A Study on equity analysis of selected banking stocks

8/19/2019 A Study on equity analysis of selected banking stocks

1/109

A STUDY ON EQUITY ANALYSIS OF SELECTED BANKING STOCKS

1. A. INDUSTRY PROFILE

INTRODUCTION

The banking section will navigate through all the aspects of the Banking System in India.

It will discuss upon the matters with the birth of the banking concept in the country to

new players adding their names in the industry in coming few years.

As per the Reserve Bank of India (RBI! India"s banking sector is sufficiently

capitali#ed and well$regulated. The financial and economic conditions in the country are

far superior to any other country in the world. %redit! market and li&uidity risk studies

suggest that Indian banks are generally resilient and have withstood the global downturn

well.

Indian banking industry is e'pected to witness better growth prospects in )*+ as a sense

of optimism stems from the ,overnment"s measures towards revitali#ing 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.

-owever! in the introduction part of the entire banking cosmos! the past has been well

e'plained under three different heads namely

• -istory of Banking in India

• /ationali#ation of Banks in India

IFIM COLLEGE, BANGALORE1

http://finance.indiamart.com/investment_in_india/banking_india.htmlhttp://finance.indiamart.com/investment_in_india/banking_india.htmlhttp://finance.indiamart.com/investment_in_india/banking_india.htmlhttp://finance.indiamart.com/investment_in_india/banking_india.html


2/109


Scheduled %ommercial Banks in India

The first deals with the history part since the dawn of banking system in India.

,overnment took ma0or step in the *1+1 to put the banking sector into systems and it

nationali#ed *2 private banks in the mentioned year. This has been elaborated in

nationali#ation of Banks in India. The last but not the least e'plains about the scheduled

and unscheduled banks in India. Section 2 (+ (a of RBI Act *132 lays down the

condition of scheduled commercial banks.

History of Bankin in In!ia

4ithout 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 e'ternal and internal factors.

5or the past three decades India6s banking system has several outstanding achievements

to its credit. The most striking is its e'tensive reach. 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 India6s growth

process.

The government6s regular policy for Indian bank since *1+1 has paid rich dividends with

the nationali#ation of *2 ma0or private banks of India.

/ot 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. ,one are days when the


http://finance.indiamart.com/investment_in_india/banking_india.htmlhttp://finance.indiamart.com/investment_in_india/banking_india.html


3/109


most efficient bank transferred money from one branch to other in two days. /ow it is

simple as instant messaging or dial a pi##a. 7oney have become the order of the day.

The first bank in India! though conservative! was established in *89+. 5rom *89+ till

today! the 0ourney of Indian Banking System can be segregated into three distinct phases.

They are as mentioned below

• :arly phase from *89+ to *1+1 of Indian Banks

• /ationali#ation of Indian Banks and up to *11* prior to Indian banking sector

Reforms.

• /ew phase of Indian Banking System with the advent of Indian 5inancial ;

Banking Sector Reforms after *11*.

The first bank in India! though conservative! was established in *89+. 5rom *89+ till

today! the 0ourney of Indian Banking System can be segregated into three distinct phases.

They are as mentioned below

• :arly phase from *89+ to *1+1 of Indian Banks

• Nationa"i#ation of In!ian Banks and up to *11* prior to Indian banking sector

Reforms.

• /ew phase of Indian Banking System with the advent of Indian 5inancial ;

Banking Sector Reforms after *11*.



4/109


Phas$ I The ,eneral Bank of India was set up in the year *89+. /e't came Bank of

-industan and Bengal Bank. The :ast India %ompany established Bank of Bengal

(*9)1! Bank of Bombay (*92) and Bank of 7adras (*923 as independent units and

called it


5/109


Phas$ II ,overnment took ma0or steps in this Indian Banking Sector Reform after

independence. In *1==! it nationali#ed Imperial Bank of India with e'tensive banking

facilities on a large scale especially in rural and semi$urban areas. It formed State Bank of

India to act as the principal agent of RBI and to handle banking transactions of the @nion

and State ,overnments all over the country.

Seven banks forming subsidiary of State Bank of India was nationali#ed in *1+) on *1th

uly! *1+1! ma0or process of nationali#ation was carried out. It was the effort of the then


6/109


*18* %reation of credit guarantee corporation.

*18= %reation of regional rural banks.

*19) /ationali#ation of seven banks with deposits over )) crore.

After the nationali#ation of banks! the branches of the public sector bank India rose to

appro'imately 9)) in deposits and advances took a huge 0ump by **!))).

Banking in the sunshine of ,overnment ownership gave the public implicit faith and

immense confidence about the sustainability of these institutions.

Phas$ III This phase has introduced many more products and facilities in the banking

sector in its reforms measure. In *11*! under the chairmanship of 7 /arasimham! a

committee was set up by his name which worked for the liberali#ation of banking

practices.

The country is flooded with foreign banks and their AT7 stations. :fforts are being put

to give a satisfactory service to customers.


7/109


%urrently


8/109


banks (3! co$operative banks and regional rural banks. EScheduled banks in IndiaE

means the State Bank of India constituted under the State Bank of India Act! *1== (3 of

*1==! a subsidiary bank as defined in the State Bank of India (Subsidiary Banks Act!

*1=1 (39 of *1=1! a corresponding new bank constituted under section 3 of the Banking

%ompanies (Ac&uisition and Transfer of @ndertakings Act! *18) (= of *18)! or under

section 3 of the Banking %ompanies (Ac&uisition and Transfer of @ndertakings Act!

*19) (2) of *19)! or any other bank being a bank included in the Second Schedule to the

Reserve Bank of India Act! *132 ( of *132! but does not include a co$operative bankE.

E/on$scheduled bank in IndiaE means a banking company as defined in clause (c of

section = of the Banking Regulation Act! *121 (*) of *121! which is not a scheduled

bankE.

