Banking Sector:

1. A retrospect of the events clearly indicates that the Indian banking
sector has come far away from the days of nationalization. The
Narasimhan Committee laid the foundation for the reformation of the
Indian banking sector. Constituted in 1991, the Committee
submitted two reports, in 1992 and 1998, which laid significant
thrust on enhancing the efficiency and viability of the banking
sector. As the international standards became prevalent, banks had to
unlearn their traditional operational methods of directed credit,
directed investments and fixed interest rates, all of which led to
deterioration in the quality of loan portfolios, inadequacy of capital
and the erosion of profitability.
2. The recent international consensus on preserving the soundness of
the banking system has veered around certain core themes. These
are: effective risk management systems, adequate capital provision,
sound practices of supervision and regulation, transparency of
operation, conducive public policy intervention and maintenance of
macroeconomic stability in the economy.

46
Until recently, the lack of competitiveness vis-à-vis global

1. standards, low technological level in operations, over staffing,

high NPAs and low levels of motivation had shackled the
performance of the banking industry.

2. However, the banking sector reforms have provided the

necessary platform for the Indian banks to operate on the basis
of operational flexibility and functional autonomy, thereby
enhancing efficiency, productivity and profitability. The
reforms also brought about structural changes in the financial
sector and succeeded in easing external constraints on its
operation, i.e. reduction in CRR and SLR reserves, capital
adequacy norms, restructuring and recapitulating banks and
enhancing the competitive element in the market through the
entry of new bank. introduction of prudential norms and
increase in the role of the market forces due
to the deregulated interest rates. These have significantly
affected the operational environment of the Indian

47
48
 At present, in India, the banks can be bifurcated into following categories:

1. Public Sector Banks or Nationalized Banks, which are commercial and

scheduled. Examples: State Bank of India, Bank of India etc.

2. Public Sector Banks, which are co-operative and non-scheduled: These are
state owned banks like the Maharashtra State Co-operative Bank, Junnar Co-
operative Society etc.

3. Private Sector Banks, which are commercial and scheduled- These could be
foreign banks, as well as Indian Banks.
examples: Foreign Banks- CITI Bank, Standard Chartered Bank etc. Indian
Banks- Bank of Rajasthan Limited, VYSYA Bank Limited etc.

4. Private Sector Banks, which are co-operative and scheduled- These are large
co- operative sector banks but which are scheduled banks. Examples: Saraswat
Co-operative Bank Limited, Cosmos Co-operative Bank Limited etc.

5. pe Sector Banks, which are co-operative and non-scheduled-These are small

co- operative banks but which are non-scheduled. Examples: Local co-
operative banks which operate within a town or a city. Example: Mahesh
Sahakari Bank Limited.

6. Regional Rural Banks. These are state owned. These banks have been
established with a view to developing the rural economy by providing, for the
purpose of development of agriculture, trade, commerce, industry and other
productive activities in the rural areas, credit and other facilities, particularly
to the small and marginal farmers, agricultural labourers and artisans and
small entrepreneurs

7. Gramin Banks, that are also state owned. They operate at still smaller level
than RRBs and serve at village level.

8. Foreign banks, these banks have Head Office outside India and branch in
India, besides, the Reserve Bank of India (hereinafter referred to as RBI) acts
as the central bank of the country. RBI is responsible for development and
supervision of the constituents of the Indian financial system (which comprises
banks and non-banking financial institutions) as well as for determining, in
conjunction with the central Government, the monetary and credit policies.
They are also controlled by RBI.

49
 Page 19

3. introduction of prudential norms and increase in the role of the

market forces due to the deregulated interest rates. These have
significantly affected the operational environment of the
Indian banking sector.

4. To encourage speedy recovery of Non-performing assets, the

Narasimhan committee laid directions to introduce Special
Tribunals and also lead to the creation of an Asset
Reconstruction Fund. For revival of weak banks, the Verma
Committee recommendations have laid the foundation.
Lastly, to maintain macroeconomic stability, RBI has
introduced the Asset Liability Management System.

5. The competitive environment created by financial sector

reforms has nonetheless compelled the banks to gradually
adopt modern technology to maintain their market share.
Thus, the declaration of the Voluntary Retirement Scheme
accounts for a positive development reducing the
administrative costs of Public Sector banks. The
developments, in general, have an emphasis on service and
technology; for the first
time that Indian public sector banks are being challenged by
the foreign banks and private sector banks. Branch size has
been reduced considerably by using technology thus saving
manpower.

6. The deregulation process has resulted in delivery of innovative

financial products at competitive rates; this has been proved
50
 by the increasing divergence of banks in retail banking for
their development and survival.

7. In order to survive and maintain strong presence, mergers and

acquisitions has been the most common development all
around the world. In order to ensure healthy competition,
giving customer the best of the services, the banking sector
reforms have lead to the development of a diversifying
portfolio in retail banking, and insurance, trend of mergers for
better stability and also the concept of virtual banking.

 Retail Banking Vs Wholesale Banking

Whole sale banking typically involves a small number of very large customers such as big
corporations and governments, whereas retail banking consists of a large number of small customers
who consume personal banking and small business services. Wholesale banking is largely inter-bank;
banks use the inter-bank markets to borrow from or lend to other banks/ large customers, to
participate in large bond issues and to engage in syndicated lending. Retail banking is largely intra-
bank; the bank itself makes many small loans.

Most of the Indian public sector banks practice retail banking; they are slowly practicing the concept
of wholesale banking. On the other hand, most of the well established foreign banks in India and the
recent private sector banks practice wholesale banking alongside retail banking.

As a result of this difference, the composition of income for a public sector bank is different. While a
major portion of the income for large public sector banks is from lending operations, in the case of
any private sector bank in India, the amount of non- operating income (other than interest income) is
51
 substantially higher. The composition of other income is commission on bills/ guarantees/ letters of
credit, counseling fees, syndication fees, credit report fees, loan processing fees, correspondent bank
charges etc.