5ig *.A.i

Th$ fo""o(in ar$ th$ S%h$!&"$! Banks in In!ia )P&*"i% S$%tor+,



9/109


• State Bank of India

•

State Bank of Bikaner and aipur

• State Bank of -yderabad

• State Bank of Indore

• State Bank of 7ysore

• State Bank of Saurashtra

• State Bank of Travancore

• Andhra Bank

• Allahabad Bank

• Bank of Baroda

• Bank of India

• Bank of 7aharashtra

• %anara Bank

• %entral Bank of India

•

%orporation Bank

• ?ena Bank

• Indian Fverseas Bank

• Indian Bank

• Friental Bank of %ommerce

•


10/109


Th$ fo""o(in ar$ th$ S%h$!&"$! Banks in In!ia )Pri-at$ S$%tor+,

• I/, Gysya Bank >td

• A'is Bank >td

• IndusInd Bank >td

• I%I%I Bank >td

• South Indian Bank

-?5% Bank >td

%enturion Bank >td

Bank of td

I?BI Bank >td

• ammu ; Hashmir Bank >td.

5ig *.A.b

Th$ fo""o(in ar$ th$ S%h$!&"$! For$in Banks in In!ia,

American :'press Bank >td.

A/ ,ridlays Bank


11/109


Bank of Tokyo >td.

Ban&uc /ationale de


12/109


5oreign /ew ,eneration and ?evelopment Banks

3+ D$-$"o2'$nt Banks, ?evelopment Banks mostly provide long term finance for setting

up industries. They also provide short$term finance (for e'port and import activities

Industrial 5inance %o$operation of India (I5%I

Industrial ?evelopment of India (I?BI

Industrial Investment Bank of India (IIBI

Small Industries ?evelopment Bank of India (SI?BI

/ational Bank for Agriculture and Rural ?evelopment (/ABAR?

:'port$Import Bank of India.



13/109

Reserve Bank of India

Commercial Banks Co-operative Banks Development Banks

Nationalized Private Short-term creditLong-term credit

Agricltral Credit !r"an Credit #$I% Indstrial Agricltral

Investment

Banking

ConsmerBanking

Commercial Banking

RetailBanking

PrivateBanking

Asset%anagem

entPensions %ortgages

CreditCards


Orani#ationa" Str&%t&r$ of Banks in In!ia,

5ig *.A.ii

In India banks are classified in various categories according to differ rent criteria. The

above charts indicate the banking structure.

PRODUCTS AND SER4ICES OFFERED BY BAN5S,



14/109


Broa! C"assifi%ation of Pro!&%ts in a *ank,

The different products in a bank can be broadly classified into

• Retail Banking.

• Trade 5inance.

• Treasury Fperations.

Retail Banking and Trade finance operations are conducted at the branch level while the

wholesale banking operations! which cover treasury operations! are at the hand office or a

designated branch.

R$tai" Bankin,

• ?eposits

• >oans! %ash %redit and Fverdraft

• /egotiating for >oans and advances

• Remittances

• Book$Heeping (maintaining all accounting records

• Receiving all kinds of bonds valuable for safe keeping



15/109


Tra!$ Finan%$,

• Issuing and confirming of letter of credit.

•

?rawing! accepting! discounting! buying! selling! collecting of bills of e'change!

promissory notes! drafts! bill of lading and other securities.

Tr$as&ry O2$rations,

• Buying and selling of bullion. 5oreign e'change

• Ac&uiring! holding! underwriting and dealing in shares! debentures! etc.

•


16/109


Special


17/109


• In terms of &uality of assets and capital ade&uacy! Indian banks are considered to

have clean! strong and transparent balance sheets relative to other banks in

comparable economies in its region.

• 5oreign banks will have the opportunity to own up to 82 per cent of Indian private

sector banks and ) per cent of government owned banks.

6EA5NESS

•


18/109


restrictive labor laws! weak corporate governance and ineffective regulations

beyond Scheduled %ommercial Banks (S%Bs! unless industry utilities and

service bureaus.

• Refusal to dilute stake in


19/109


• /ew private banks could reach the ne't level of their growth in the Indian

banking sector by continuing to innovate and develop differentiated business

models to profitably serve segments like the ruralLlow income and affluentL-/I

segmentsM actively adopting ac&uisitions as a means to grow and reaching the

ne't level of performance in their service platforms. Attracting! developing and

retaining more leadership capacity

• 5oreign banks committed to making a play in India will need to adopt alternative

approaches to win the Jrace for the customerK and build a value$creating

customer franchise in advance of regulations potentially opening up post ))1. At

the same time! they should stay in the game for potential ac&uisition opportunities

as and when they appear in the near term. 7aintaining a fundamentally long$term

value$creation mindset.

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

• 4ith the growth in the Indian economy e'pected to be strong for &uite some time$

especially in its services sector$the demand for banking services! especially retail

banking! mortgages and investment services are e'pected to be strong.

• Reserve Bank of India (RBI has approved a proposal from the government to

amend the Banking Regulation Act to permit banks to trade in commodities and

commodity derivatives.IFIM COLLEGE, BANGALORE19


20/109


• -ybrid 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


21/109


Sto%k 9ark$ts,

Stock 7arket is a market where the trading of company stock! both listed

securities and unlisted takes place. It is different from stock e'change because it includes

all the national stock e'changes of the country. 5or e'ample! we use the term! Ethe stock

market was up todayE or Ethe stock market bubble.E

Sto%k E:%han$s,

Stock :'changes are an organi#ed marketplace! either corporation or mutual

organi#ation! where members of the organi#ation gather to trade company stocks or other

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

their own accounts. Stock e'changes also facilitates for the issue and redemption of

securities and other financial instruments including the payment of income and dividends.

The record keeping is central but trade is linked to such physical place because modern

markets are computeri#ed. The trade on an e'change is only by members and stock

broker do have a seat on the e'change.

Ca2ita" 9ark$t, The capital market is divided into two segments via

a+ Pri'ary 9ark$t,

7ost companies are usually started privately by their promoters. -owever the

promoters Ncapital and the borrowed capital from banks or financial institutions might not

be sufficient for running the business over the long term. That is when corporate and the

government looks at the primary market to raise long term funds by issuing securities



22/109


such as debt or e&uity. These securities may be issued at face value! at premium or at

discount.

*+ S$%on!ary 9ark$t,

The secondary market provides li&uidity to the investors in the primary market.