 Global Banking

Global Banking activities are an extension of various activities listed above into the international
market. Global banking primarily consists of trade in international banking services and
establishment of branches and subsidiaries in foreign countries.

 Special kinds of Bank branches:

Most Banks in India have special kind of branches. This is done to reap benefits of specialization as
activities done by these branches are quite complex and require specialized knowledge and attention.

Types of some special branches are:

1. Foreign exchange branches
2. NPA recovery branches
3. Service branches dealing in Clearing house operations/Corporate banking and Industrial
finance branches
4. Personal banking branches
5. Housing finance branch
6. SSI branches
7. Agricultural finance branches

52
 What are the sources of funds for banks in India?

The banks in India generate their funds from two types of sources:

 Long-Term Sources:

1. Tier one and Tier two Capitals in the form of

equity/subordinate debts/debentures/preference shares.
2. Internal accrual generated out of profits.
3. Long-term fixed deposits generated from public and corporate clients,
financial institutions, and mutual funds, etc.
4. Long-term borrowings from financial institutions like NABARD/SIDBI.

 Short-Term Sources:

1. Call money market, i.e., funds generated among inter banking transactions where
there is online trading of money between bankers.
2. Fixed deposits generated from public and corporate clients, FIs, and MFs, etc.
3. Market-linked borrowings from RBI.
4. Sale of liquid certificate deposits in the open market.
5. Borrowing from RBI under Repo (Repurchase option).
6. Short and medium-term fixed deposits generated from public and corporate
clients, mutual funds, and financial institutions, etc.
7. Floating in current and saving accounts.
8. Short-term borrowings from FIs by way of rated papers placed, etc.
Andhra Bank State Bank of India

Allahabad Bank Vijaya Bank

Punjab National Bank HDFC Bank

Axis Bank ICICI Bank

Kotak Mahindra Bank ABN AMRO

Citibank Standard Chartered Bank

HSBC Bank Barclays Bank

Bank of Baroda Union Bank of India

Bank of India Yes Bank

 ANALYSIS OF BANKING SECTOR

 STRENGTH:
1. Indian banks have compared favorably on growth, asset quality and
profitability with other regional banks over the last few years. The banking
index has grown at a compounded annual rate of over 51 per cent since April
2001 as compared to a 27 per cent growth in the market index for the same
period.
2. Policy makers have made some notable changes in policy and regulation to
help strengthen the sector. These changes include strengthening prudential
norms, enhancing the payments system and integrating regulations between
commercial and co-operative banks.
3. Bank lending has been a significant driver of GDP growth and employment.
Extensive reach: the vast networking & growing number of branches &
ATMs. Indian banking system has reached even to the remote corners of the
country.
4. In terms of quality of assets and capital adequacy, Indian banks are
considered to have clean, strong and transparent balance sheets relative to
other banks in comparable economies in its region.

 WEAKNESS:

1. Public Sector Banks need to fundamentally strengthen institutional skill levels

especially in sales and marketing, service operations, risk management and the
overall organisational performance ethic & strengthen human capital.
2. Old private sector banks also have the need to fundamentally strengthen skill levels.

3. The cost of intermediation remains high and bank penetration is limited to only a
few customer segments and geographies.
4. Structural weaknesses such as a fragmented industry structure, restrictions on capital
availability and deployment, lack of institutional support infrastructure, restrictive
labour laws, weak corporate governance and ineffective regulations beyond
Scheduled Commercial Banks (SCBs), unless industry utilities and service bureaus.
55
5. Refusal to dilute stake in PSU banks: The government has refused to dilute its
stake in PSU banks below 51% thus choking the headroom available to these banks
for raining equity capital.

6. Impediments in sectoral reforms: Opposition from Left and resultant cautious

approach from the North Block in terms of approving merger of PSU banks may
hamper their growth prospects in the medium term.

 OPPORTUNITY:

1. The market is seeing discontinuous growth driven by new products and services
that include opportunities in credit cards, consumer finance and wealth
management on the retail side, and in fee-based income and investment banking
on the wholesale banking side. These require new skills in sales & marketing,
credit and operations.

2. With increased interest in India, competition from foreign banks will only intensify.

3. Given the demographic shifts resulting from changes in age profile and household
income, consumers will increasingly demand enhanced institutional capabilities
and service levels from banks.

4. New private banks could reach the next level of their growth in the Indian banking
sector by continuing to innovate and develop differentiated business models to
profitably serve segments like the rural/low income and affluent/HNI segments;
actively adopting acquisitions as a means to grow and reaching the next level of
performance in their service platforms. Attracting, developing and retaining more
leadership capacity.

5. Foreign banks committed to making a play in India will need to adopt alternative
approaches to win the “race for the customer” and build a value-creating customer
franchise in advance of regulations potentially opening up post 2009.

56
 6. Reach in rural India for the private sector and foreign banks.

7. Liberalization of ECB norms: The government also liberalised the ECB norms to
permit financial sector entities engaged in infrastructure funding to raise ECBs.
This enabled banks and financial institutions, which were earlier not permitted to
raise such funds, explore this route for raising cheaper funds in the overseas
markets.

8. Hybrid capital: In an attempt to relieve banks of their capital crunch, the RBI has
allowed them to raise perpetual bonds and other hybrid capital securities to shore
up their capital. If the new instruments find takers, it would help PSU banks, left
with little headroom for raising equity.

 THREATS:
1. Threat of stability of the system: failure of some weak banks has often threatened
the stability of the system.

2. Rise in inflation figures which would lead to increase in interest rates.

Increase in the number of foreign players would pose a threat to the Public Sector Bank as well
as the private.