Today we would not invest in any instrument if there was no medium to li&uidate our

position. The secondary markets provide an efficient platform for trading of those

securities initially offered in the primary market. Also those investors who have applied

for shares in an I


23/109


Act! *1=+. The :'change! while providing an efficient and transparent market for trading

in securities! debt and derivatives upholds the interests of the investors and ensures

redressal of their grievances whether against the companies or its own member$brokers. It

also strives to educate and enlighten the investors by conducting investor education

programs and making available to them necessary informative inputs. A ,overning Board

having ) directors is the ape' body! which decides the policies and regulates the affairs

of the :'change. The ,overning Board consists of 1 elected directors! who are from the

broking community (one third of them retire every year by rotation! three S:BI

nominees! si' public representatives and an :'ecutive ?irector ; %hief :'ecutive

Ffficer and a %hief Fperating Ffficer.

The :'ecutive ?irector as the %hief :'ecutive Ffficer is responsible for the day$

to$day administration of the :'change and he is assisted by the %hief Fperating Ffficer

and other -eads of ?epartment the :'change has inserted new Rule in its Rules! Bye$

laws ; Regulations pertaining to constitution of the :'ecutive %ommittee of the

:'change. Accordingly! an :'ecutive %ommittee! consisting of three elected directors!

three S:BI nominees or public representatives! :'ecutive ?irector ; %:F and %hief

Fperating Ffficer has been constituted. The %ommittee considers 0udicial ; &uasi

matters in which the ,overning Board has powers as an Appellate Authority! matters

regarding annulment of transactions! admission! continuance and suspension of member$

brokers! declaration of a member$broker as defaulter! norms! procedures and other

matters relating to arbitration! fees! deposits! margins and other monies payable by the

member$brokers to the :'change! etc.



24/109


NATIONAL STOC5 E;CHAN7E )NSE+,

/ational Stock :'change of India >imited has genesis in the report of the -igh


25/109


license agreements covering benchmark inde'es for @.S. and Indian e&uities with %7:

,roup and has also signed a 7emorandum of @nderstanding (7F@ with Singapore

:'change (S,O to cooperate in the development of a market for India$linked products

and services to be listed on S,O. The two e'changes also will look into a bilateral

securities trading link to enable investors in one country to seamlessly trade on the other

country6s e'change.

/S: is committed to operate a market ecosystem which is transparent and at the

same time offers high levels of safety! integrity and corporate governance! providing ever

growing trading ; investment opportunities for investors. /S: has played a catalytic role

in reforming the Indian securities market in terms of microstructure! market practices and

trading volumes. The market today uses state$of$art information technology to provide an

efficient and transparent trading! clearing and settlement mechanism! and has witnessed

several innovations in products ; services vi#. demutuali#ation of stock e'change

governance! screen based trading! compression of settlement cycles! demateriali#ation

and electronic transfer of securities! securities lending and borrowing! professionali#ation

of trading members! fine$tuned risk management systems! emergence of clearing

corporations to assume counterparty risks! market of debt and derivative instruments and

intensive use of information technology.

The fluctuating Indian securities market has probed the need for the study in order

to understand the market conditions and to identify the price movements. This study

would give an idea about the tools that can be used to determine how the price

fluctuations in the future can be predicted. The past one year data of *) companies wereIFIM COLLEGE, BANGALORE25


26/109


chosen for the study! from which the technical analysis has been made.

F&n!a'$nta" Ana"ysis

It is one of the ma0or techni&ues involved in the securities market. The

fundamental analysis involves intense knowledge on the economy! industry and company

as a whole! and hence! it has not been included in the part of this study.

4hen talking about stocks! fundamental analysis is a techni&ue that attempts to

determine a security6s value by focusing on underlying factors that affect a

company6s actual business and its future prospects. Fn a broader scope! you can perform

fundamental analysis on industries or the economy as a whole. The term simply refers to

the analysis of the economic well$being of a financial entity as opposed to only its price

movements.

5undamental analysis serves to answer &uestions! such as

• Is the company6s revenue growingP

• Is it actually making a profitP

• Is it in a strong$enough position to beat out its competitors in the futureP

• Is it able to repay its debtsP

• Is management trying to Ecook the booksEP


http://www.investopedia.com/terms/p/profit.asphttp://www.investopedia.com/terms/d/debt.asphttp://www.investopedia.com/terms/c/cookthebooks.asphttp://www.investopedia.com/terms/p/profit.asphttp://www.investopedia.com/terms/d/debt.asphttp://www.investopedia.com/terms/c/cookthebooks.asp


27/109


Ff course! these are very involved &uestions! and there are literally hundreds of others

you might have about a company. It all really boils down to one &uestion Is the

company6s stock a good investmentP Think of fundamental analysis as a toolbo' to help

you answer this &uestion.

E%ono'i% Ana"ysis

The economic forecast is important for making decisions concerning both the timings of

an investment and the relative investment desirability among the various industries in the

economy.

Rate of GDP

,?< is a measure of the total production of goods and services in the economy during a

year. It is indicator of economic growth. ,enerally! ,?< growth rate ranges from +$9

percent. The growth rate of economy points out the prospectus for the industrial sector

and the returns investors can e'pect from investment in shares. The higher the growth

rate of ,?< the more favourable it is for stocks.

Price Level and Fluctuations

If the inflation rate increases! then the growth rate would be very little. The increasingly

inflation rate significantly affect the demand of consumer product industry. The industry

which en0oy a strong market for their product and which do not come under purview of



28/109


price control may benefit from inflation. If there is a mild level of inflation! it is good to

the stock market but high rate of inflation is harmful to the stock market.

Agriculture and Monsoons

Increase or decrease in agricultural production has a significant impact on the industrial

production and corporate performance. %ompanies using agricultural raw materials as

inputs or supplying inputs to agriculture are directly affected by change in agriculture

production. A good monsoon leads to higher demand for inputs and results in bumper

crops. This would lead to buoyancy in stock market.

Government Budget Deficit

,overnment revenue come from various direct and indirect ta'es and government made

e'penditure on various development activities. The e'cess of e'penditure over revenue

leads to budget deficit. The deficit budget may lead to high rate of inflation and adversely

affects the cost of production and surplus budget may results in deflation. -ence balanced

budget is highly favourable to the stock market.