57
 TYPES OF BANKS AND BANKING

ACTIVITIES

 Scheduled and Non-Scheduled Banks:

In India the central banking authority is the Reserve Bank of India. It is

also referred to as the Apex Bank. It functions under an act called The
Reserve Bank of India Act, 1934.

All the banks and other financial institutions operating in India come
under the monitoring and control of RBI. RBI controls the banking sector
in India through an Act called The Banking Regulations Act 1949. In the
past, when there were very few banks, RBI used to include all the
scheduled banks in its schedule. Now a day, when the number of banks
has gone up substantially, RBI has to change the schedule every now and
then, hence irrespective of whether a bank finds its name in the schedule
to the RBI Act or not, its schedule status can be found out from its
banking license. A Bank that is not a scheduled bank is referred to as
non scheduled bank even in it is having banking license.

The difference lies in the type of banking activities that a bank can carry
out in India. In the case of a scheduled bank, it is licensed by the RBI to
carry on extensive banking operations including foreign exchange
operations, whereas, a non-scheduled bank can carry out only limited
operations. There are a number of factors considered by RBI to declare a
bank as a scheduled bank, like the amount of share capital, type of
banking activities that the bank is permitted to carry out etc. An example
of difference between a scheduled and non-scheduled bank is dealing in
Foreign Exchange.

Banks implies the financial institution that takes public deposits and
extends credit to those who need it. They are a substantial part of the
58
 financial system, which assists in the overall economic development.
These are broadly classified as scheduled and non-scheduled banks in
India regulated under the Banking Regulation Act, 1949,
wherein scheduled banks include all the commercial banks like
nationalised, foreign, development, cooperative and regional rural banks.

On the other extreme, non-scheduled banks are the banks that do not
adhere to the norms prescribed by the Reserve Bank of India (RBI). In
this article excerpt, you can find out all the relevant differences between
scheduled and non-scheduled banks in India.

Definition of Scheduled Bank

Scheduled Banks as the name suggest are the banks, which are accounted in the Second Schedule of the
Reserve Bank of India (RBI) Act, 1934. To qualify as a scheduled bank, the bank should conform to the
following conditions:
 The total minimum value of paid up capital and reserve must be of Rs. 5 lacs.
 The bank requires to satisfy the central bank that its affairs are not carried out in a way that
causes harm to the interest of the depositors.
 The bank needs to be a corporation rather than a sole-proprietorship or partnership firm.

Scheduled banks enjoy certain rights such as:

 Right to receive refinance facility from the apex bank
 Entitled for currency chest facility.
 Right to become members of clearing house

However, they are required to fulfil certain obligations like maintenance of an average daily balance of CRR
(Cash Reserve Ratio) with the central bank at the rates specified by it. Add to that; these banks need to
submit returns at regular intervals, to the central bank subject to the rules of Reserve Bank of India Act,
1934 and Banking Regulation Act, 1949.

Definition of Non-Scheduled Bank

Non-Scheduled Bank refers to the banks which are not listed in the Second Schedule of Reserve Bank of
India.

59
In finer terms, the banks which do not comply with the provisions specified by the central bank, within the
meaning of the Reserve Bank of India Act, 1934, or as per specific functions, etc. or as per the judgement of
the RBI, are not able to serve and protect the depositor’s interest, are known as non-scheduled banks.

Non-Scheduled Banks are also required to maintain the cash reserve requirement, not with the RBI, but with
themselves. These are local area banks.

Conclusion
When it comes to privileges, scheduled banks is ahead of non-scheduled banks. Scheduled banks get
remittances through the offices of the Reserve Bank of India and its agents, for free or at concessional rates.
Moreover, borrowing facilities by Central Bank on the submission of the documents. Such facilities are not
provided to the non-scheduled banks.

60
 Commercial and Co-operative Banks:

Commercial banks are by far the most widespread banking institutions in

India. They provide major products and services in India. A commercial
bank is run on commercial lines, for profits of the organization.

A co-operative bank on the other hand is run for the benefit of a group of
members of the co-operative body. A co-operative bank distributes only a
very small portion of its profit as dividend, retaining a major portion of it
in business.

All the nationalized banks in India and almost all the private sector banks
are commercial scheduled banks. There are a large number of private
sector co- operative banks and most of them are non-scheduled banks. In
the public sector also, within a state, starting from the State capital, there
are State Co-operative Banks and District Central Co-operative Banks at
the District level.

Commercial Banks in India

Commercial Banks in India can be broadly classified into three

categories:

Public Sector Banks-

The term “public sector banks” refers to a bank wherein which,
the majority equity stake in the banks is held by the government. The
Indian Government keeps default holdings of minimum
51% shareholding, and the management control lies with the Central
Government, thereby classifying them as Public Sector Banks. E.g SBI,
Nationalized Banks like IDBI etc.

Private Sector Banks-

These are banks in which individuals and corporations are the majority
shareholders. In India, banks were nationalized in two phases, in 1969
and the year 1980. In 1993, Reserve Bank of India (RBI), the regulating
body for all the country’s banking institutions, allowed for many new
commercial banks in India to start operations. E.g ICICI Bank, Yes Bank,
HDFC Bank, Kotak Mahindra Bank etc.

Foreign Banks-
Foreign banks and the financial institutions that serve as an important
segment of the commercial banking sector. They are headquartered
outside India, and they operate via their wholly-owned subsidiaries or
branches in the country of operation. E.g Deutsche bank, Bank Of
America, Royal Bank of Scotland etc.

61
Cooperative Banks in India

The Cooperative movement in India was started, primarily for dealing

with the problem of rural credit. The origin of Indian cooperative banking
started is with the passing of the Cooperative Societies Act in 1904. The
objective of this Act was to establish cooperative credit societies “to
encourage thrift, self-help and cooperation among agriculturists, artisans
and persons of limited means.”