Infrastructure Facilities and Arrangements

A wide network of communication system! regular supply of power! a well$developed

transportation system boost the industrial production and improves the growth of the

economy. Banking and financial sector should be sound enough to provide ade&uate

support t industry and agriculture. Thus! good infrastructure facilities affect the stock

market favorably.

In!&stry Ana"ysis



29/109


>earning about how the industry works will give an investor a deeper

understanding of a company6s financial health.

Customers

Some companies serve only a handful of customers! while others serve millions.

In general! it6s a red flag (a negative if a business relies on a small number of

customers for a large portion of its sales because the loss of each customer could

dramatically affect revenues. 5or e'ample! think of a military supplier who has

*)) of its sales with the @.S. government. Fne change in government policy

could potentially wipe out all of its sales.

Market Share

@nderstanding a company6s present market share can tell volumes about the

company6s business. The fact that a company possesses an 9= market share tells

you that it is the largest player in its market by far. 5urthermore! this could also

suggest that the company possesses some sort of Eeconomic moat!E in other

words! a competitive barrier serving to protect its current and future earnings!

along with its market share.

Industr Gro!th

Fne way of e'amining a company6s growth potential is to first e'amine whether

the amount of customers in the overall market will grow. This is crucial because

without new customers! a company has to steal market share in order to grow.


http://www.investopedia.com/terms/e/economicmoat.asphttp://www.investopedia.com/terms/e/earnings.asphttp://www.investopedia.com/terms/g/growthrates.asphttp://www.investopedia.com/terms/e/economicmoat.asphttp://www.investopedia.com/terms/e/earnings.asphttp://www.investopedia.com/terms/g/growthrates.asp


30/109


In some markets! there is #ero or negative growth! a factor demanding careful

consideration. 5or e'ample! a manufacturing company dedicated solely to

creating audio compact cassettes might have been very successful in the 68)s! 69)s

and early 61)s. -owever! that same company would probably have a rough time

now due to the advent of newer technologies! such as %?s and 7


31/109


to the public! they can drastically affect the attractiveness of a company for

investment purposes.

In industries where one or two companies represent the entire industry for a

region (such as utility companies! governments usually specify how much profit

each company can make. In these instances! while there is the potential for si#able

profits! they are limited due to regulation.

Co'2any Ana"ysis

In this section we are going to highlight some of the company$specific &ualitative and

&uantitative factors that you should be aware of.

Std& on 'inancial Statements

5inancial statements are the medium by which a company discloses information

concerning its financial performance. The three most important financial statements

$ income statements! balance sheets and cash flow statements $ we will briefly introduce

each financial statement6s specific function! along with where they can be found.

Th$ 9a


32/109


The balance sheet represents a record of a company6s assets! liabilities and e&uity at a

particular point in time. The balance sheet is named by the fact that a business6s financial

structure balances in the following manner

Assets Q >iabilities Shareholders6 :&uity

Assets represent the resources that the business owns or controls at a given point in time.

This includes items such as cash! inventory! machinery and buildings. The other side of

the e&uation represents the total value of the financing the company has used to ac&uire

those assets. 5inancing comes as a result of liabilities or e&uity. >iabilities represent debt

(which of course must be paid back! while e&uity represents the total value of money

that the owners have contributed to the business $ including retained earnings! which is

the profit made in previous years.

#he Income Statement

4hile the balance sheet takes a snapshot approach in e'amining a business! the income

statement measures a company6s performance over a specific time frame. Technically!

you could have a balance sheet for a month or even a day! but you6ll only see public

companies report &uarterly and annually.

The income statement presents information about revenues! e'penses and profit that was

generated as a result of the business6 operations for that period.

Statement of Cash Flo!s

The statement of cash flows represents a record of a business6 cash inflows and outflows


http://www.investopedia.com/terms/l/liability.asphttp://www.investopedia.com/terms/l/liability.asphttp://www.investopedia.com/terms/l/liability.asphttp://www.investopedia.com/terms/e/equity.asphttp://www.investopedia.com/terms/e/equity.asphttp://www.investopedia.com/terms/l/liability.asphttp://www.investopedia.com/terms/e/equity.asp


33/109


over a period of time. The cash flow statement is important because it6s very difficult for

a business to manipulate its cash situation. Typically! a statement of cash flows focuses on

the following cash$related activities

• Fperating %ash 5low (F%5 %ash generated from day$to$day business operations

• %ash from investing (%5I %ash used for investing in assets! as well as the

proceeds from the sale of other businesses! e&uipment or long$term assets

• %ash from financing (%55 %ash paid or received from the issuing and borrowing

of funds

B&sin$ss 9o!$"

:ven before an investor looks at a company6s financial statements or does any research!

one of the most important &uestions that should be asked is 4hat e'actly does the

company doP This is referred to as a company6s business model it6s how a company

makes money. Cou can get a good overview of a company6s business model by checking

out its website.

Sometimes business models are easy to understand. Take 7c?onalds! for instance! which

sells hamburgers! fries! soft drinks! salads and whatever other new special they are

promoting at the time. It6s a simple model! easy enough for anybody to understand.


http://www.investopedia.com/terms/o/operatingcashflow.asphttp://www.investopedia.com/terms/b/businessmodel.asphttp://www.investopedia.com/terms/o/operatingcashflow.asphttp://www.investopedia.com/terms/b/businessmodel.asp


34/109


Fther times! you6d be surprised how complicated it can get. Boston %hicken Inc. is a

prime e'ample of this. Back in the early 61)s its stock was the darling of 4all Street. At

one point the company6s %:F bragged that they were the Efirst new fast$food restaurant

to reach D* billion in sales since *1+1E. The problem is! they didn6t make money by

selling chicken. Rather! they made their money from royalty fees and high$interest loans

to franchisees. Boston %hicken was really nothing more than a big franchisor. Fn top of

this! management was aggressive with how it recogni#ed its revenue. As soon as it was

revealed that all the franchisees were losing money! the house of cards collapsed and the

company went bankrupt.

At the very least! you should understand the business model of any company you invest

in. The EFracle of FmahaE! 4arren Buffett! rarely invests in tech stocks because most of

the time he doesn6t understand them. This is not to say the technology sector is bad! but

it6s not Buffett6s area of e'pertiseM he doesn6t feel comfortable investing in this area.