Difference between Commercial Banks and Cooperative Banks

The major differences between commercial and cooperative banks
are indicated below:

 A bank which is established to provide banking services to

individuals and businesses is called as a Commercial Bank. While a
cooperative bank is a bank that provides financing to agro and rural
industries/bodies and to trade and industry in urban areas (but up to a
certain limit).

 A commercial bank is incorporated under Banking Regulation Act,

1949. On the contrary, a cooperative bank is registered under the
Cooperative Societies Act, 1965.

 The area of operation of a commercial bank is comparatively larger

than a cooperative bank, as opposed to the cooperative banks which
are confined to a limited area.

 Commercial banks can be considered as joint stock companies,

incorporated as a banking company that operates for a bottomline
(profit) motive. As opposed to Cooperative banks, which are
cooperative organisations, that works for service (Financial Inclusion,

62
 Community Service) motive.

 The borrower in a commercial banks are account holders; they do not

have any voting power. Unlike Cooperative banks, wherein, the
borrowers are members that influence the credit policy through their
voting power.

 Commercial bank’s primary function is to accept deposits from the

public and provision loans to individuals or businesses. In contrast to
this, a cooperative bank’s primary business is to accept deposits from
members and the public, and grant loans to farmers and small
businessmen.

 Commercial banks generally offer an array of products to its

customers, whereas there are limited products provided by the
cooperative banks to its members and the public.

 The commercial bank’s interest rate on deposits is relatively lesser

than a cooperative bank.

63
 DETAILED ANALYSIS OF BANKS

1. STATE BANK OF INDIA:

State Bank of India (SBI) is an Indian multinational public sector bank and
financial services statutory body headquartered in Mumbai, Maharashtra. SBI is the
43rd largest bank in the world and ranked 221st in the Fortune Global 500 list of the
world's biggest corporations of 2020, being the only Indian bank on the list. It is a
public sector bank and the largest bank in India with a 23% market share by assets
and a 25% share of the total loan and deposits market. It is also the fifth largest
employer in India with nearly 250,000 employees.

The bank descends from the Bank of Calcutta, founded in 1806 via the Imperial
Bank of India, making it the oldest commercial bank in the Indian Subcontinent.
The Bank of
Madras merged into the other two presidency banks in British India, the Bank of
Calcutta and the Bank of Bombay, to form the Imperial Bank of India, which in turn
became the State Bank of India in 1955. The Government of India took control of the
Imperial Bank of India in 1955, with Reserve Bank of India (India's central bank)
taking a 60% stake, renaming it State Bank of India.
64
SBI acquired the control of seven banks in 1960. They were the seven regional banks
of former Indian princely states. They were renamed, prefixing them with 'State
Bank of'. These seven banks were State Bank of Bikaner and Jaipur (SBBJ), State
Bank of
Hyderabad (SBH), State Bank of Indore (SBN), State Bank of Mysore (SBM), State
Bank of Patiala (SBP), State Bank of Saurashtra (SBS) and State Bank of Travancore
(SBT). All these banks were given the same logo as the parent bank, SBI. State Bank
of India and all its associate banks used the same blue Keyhole logo said to have been
inspired
by Ahmadabad’s Kankaria Lake. The State Bank of India word mark usually had one
standard typeface, but also utilized other typefaces. The word mark now has the
keyhole logo followed by "SBI".

The plans for making SBI a single very large bank by merging the associate banks
started in 2008, and in September the same year, SBS merged with SBI. The very
next year, State Bank of Indore (SBN) also merged.

65
Following a merger process, the merger of the 5 remaining associate banks, (viz.
State Bank of Bikaner and Raipur, State Bank of Hyderabad, State Bank of Mysore,
State Bank of Patiala, State Bank of Travancore); and the Bharatiya Mahila Bank)
with the SBI was given an in-principle approval by the Union Cabinet on 15 June
2016. This came a month after the SBI board had, on 17 May 2016, cleared a
proposal to merge its five associate banks and Bharatiya Mahila Bank with itself.

On 15 February 2017, the Union Cabinet approved the merger of five associate
banks with SBI. An analyst foresaw an initial negative impact as a result of
different pension liability provisions and accounting policies for bad loans. The
merger went into effect from 1 April 2017.

Shareholders Shareholding

Promoters: Government of India 56.92%

FIIs/GDRs/OCBs/NRIs 10.94%

Banks & Insurance Companies 10.63%

Mutual Funds & UTI 13.72%

Others 07.79%

Total 100.0%

The equity shares of SBI are listed on the Bombay Stock Exchange, where it is a
constituent of the BSE SENSEX index, and the National Stock Exchange of India,
where it is a constituent of the CNX Nifty. Its Global Depository Receipts
(GDRs) are listed on the London Stock Exchange.

66
  TECHNICAL ANALYSIS:

 INTERPRETATION:
1. In the above analysis it represents the price and volume of the
Bank for 3 years.
2. In the above chart left side represents price and right side
represents the volume.
3. In this chart the curve represents price.
4. By comparing 3 years the price is high in year 2021 and it is low in
the year 2019.

 Financial Analysis:
67
 FINANCIAL YEAR 2019 2020 2021

TOTAL REVENUE 330687.36 368010.65 385337.89

EBITDA 8716.39 33978.15 36507.02
PBIT 5220.50 30316.59 32795.96
NET INCOME 2299.66 19767.80 22405.45
EPS 2.58 22.15 25.11
DPS 0.00 0.00 4.00
PAYOUT RATIO 0.00 0.00 0.16

 BALANCE SHEET:

FINANCIAL YEAR 2019 2020 2021

CURRENT ASSETS 2,25,512.26 2,54,315.26 3,47,707.03
NON CURRENT ASSETS 36,62,951.94 39,51,381.44 45,07,359.87
TOTAL ASSETS 38,88,464.20 42,05,696.70 48,55,066.90

CURRENT LIABILITIES 29,40,541.06 32,74,160.63 37,15,331.24

NON CURRNET LIABILITIES 7,07,390.49 6,72,532.13 8,54,548.18
TOTAL LIABILITIES 36,47,931.55 39,46,692.76 45,69,879.42
TOTAL EQUITY 2,40,532.65 2,59,003.94 2,85,187.48
TOTAL LIABILITIES & 38,88,464.20 42,05,696.70 48,55,066.90
SHAREHOLDER’S EQUITY

TOTAL COMMOM SHARE 892.46 892.46 892.46

OUTSTANDING

68
2. AXIX BANK:

Axis Bank Limited, formerly known as UTI Bank, is an Indian banking and
financial services company headquartered in Mumbai, Maharashtra. It sells
financial services to large and mid-size companies, SMEs and retail businesses. As
of 30 June 2016, 30.81% shares are owned by the promoters and the promoter
group. The remaining 69.19% shares are owned by mutual funds, FIIs, banks,
insurance companies, corporate bodies and individual investors.

Axis Bank Limited, formerly known as UTI Bank (1993–2007), is an

Indian banking and financial services company headquartered in Mumbai,
Maharashtra. It sells financial services to large and mid-size companies, SMEs
and retail businesses.

As of 30 June 2016, 30.81% shares are owned by the promoters and the promoter
group (United India Insurance Company Limited, Oriental Insurance Company
Limited, National Insurance Company Limited, New India Assurance Company
Ltd, GIC, LIC and UTI). The remaining 69.19% shares are owned by mutual funds,
FIIs, banks, insurance companies, corporate bodies and individual investors

The bank was founded on 3 December 1993 as UTI Bank, opening its

69
registered office in Ahmadabad and a corporate office in Mumbai. The bank
was promoted jointly by the
Administrator of the Unit Trust of India (UTI), Life Insurance Corporation of
India (LIC), General Insurance Corporation, National Insurance Company, The
New India Assurance Company, The Oriental Insurance Corporation and United
India Insurance Company. The first branch was inaugurated on 2 April 1994 in
Ahmadabad by Manmohan Singh, then finance minister of India.

In 2001 UTI Bank agreed to merge with Global Trust Bank, but the Reserve Bank of
India (RBI) withheld approval and the merger did not take place. In 2004, the RBI
put Global Trust under moratorium and supervised its merger with Oriental Bank of
Commerce. The following year, UTI bank was listed on the London Stock Exchange.
In the year 2006, UTI Bank opened its first overseas branch in Singapore. The same
year it opened an office
in Shanghai, China. In 2007, it opened a branch in the Dubai International
Financial Centre and branches in Hong Kong

70
Axis Banks’ equity shares are listed on the Bombay Stock Exchange (BSE) and
National Stock Exchange of India (NSE). The company's global depository receipts
(GDRs) are listed on the London Stock Exchange. The Bonds issued by the bank
under the MTN program are listed on the Singapore Stock Exchange
SUBSIDARIES:
1. Axis Capital Ltd.
2. Axis Securities Ltd.
3. Axis Private Equity Ltd.
4. Axis Mutual Fund

 TECHNICAL ANALYSIS:


 INTERPRETATION:
5. In the above analysis it represents the price and volume of the
Bank for 3 years.
6. In the above chart left side represents price and right side
represents the volume.
7. In this chart the curve represents price.
8. By comparing 3 years the price is high in year 2019 and it is low in
the year 2020.

71
 Financial Analysis:
Position of State Bank of India as a part of fundamental analysis:

FINANCIAL YEAR 2019 2020 2021

TOTAL REVENUE 70232.4 80057.67 80847.94
EBITDA 8329.23 6086.12 10729.48
PBIT 7592.06 5280.05 9750.09
NET INCOME 5038.60 1853.12 7195.51
EPS 19.61 6.87 24.85
DPS 1.00 0.00 0.00
PAYOUT RATIO 0.05 0.00 0.00

 BALANCE SHEET:
FINANCIAL YEAR 2019 2020 2021
CURRENT ASSETS 68,004.31 97,799.77 63,424.36
NON CURRENT ASSETS 7,46,131.60 8,30,131.98 9,46,943.92
TOTAL ASSETS 8,14,135.91 9,27,931.75 10,10,368.28

CURRENT LIABILITIES 5,50,745.94 6,42,157.21 7,07,623.42

NON CURRNET LIABILITIES 1,95,502.74 1,99,320.55 1,98,977.4
1
TOTAL LIABILITIES 7,46,248.68 8,41,477.76 9,06,600.83
TOTAL EQUITY 67,887.23 86,453.99 1,03,767.45
TOTAL LIABILITIES & 8,14,135.91 9,27,931.75 10,10,368.28
SHAREHOLDER’S EQUITY
TOTAL COMMOM SHARE 257.16 282.17 306.37

72
3. HDFC BANK:

HDFC Bank Limited is an Indian banking and financial services company,

headquartered in Mumbai, Maharashtra. HDFC Bank is India's largest private sector
bank by assets and by market capitalisation as of April 2021. It is the third largest
company by market capitalisation of $122.50 billion on the Indian stock exchanges.
It is also the fifteenth largest employer in India with nearly 120,000 employees

HDFC Bank was incorporated in 1994 as a subsidiary of the Housing Development

Finance Corporation, with its registered office in Mumbai, Maharashtra, India. Its
first corporate office and a full-service branch at Sandoz House, Worli were
inaugurated by the then Union Finance Minister, Manmohan Singh.