Similarly! unless you understand a company6s business model! you don6t know what the

drivers are for future growth! and you leave yourself vulnerable to being blindsided like

shareholders of Boston %hicken were.

Co'2$titi-$ A!-anta$

Another business consideration for investors is competitive advantage. A company6s long$

term success is driven largely by its ability to maintain a competitive advantage $ and

keep it.


35/109


a business allowing it to keep competitors at bay and en0oy growth and profits. 4hen a

company can achieve competitive advantage! its shareholders can be well rewarded for

decades.

9ana$'$nt

ust as an army needs a general to lead it to victory! a company relies upon management

to steer it towards financial success. Some believe that management is the most important

aspect for investing in a company. It makes sense $ even the best business model is

doomed if the leaders of the company fail to properly e'ecute the plan.

So how does an average investor go about evaluating the management of a companyP

This is one of the areas in which individuals are truly at a disadvantage compared to

professional investors. Cou can6t set up a meeting with management if you want to invest

a few thousand dollars.

:very public company has a corporate information section on its website. @sually there

will be a &uick biography on each e'ecutive with their employment history! educational

background and any applicable achievements. >et6s be honest 4e6re looking for dirt! and

no company is going to put negative information on its corporate website.

Instead! here are a few ways for you to get a feel for management

*. Conference calls

%hief :'ecutive Ffficer (%:F and %hief 5inancial Ffficer (%5F host &uarterly

conference calls. (Sometimes you6ll get other e'ecutives as well. The first portion of the


http://www.investopedia.com/terms/p/publiccompany.asphttp://www.investopedia.com/terms/c/ceo.asphttp://www.investopedia.com/terms/c/cfo.asphttp://www.investopedia.com/terms/p/publiccompany.asphttp://www.investopedia.com/terms/c/ceo.asphttp://www.investopedia.com/terms/c/cfo.asp


36/109


call is management basically reading off the financial results. 4hat is really interesting is

the &uestion$and$answer portion of the call. This is when the line is open for analysts to

call in and ask management direct &uestions. Answers here can be revealing about the

company! but more importantly! listen for candor. ?o they avoid &uestions! like

politicians! or do they provide forthright answersP

. Management Discussion and Analsis

The 7anagement ?iscussion and Analysis is found at the beginning of the annual report.

In theory! the 7?;A is supposed to be frank commentary on the management6s outlook.

Sometimes the content is worthwhile! other times its boilerplate. Fne tip is to compare

what management said in past years with what they are saying now. Is it the same

material rehashedP -ave strategies actually been implementedP If possible! sit down and

read the last five years of 7?; asM it can be illuminating.

3. $!nershi" and Insider Sales

ust about any large company will compensate e'ecutives with a combination of cash!

restricted stock and options. 4hile there are problems with stock options (See


37/109


:'change %ommission (S:%! so it6s publicly available information. Talk is cheap $ think

twice if you see management unloading all of its shares while saying something else in

the media.

2. Past Performance

Another good way to get a feel for management capability is to check and see how

e'ecutives have done at other companies in the past. Cou can normally find biographies

of top e'ecutives on company web sites. Identify the companies they worked at in the

past and do a search on those companies and their performance.

Cor2orat$ 7o-$rnan%$

%orporate governance describes the policies in place within an organi#ation denoting the

relationships and responsibilities between management! directors and stakeholders. These

policies are defined and determined in the company charter and its bylaws! along with

corporate laws and regulations. The purpose of corporate governance policies is to ensure

that proper checks and balances are in place! making it more difficult for anyone to

conduct unethical and illegal activities.

,ood corporate governance is a situation in which a company complies with all of its

governance policies and applicable government regulations in order to look out for the

interests of the company6s investors and other stakeholders.

Although! there are companies and organi#ations (such as Standard ;


38/109


stakeholders! most of these reports are &uite e'pensive for the average investor to

purchase.

5ortunately! corporate governance policies typically cover a few general areas structure

of the board of directors! stakeholder rights and financial and information transparency.

4ith a little research and the right &uestions in mind! investors can get a good idea about

a company6s corporate governance.

T$%hni%a" Ana"ysis

Technical analysis can be defined as a method that attempts to forecast future

price trends by the means of analy#ing market action. It was established as early as *9th

century. -owever! most of its methods as we know them today were created in the first

decades of )th century. The core idea of technical analysis is that history tends to repeat

itself. That is why we can find certain situations in the market that occur regularly. These

situations can be discovered by %hart analysis and technical indicators! which we can use

for our advantage and that is precisely what technical analysis is trying to do.

There are several approaches to technical analysis such as the ?ow Theory!

:lliot wave theory! 5ibonacci6s analysis! cyclical analysis and so on. -owever! the most

commonly used methods can be divided into two ma0or branches namely %hart analysis

(also called charting and statistical approach. 4ith %hart analysis! the analyst is trying to

find patterns that price creates in the %hart and that occur repeatedly. 5or e'ample! head

and shoulders or double bottoms are considered typical %hart patterns. As soon as the

analyst identifies such a pattern! he can make a trade based on the direction the price



39/109


should follow based on the type of the pattern.

Another branch of technical analysis is constituted by the statistical techni&ues!

which comprise mostly the study and use of various technical indicators. These indicators

are computed from historical market data and are mostly used for forecasting trend

reversals or changes in strength of the trend. 7any of the indicators yield precise buy and

sell signals. There are several kinds of indicators from the very simple ones like moving

averages to the very complicated such as Swing inde'! for which the mathematical

formula is several lines long. Cet! the ma0or drawback of using technical indicators is that

they provide too many trading signals that are often contradicting each other. It is so

because different indicators work best in different kind of market (or phase of the trend.

Th$ Basi% Ass&'2tions of T$%hni%a" Ana"ysis ar$

1. 9ark$t F"&%t&ations Dis%o&nt E-$rythin $"s$. Technical analysts

believe that changes in the price of a security and how well it trades in the

market embody all available information about that security from everyone

involved with it and therefore represents the fair value of that security.



40/109


Sudden changes in how a stock trades often precedes ma0or news about the

company that issued the stock. Technical analysts don6t concern themselves

with the price$to$earnings ratio! shareholder e&uity! return on e&uity or other

factors that fundamental analysts do.

. Pri%$ 9o-$'$nts %an oft$n *$ %hart$! an! 2r$!i%t$! . Technical

analysts acknowledge that there are periods when prices move randomly! but there are

also times when they move in an identifiable trend. Fnce a trend is identified! it is

possible to make money from it! either by buying low and selling high during an upward

trend (bull market or by selling short during a downward trend (bear market. By

ad0usting the length of time the market is being analy#ed! it is possible to spot both short$

and long$term trends.

/. History R$2$ats Its$"f .


41/109


calculated by adding the closing price of the security for a number of time periods and

then dividing this total by the number of time. In this study Simple moving average is

used. A simple moving average is formed by computing the average (mean price of a

security over a specified number of periods. 4hile it is possible to create moving

averages from the Fpen! the -igh! and the >ow data points! most moving average are

created using the closing price. 5or e'ample a =$day simple moving average is calculated

by adding the closing prices for the last = days and dividing the total by =.

1= > 11 > 1 > 1/ > 10 ? @=

)@= 3+ ? 1

The calculation is repeated for each price bar on the chart. The averages are then

0oined to form a smooth curving line $ the moving average line. %ontinuing our e'ample!

if the ne't closing price in the average is *=! then this new period would be added and the

oldest day! which is *)! would be dropped. The new =$day simple moving average would

be calculated as follows

11 > 1 > 1/ > 10 > 13 ? @3

)@3 3+ ? 1/.

RELATI4E STREN7TH INDE;

RSI is an oscillator used to identify the inherent technical strength and weakness

of a particular scrip or market. RSI can be calculated for scrip by adopting the following

formula.



42/109


RSIQ*))$*))

*RS

RSQAverage ,ain per ?ay

Average loss per ?ay

The RSI can be calculated for any number of days depending on the wish of the

technical analyst and the time frame of trading adopted in a particular stock market. RSI

is calculated for =! 8! 1 and *2 days. If the period taken for calculation is more! the

possibility of getting wrong signals is reduced.

The broad rule is! if the RSI crosses seventy there may be downturn and it is time

to sell. If the RSI falls below thirty it is time to pick up the script. If the RSI is rising in

the overbought #one! it would indicate the downfall of the price. If RSI falls in the

overbought #one! it gives a clear signal of sell. This condition occurs after a sharp rise in

price during a period of heavy buying. 4hen the RSI is in the oversold region! it

generates the buy signal. The term oversold is used to describe a security or market that

has declined to an unreasonably low level.

In simple words! the RSI ranges from ) to *)). An asset is deemed to be

overbought once the RSI approaches the 8) level! meaning that it may be getting

overvalued and is a good candidate for a pullback . >ikewise! if the RSI approaches 3)! it

is an indication that the asset may be getting oversold and therefore likely to become

undervalued.

A trader using RSI should be aware that large surges and drops in the price of an


http://www.investopedia.com/terms/p/pullback.asphttp://www.investopedia.com/terms/p/pullback.asp


43/109


asset will affect the RSI by creating false buy or sell signals. The RSI is best used as a

valuable complement to other stock$picking tools.

Rat$ of %han$ is the speed at which a variable changes over a specific period

of time. RF% measures the rate of change between the current price and the price Nn"

number of days in the past. RF% helps to find out the overbought and oversold positions

in scrip. %losing prices are used to calculate the RF%. ?aily closing prices are used for

the daily RF% and weekly closing prices for weekly RF%. In this study I have used

weekly closing prices for calculation. 7any traders pay close attention to the speed at

which one variable changes relative to another.

The Rate of %hange (RF% indicator is a very simple yet effective momentum

oscillator that measures the percent change in price from one period to the ne't. The

(RF% calculation compares the current price with the price n periods ago.

ROC ? ))To!ays %"os$ C"os$ n 2$rio!s ao+ )C"os$ n 2$rio!s ao++ 1==

The main advantage of RF% is the identification of overbought and oversold

region. The historic high and low values of the RF% should be identified at first to locate

the overbought and oversold region. If the scrip"s RF% reaches the historic high values!

the scrip is in the overbought region. If the scrip"s RF% reaches the historic low value!

the scrip is in the oversold region.

. RESEARCH STUDY

. I.TITLE OF THE STUDYST@?C F/ :U@ITC A/A>CSIS F5 S:>:%T:? BA/HI/, STF%HS

STATE9ENT OF PROBLE9



44/109


To suggest the investors to make investment in good stocks using technical

analysis.Stock investment re&uires meticulous planning and careful evaluation of the

underlying stock before making investment. A statistical data in the recent past

indicated that 1= per cent of the investors in the stock markets are losers! since

they undertake investment without any information and without discipline.4hich stock to investP4hat type of security to buyP4hen to sell the securitiesP 4here to InvestP -ow to InvestP 4hether hold! sell or buy securitiesP It is much re&uired for the investors to study the market and to understand market

psychology so that they can make optimal decisions.

.II. O*


45/109


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

pro0ect is based on tools like technical analysis. 5urther! the study is based on

information of last two years.

To help the investor in making decisions based on report. Analysis of the shares of

companies.

Studying the stock price movement of the security market. -elps to identify trend

reversals at an earlier stage to formulate the buying and selling strategy.

. I4.RESEARCH 9ETHODOLO7Y

R$s$ar%h D$sin

Research design is the procedure of collecting! analy#ing and interpreting the data to

diagnose the problem and react to the opportunity in such a way where the costs can

be minimi#ed and the desired level of accuracy can be achieved to arrive at a

particular conclusion.

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

on the basis of convenient sampling. The stocks are chosen in an unbiased manner and



46/109


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

the Banking sector.

The sample si#e for the number of stocks is four for technical analysis of stocks as

technical analysis re&uires detailed study. 5or these four stocks technical analysis is done.

The validity of any research is based on the systematic method of data collection and

analysis. Secondary data from website! newspapers are used for the present study.

Analytical research design has been used in this study.

Data Co""$%tion 9$tho!,

To carry out this pro0ect! secondary data was collected which is the closing stock prices

of the following companies

• State Bank India.

• I%I%I Bank >td.

• -?5% Bank >td.

• Bank of Baroda >td.