As of 30 June 2019, the Bank's distribution network was at 5,500 branches across
2,764 cities. The bank also installed 430,000 POS terminals and issued 23,570,000
debit cards and 12 million credit cards in FY 2017.[15] It has a base of 1,16,971
permanent employees as of 21 March 2020.

HDFC Bank provides a number of products and services including wholesale

banking, retail banking, treasury, auto loans, two-wheeler loans, personal loans,
loans against property, consumer durable loan, lifestyle loan and credit cards. Along
with this various digital products are Payzapp and SmartBUY.

HDFC Bank provides a number of products and services including wholesale

banking, retail banking, treasury, auto loans, two-wheeler loans, personal loans,

73
loans against property, consumer durable loan, lifestyle loan and credit cards. Along
with this various digital products are Payzapp and SmartBUY

HDFC Bank merged with Times Bank in February 2000. This was the first
merger of two private banks in the New Generation private sector banks
category. Times Bank was established by Bennett, Coleman and Co. Ltd.,
commonly known as The Times Group, India's largest media conglomerate.

In 2008, Centurion Bank of Punjab (CBoP) was acquired by HDFC Bank. HDFC
Bank's board approved the acquisition of CBoP for ₹95.1 billion in one of the
largest mergers in the financial sector in India.

74
In 2021, the bank acquired a 9.99% stake in FERBINE, an entity promoted by Tata
Group, to operate a Pan-India umbrella entity for retail payment systems, similar to
National Payments Corporation of India.

In September 2021, the bank partnered with Paytm to launch a range of credit cards
powered by the global card network Visa

The equity shares of HDFC Bank are listed on the Bombay Stock Exchange and the
National Stock Exchange of India. Its American depositary receipts are listed on the
NYSE issued through JP Morgan Chase Bank.

Its global depository receipts (GDRs) was listed on the Luxembourg Stock Exchange
but was terminated by board of directors following its low trading volume.

Shareholders (as of 30 September 2021)[28] Shareholding[26]

Promoter group (HDFC) 25.88%

Foreign institutional investor(FII) 38.30%

Individual shareholders 13.25%

Qualified institutional buyer 4.74%

Insurance companies 2.94%

Unit Trust of India/mutual funds 14.57%

Financial institutions/banks 0.4%

 Financial Analysis:
75
Position of HDFC Bank as a part of fundamental analysis:

FINANCIAL YEAR 2019 2020 2021

TOTAL REVENUE 124107.79 147068.26 155885.27
EBITDA 35538.83 39471.62 44181.15
PBIT 34318.16 38194.85 42796.14
NET INCOME 22332.43 27253.95 31833.
EPS 41.99 49.87 57.90
DPS 7.50 2.50 6.50
PAYOUT RATIO 0.18 0.05 0.11

76
 TECHNICAL ANALYSIS:

 INTERPRETATION:

a. In the above analysis it represents the price and volume of the Bank for 3 years.
b. In the above chart left side represents price and right side represents the volume.
c. In this chart the curve represents price.
d. By comparing 3 years the price is high in year 2019 and it is low in the year 2021

77
78
  BALANCE SHEET:

FINANCIAL YEAR 2019 2020 2021

CURRENT ASSETS 81,817.64 87,940.11 1,21,272.52
NON CURRENT ASSETS 12,10,988.06 14,92,890.33 16,78,234.1
1
TOTAL ASSETS 12,92,805.70 15,80,830.44 17,99,506.63

CURRENT LIABILITIES 9,22,502.68 11,46,207.13 13,33,720.88

NON CURRNET LIABILITIES 2,16,128.57 2,57,687.96 2,55,342.80
TOTAL LIABILITIES 11,38,631.25 14,03,895.09 15,89,063.68
TOTAL EQUITY 1,54,174.45 1,76,935.35 2,10,442.95
TOTAL LIABILITIES & 12,92,805.70 15,80,830.44 17,99,506.63
SHAREHOLDER’S EQUITY

TOTAL COMMOM SHARE 544.66 548.33 551.28

OUTSTANDING

79
4. ICICI BANK:

ICICI Bank Limited is an Indian multinational bank and financial services

company with its corporate office in Mumbai, Maharashtra. It offers a wide range of
banking products and financial services for corporate and retail customers through a
variety of delivery channels and specialized subsidiaries in the areas of investment
banking, life, non-life
insurance, venture capital and asset management. The bank has a network of 5,275
branches and 15,589 ATMs across India and has a presence in 17 countries.

The bank has subsidiaries in the United Kingdom and Canada; branches in United
States, Singapore, Bahrain, Hong Kong, Qatar, Oman, Dubai International Finance
Centre, China and South Africa; as well as representative offices in United Arab
Emirates, Bangladesh, Malaysia and Indonesia. The company's UK subsidiary
has also established branches in Belgium and Germany.

ICICI Bank was established by the Industrial Credit and Investment Corporation
of India (ICICI), an Indian financial institution, as a wholly owned subsidiary in
1994
in Vadodara however the parent company was formed in 1955 as a joint-venture of
the World Bank, India's public-sector banks and public-sector insurance companies to

80
provide project financing to Indian industry. The bank was founded as the Industrial
Credit and Investment Corporation of India Bank, before it changed its name to ICICI
Bank. The parent company was later merged with the bank. The Industrial Credit and
Investment Corporation of India (ICICI) was established on 5 January 1955 and Sir
Arcot Ramasamy Mudaliar was elected as the first Chairman of ICICI Ltd.

ICICI Bank launched Internet Banking operations in 1998.

ICICI's shareholding in ICICI Bank was reduced to 46% through a public offering
of shares in India in 1998, followed by an equity offering in the form of American
depositary receipts on the NYSE in 2000. ICICI Bank acquired the Bank of
Madura Limited in an all- stock deal in 2001 and sold additional stakes to
institutional investors during 2001–02.