Statisti%a" Too"s &s$!,

• Simple 7oving Average

• Relative Strength Inde'

• Rate of %hange Indicator

. 4.RE4IE6 OF LITERATURE

Coot$r )1G@+ found that the stock prices move at random when studied at one week

interval. The data for his study was weekend prices of forty five stocks from /ew Cork

stock e'change .-e tested randomness of share by means of a mean s&uare successive



47/109


difference test. -e concluded that there was not one random walk model. -e concluded

that the share price trends could be predicted when studied at fourteen week interval.

Tay"or an! A""$n )1GG+ conducted a survey on the use of technical analysis among

chief foreign e'change dealers in the >ondon market in *199. The results indicated that

+2 of respondents reported using moving averages andLor other trend$following

systems and 2) reported using other trading systems such as momentum indicators or

oscillators.

F$rnan!o F$rnan!$# Ro!ri&$# Si'on Sos-i""a Ri-$ro 8&"ian An!ra!a F$"i:

)1GGG+ assessed whether some simple forms of technical analysis can predict stock price

movement in the 7adrid stock e'change! covering thirty$one$year period from an *1++

Fct *118.the results provide strong support for profitability of those technical trading

rules. By making use of bootstrap techni&ues the author shows the returns obtained from

these trading rules are not consistent with several null models fre&uently used in finance.

Ch$&n Chinn an! 9arsh )===+ surveyed the views of @H$based foreign e'change

?ealers on technical analysis in *119 and found that + of the dealers responded that

technical trading is the most important factor that determines e'change rate movements

over the medium run.

O*$r"$%hn$r )==1+ reported findings from a survey on the importance of technical and

fundamental analysis among foreign e'change traders and financial 0ournalists in



48/109


5rankfurt! >ondon! Gienna! and urich in *11+. 5or foreign e'change traders! technical

analysis seemed to be a more important forecasting tool than fundamental analysis up to a

3$ month forecasting*3 hori#on! while for financial 0ournalists it seemed to be more

important up to *$month.

Ch$&n an! Chinn )==1+ published survey results for @S$based foreign e'change

traders conducted in *119. In the survey! about 3) of the traders indicated that technical

trading best describes their trading strategy. About 3* of the traders responded that

technical trading was the primary factor determining e'change rate movements up to +

months.

C. L. Os"$r )==1+ provides a micro$structural e'planation for the success of two

familiar predictions from technical analysis (* trends tend to be reversed at predictable

support and resistance levels! and ( trends gain momentum once predictable support

and resistance levels are crossed. The e'planation is based on a close e'amination of

stop$loss and take$profit orders at a large foreign e'change dealing bank.

Ra-in!ra an! 6an )==@+ e'amine the relationship of trading volume to stock

indices in Asian markets. Stock market indices from si' developing markets in Asia are

analy#ed over the 32 month period ending in Fctober ))=. In the South Horean market!

the causality e'tends from the stock indices to trading volume while the causality is the

opposite in the Taiwanese market.



49/109


R.Chitra )=11+ has performed technical analysis of selected stocks of :nergy sector

and has found that technical analysis is a useful tool for prediction of stock prices for a

short term

. 4I.NEED OF THE STUDY

To start any business capital plays a ma0or role. %apital can be ac&uired in two ways by

issuing shares or by taking debt from financial institutions or borrowing money from

financial institutions. The owners of the company have to pay regular interest and

principal amount at the end.

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

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

shares you own! the more dividend you earn when the company makes profit. In the

financial world! ownership is called J:&uityK.

Advantages of selling stock

A company can raise more capital than it could borrow.

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

A company does not have to make principal payments.

StockLshares play a ma0or role in ac&uiring capital to the business in return investors are

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

receive. The role of e&uity analysis is to provide information to the market. An efficient

market relies on information a lack of information creates inefficiencies that result in



50/109


stocks being misrepresented (over or under valued. This is valuable because it fills

information gaps so that each individual investor does not need to analy#e every stock

there by making the markets more efficient. If there is no e&uity analysis investor may

invest in wrong stocks and finally end up in loses.

. 4II.LI9ITATIONS OF THE

RESEARCH

• The analysis is focused on four banking companies.

• The study e'cludes 5undamental Analysis! which is one of the most important

techni&ues of analysis.

• The study focuses on the companies already e'isting in the Securities 7arket and

it e'cludes the companies that newly listed ones into the market.

• Times period of the study is too short.

/. CO9PANY PROFILE

Ty2$


51/109


Pro!&%ts , %redit cards! consumer banking! corporate banking !finance and

insurance! investment banking! mortgage loans! private banking! private

e&uity! wealth management.

Tota" ass$ts , D**3.3 billion ()*=.

O(n$r , ,overnment of India.

6$*sit$ www.bankofbaroda.com.

Shar$ Ho"!in Patt$rn of Bank of Baro!a


https://en.wikipedia.org/wiki/Commercial_bankhttps://en.wikipedia.org/wiki/Financial_serviceshttps://en.wikipedia.org/wiki/Financial_serviceshttps://en.wikipedia.org/wiki/Investment_bankinghttps://en.wikipedia.org/wiki/Investment_bankinghttps://en.wikipedia.org/wiki/Investment_bankinghttps://en.wikipedia.org/wiki/Mortgage_loanhttps://en.wikipedia.org/wiki/Mortgage_loanhttps://en.wikipedia.org/wiki/Private_bankinghttps://en.wikipedia.org/wiki/Private_equityhttps://en.wikipedia.org/wiki/Private_equityhttps://en.wikipedia.org/wiki/Wealth_managementhttps://en.wikipedia.org/wiki/Wealth_managementhttp://www.bankofbaroda.com/https://en.wikipedia.org/wiki/Commercial_bankhttps://en.wikipedia.org/wiki/Financial_serviceshttps://en.wikipedia.org/wiki/Financial_serviceshttps://en.wikipedia.org/wiki/Investment_bankinghttps://en.wikipedia.org/wiki/Mortgage_loanhttps://en.wikipedia.org/wiki/Private_bankinghttps://en.wikipedia.org/wiki/Private_equityhttps://en.wikipedia.org/wiki/Private_equityhttps://en.wikipedia.org/wiki/Wealth_managementhttp://www.bankofbaroda.com/


52/109


5ig 3.a

Ty2$ , S: SBI?