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 a financial institution from non-Japan Asia to be listed on the NYSE.

81
ICICI, ICICI Bank, and ICICI subsidiaries ICICI Personal Financial Services
Limited and ICICI Capital Services Limited merged in a reverse merger in 2002.

 The National Stock Exchange was promoted by India's leading financial

institutions (including ICICI Ltd.) in 1992 on behalf of the Government of India
with the objective of establishing a nationwide trading facility for equities, debt
instruments and hybrids, by ensuring equal access to investors all over the
country through an appropriate communication network.
 In 1987, ICICI Ltd along with UTI set up CRISIL as India's first
professional credit rating agency.
 NCDEX (National Commodities and Derivatives Exchange) was set up in 2003,
by ICICI Bank Ltd, LIC, NABARD, NSE, Canara Bank, CRISIL, Goldman
Sachs, Indian Farmers Fertiliser Cooperative Limited (IFFCO) and Punjab
National Bank.
 ICICI Bank facilitated the setting up of "FINO Cross Link to Case Link Study"
in 2006, as a company that would provide technology solutions and services to
reach the underserved and underbanked population of the country. Using
technologies like smart cards, biometrics and a basket of support services, FINO
enables financial institutions to conceptualise, develop and operationalise
projects to support sector initiatives
in microfinance and livelihoods.
 Entrepreneurship Development Institute of India (EDII), was set up in 1983,
by the erstwhile apex financial institutions like IDBI, ICICI, IFCI and SBI
with the support of the Government of Gujarat as a national resource
organisation committed to entrepreneurship development, education, training
and research.

82
 Finantial Analysis:
Position of ICICI Bank as a part of fundamental analysis:
FINANCIAL YEAR 2019 2020 2021
TOTAL REVENUE 131306.50 149786.10 161336.47
EBITDA 8354.10 19759.82 27368.4
PBIT 7408.25 18588.6 26028.33
NET INCOME 4254.24 9566.30 18384.31
EPS 6.61 14.81 27.64
DPS 1.00 0.00 2.00
PAYOUT RATIO 0.15 0.00 0.07

83
 TECHNICAL ANALYSIS:

 INTERPRETATION:
1. In the above analysis it represents the price and volume of the
Bank for 3 years.
2. In the above chart left side represents price and right side
represents the volume.
3. In this chart the curve represents price.
4. By comparing 3 years the price is high in year 2021 and it is low in
the year 2019.

84
 BALANCE SHEET:

FINANCIAL YEAR 2019 2020 2021

CURRENT ASSETS 87,390.90 1,27,852.92 1,47,570.54
NON CURRENT ASSETS 11,55,404.12 12,52,340.18 14,29,499.5
4
TOTAL ASSETS 12,42,795.02 13,80,193.10 15,77,070.08

CURRENT LIABILITIES 6,81,316.94 8,00,784.46 9,59,940.02

NON CURRNET LIABILITIES 4,40,644.13 4,49,653.81 4,49,954.22
TOTAL LIABILITIES 11,21,961.07 12,50,438.27 14,09,894.24
TOTAL EQUITY 1,20,833.95 1,29,754.83 1,67,175.84
TOTAL LIABILITIES & 12,42,795.02 13,80,193.10 15,77,070.08
SHAREHOLDER’S EQUITY

TOTAL COMMOM SHARE 644.65 647.30 691.63

OUTSTANDING

85
 5. BANK OF BARODA:

Bank of Baroda (BOB) is an Indian nationalised banking and financial services company. It
is under the ownership of the Ministry of Finance of the government ofd In ia. It is the fourth
largest nationalised bank in India, with 132 million customers, a total business of
US$218 billion, and a global presence of 100 overseas offices. Based on 2019 data,
it is ranked 1145 on Forbes] Global 2000 list.[3 [4]
The Maharaja of Baroda, hMa araja Sayajirao Gaekwad III, founded the bank on 20 July 1908
in the Princely State of Baroda, in Gujarat.[5] The government of India nationalized
the bank, along with 13 other major commercial banks of India on 19 July 1969; the
bank has been designated as a profit-making public sector undertaking (PSU).
B ),[6] with other
In 1908, Maharaja Sayajirao Gaekwad III, set up the Bank of Baroda (Bo
stalwarts of industry Sampatrao Gaekwad, Ralph Whitenack, Vithaldas
such as Tulsidas Thakersey, hokshi.[7] Two years later, BoB established
Kilachand and NM Cits first branch
in Ahmedabad. The bank grew domestically until after World War II. Then in 1953 it
crossed the Indian Ocean to serve the communities of Indians in Kenya and Indians
in Uganda by establishing a branch each in Mombasa and Kampala. The next year it
opened a second
a nd in 1956 it opened a branch in Tanzania at Dar-es-Salaam.
branch in Kenya, in Nairobi,
d on. London was
Then in 1957, BoB took a big step abroad by establishing a branch in Lon
the center of the British Commonwealth and the most important international
banking center. In 1958 BoB acquired Hind Bank (Calcutta; est. 1943), which
became BoB's first domestic acquisition
The shareholding structure of the bank as of 30 September 2021 is as follows:

86
Shareholders Shareholding %

Govt of India 63.97%

Mutual Funds 8.75%

Insurance Companies 5.75%

Foreign Holding 7.82%

Indian Public 13.24%

Bodies Corporates 1.01%

Others 1.30%

 TECHNICAL ANALYSIS:

87
 INTERPRETATION:
1. In the above analysis it represents the price and volume of the Bank for 3 years.
2. In the above chart left side represents price and right side represents the volume.
3. In this chart the curve represents price.
4. By comparing 3 years the price is high in year 2019 and it is low in
the year 2021.

 Finantial Analysis:

Position of Bank of Baroda as a part of fundamental analysis:

FINANCIAL YEAR 2019 2020 2021
TOTAL REVENUE 60973.30 91086.03 89001.18
EBITDA 2472.83 463.32 7730.47
PBIT 1524.58 -1233.91 6373.16
NET INCOME 1100.09 927.75 1547.66
EPS 4.14 2.54 3.15
DPS 0.00 0.00 0.00
PAYOUT RATIO 0.00 0.00 0.00

 BALANCE SHEET:

FINANCIAL YEAR 2019 2020 2021

CURRENT ASSETS 97,884.83 1,31,005.07 1,28,661.13
NON CURRENT ASSETS 7,24,925.47 10,72,865.76 10,76,736.86
TOTAL ASSETS 8,22,810.30 12,03,870.83 12,05,397.99

CURRENT LIABILITIES 6,65,588.69 9,73,228.15 9,95,909.81

NON CURRNET LIABILITIES 1,01,884.13 1,54,152.22 1,26,662.40
TOTAL LIABILITIES 7,67,472.82 11,27,380.37 11,22,572.21
TOTAL EQUITY 55,337.48 76,490.46 82,825.78
TOTAL LIABILITIES & 8,22,810.30 12,03,870.83 12,05,397.99
SHAREHOLDER’S EQUITY

TOTAL COMMOM SHARE 265.92 463.42 518.50

OUTSTANDING

88
 FINDINGS:

1. ICICI Bank has highest Share capital in 2021 and Axix Bank has lowest total
asset in 2017.
2. State Bank of India has lowest EPS in 2018, HDFC has highest EPS in
2019. SBI has low return on equity of 1.42% for last 3 years.
3. Bank of Baroda has low interest Coverage ratio.
4. In ICICI Bank tax rate seems low.
5. Axis Bank has low return on equity of 7.33% for last 3 years.

89
 SUGGESTIONS:

1. Bank operations and rates are good but need to achieve the highest rank.
2. Banks should be strengthening where customers are dissatisfied with some services.
3. Bank charges have to reduce in order to attract more number of customers.
4. Whatever transaction are done by the customers that should be clearly
maintained in the Book of Accounts.
5. SBI is better to invest it provides loans with less interest rates and it
has highest market capital, dividend P/E ratio.

90
 CHAPTER 5
CONCLUSION

Technical Analysis is a technique which gives an idea about the future share prices of
selected companies in which we invest. On the basis of the knowledge of technical
analysis one can predict the perfect investment decision of the stock market. By
using the technical indicators the future market of securities would be known in
which to invest. It allows them to get knowledge about financial market and to avoid
facing high risk in the share market. On the basis of prediction of 5 different bank
and its pattern of share price used to predict the possible future swings of price in the
market.
According to RSI, there is an increase in RSI value which indicates that there is
increase in the share price. This states to the investor that it is a strong sell signal.
Whenever there is a decrease in share price value, which indicates the investor that it
is strong buy signal. We can conclude from the result that technical indicators can
play useful role in the timing stock market entry and exit. By applying technical
indicators investors enjoy substantial profit.
Therefore, the small investors and traders should not blindly make an investment
rather they should analyze using various tools to check if the scrip is technically
strong.
Equity analysis is the process of analysing sectors and companies to give advice to
professional fund managers and private clients on which shares to buy.Sell-side
analyst work for brokers who sell shares to the investors mainly for private
clients .Buy-side analysts work for fund management firms. Equity analysis is to
provide information to the investors in the markets. An efficient market relies on
information. Banks were considered as a backbone to the financial system and play
an important role in economic development of a nation.
They act as intermediaries in channelizing funds from surplus units to deficit units to
the fully utilization of the funds. An efficient banking system of nations has
significant positive externalities which increase the efficiency of economic
transaction in general. There is a major shift in banking system in the policy
atmosphere after the introduction of financial sector reform in 1992; these reforms
impact the working of commercial banks. As one of the objectives of financial sector
reform was to improve the efficiency of banking system in India economy.
The financial system's contributes to the economy depends upon the quantity and
quality of its service and efficiency with which it provides them. Financial System
of any country consists of financial markets, financial intermediation and financial
instruments or financial products. The term "finance" in our simple understanding
it is perceived as equivalent to 'Money'. The word "system", in the term "financial
system", implies a set of complex and closely connected or interlined institutions,
agents, practices, markets, transactions, claims, and liabilities in the economy.

91
 REFERANCE

1. www.moneycontrol.com
2. www.sbi.co.in
3. www.icicibank.com
4. www.in.finance.yahoo.co
5. www.tickertape.com
6. www.nseindia.com
7. Shah R. Investment perception regarding Indian Financial markets.
Abhinav International Monthly Refereed Journal of Research in
Management & Technology 2015; 4(6).
8. Annapoorna MS, Gupta P. A comparative analysis of returns of
mutual fund schemes ranked 1 by CRISIL. Tactful management
resarch journal 2013; 2(1).
9. Hanumantha Rao P, Dutta S. Fundamental Analysis of the Banking
Sector in India. Indian Journal of Finance 2014.
10. Shukla S. Performance of the Indian Banking Industry: A Comparison
of Public and Private Sector Banks. Indian Journal of finance 2015.
11. Kothari SP, Shanken J. Beta and Book-to-Market: Is the Glass Half
Full or Half Empty. Sloan School of Management 1998.
12. Thamaraiselvi R, Anupama. An Analytical Study on Equity Research of
Stocks in Banking Sector. Indian Journal of Finance 2008.
13. Jain S. Analysis of equity based mutual funds in India. OSR journal of
business and management (IOSRJBM) 2012; 2(1): 1-4.
14. Narayanaswamy T, Muthulakshmi AP. Efficiency of Private Sector
Banks in India. Indian Journal of Finance 2014.

92