BS: S:/S:O %onstituent

%/O /ifty %onstituent

In!&stry , Banking! financial servicesFo&n!$! , 8 anuary *1*! Imperial Bank of India

H$a!&art$rs , 7umbai! 7aharashtra! India

Ar$a s$r-$! , 4orldwide5$y 2$o2"$ Smt. Arundhati Bhattacharya (%hairperson

Pro!&%ts , %onsumer banking! corporate banking! finance and

insurance! investment banking! loans! private! private

e&uity! savings! securities! asset! wealth management! credit cards

R$-$n&$ , Rs.=891 crore (@SD39 billion ()*=

Profit , Rs(*8=*8 crore (@SD.+ billion ()*=


S!" B!#$ %&

https://en.wikipedia.org/wiki/Types_of_business_entityhttps://en.wikipedia.org/wiki/Public_companyhttps://en.wikipedia.org/wiki/Ticker_symbolhttps://en.wikipedia.org/wiki/National_Stock_Exchange_of_Indiahttp://www.nseindia.com/live_market/dynaContent/live_watch/get_quote/GetQuote.jsp?symbol=SBINhttp://www.nseindia.com/live_market/dynaContent/live_watch/get_quote/GetQuote.jsp?symbol=SBINhttps://en.wikipedia.org/wiki/Bombay_Stock_Exchangehttp://www.bseindia.com/stock-share-price/x/y/500112/http://www.bseindia.com/stock-share-price/x/y/500112/https://en.wikipedia.org/wiki/London_Stock_Exchangehttp://www.londonstockexchange.com/exchange/searchengine/search.html?q=SBIDhttps://en.wikipedia.org/wiki/BSE_SENSEXhttps://en.wikipedia.org/wiki/CNX_Niftyhttps://en.wikipedia.org/wiki/Bankinghttps://en.wikipedia.org/wiki/Financial_serviceshttps://en.wikipedia.org/wiki/Mumbaihttps://en.wikipedia.org/wiki/Maharashtrahttps://en.wikipedia.org/wiki/Indiahttps://en.wikipedia.org/wiki/Arundhati_Bhattacharyahttps://en.wikipedia.org/wiki/Chairpersonhttps://en.wikipedia.org/wiki/Retail_bankinghttps://en.wikipedia.org/wiki/Retail_bankinghttps://en.wikipedia.org/wiki/Commercial_bankhttps://en.wikipedia.org/wiki/Financial_serviceshttps://en.wikipedia.org/wiki/Financial_serviceshttps://en.wikipedia.org/wiki/Investment_bankinghttps://en.wikipedia.org/wiki/Investment_bankinghttps://en.wikipedia.org/wiki/Private_equityhttps://en.wikipedia.org/wiki/Private_equityhttps://en.wikipedia.org/wiki/Savingshttps://en.wikipedia.org/wiki/Wealth_managementhttps://en.wikipedia.org/wiki/Credit_cardhttps://en.wikipedia.org/wiki/Crorehttps://en.wikipedia.org/wiki/Net_incomehttps://en.wikipedia.org/wiki/Crorehttps://en.wikipedia.org/wiki/Types_of_business_entityhttps://en.wikipedia.org/wiki/Public_companyhttps://en.wikipedia.org/wiki/Ticker_symbolhttps://en.wikipedia.org/wiki/National_Stock_Exchange_of_Indiahttp://www.nseindia.com/live_market/dynaContent/live_watch/get_quote/GetQuote.jsp?symbol=SBINhttps://en.wikipedia.org/wiki/Bombay_Stock_Exchangehttp://www.bseindia.com/stock-share-price/x/y/500112/https://en.wikipedia.org/wiki/London_Stock_Exchangehttp://www.londonstockexchange.com/exchange/searchengine/search.html?q=SBIDhttps://en.wikipedia.org/wiki/BSE_SENSEXhttps://en.wikipedia.org/wiki/CNX_Niftyhttps://en.wikipedia.org/wiki/Bankinghttps://en.wikipedia.org/wiki/Financial_serviceshttps://en.wikipedia.org/wiki/Mumbaihttps://en.wikipedia.org/wiki/Maharashtrahttps://en.wikipedia.org/wiki/Indiahttps://en.wikipedia.org/wiki/Arundhati_Bhattacharyahttps://en.wikipedia.org/wiki/Chairpersonhttps://en.wikipedia.org/wiki/Retail_bankinghttps://en.wikipedia.org/wiki/Commercial_bankhttps://en.wikipedia.org/wiki/Financial_serviceshttps://en.wikipedia.org/wiki/Financial_serviceshttps://en.wikipedia.org/wiki/Investment_bankinghttps://en.wikipedia.org/wiki/Private_equityhttps://en.wikipedia.org/wiki/Private_equityhttps://en.wikipedia.org/wiki/Savingshttps://en.wikipedia.org/wiki/Wealth_managementhttps://en.wikipedia.org/wiki/Credit_cardhttps://en.wikipedia.org/wiki/Crorehttps://en.wikipedia.org/wiki/Net_incomehttps://en.wikipedia.org/wiki/Crore


53/109


Tota" ass$ts Rs.8))**) crore (@SD2)) billion ()*=

Tota" $&ity Rs. )32*8 crore (@SD3) billion ()*=

O(n$r , ,overnment of India.

9$'*$rs , 9+ million users with 2=) million accounts ()*+

N&'*$r of $'2"oy$$s, !)33 ()*2

S"oan , The Banker to :very Indian.

Shar$ Ho"!in Patt$rn of SBI


https://en.wikipedia.org/wiki/Assethttps://en.wikipedia.org/wiki/Crorehttps://en.wikipedia.org/wiki/Equity_(finance)https://en.wikipedia.org/wiki/Indian_rupeehttps://en.wikipedia.org/wiki/Crorehttps://en.wikipedia.org/wiki/Crorehttps://en.wikipedia.org/wiki/Sloganhttps://en.wikipedia.org/wiki/Assethttps://en.wikipedia.org/wiki/Crorehttps://en.wikipedia.org/wiki/Equity_(finance)https://en.wikipedia.org/wiki/Indian_rupeehttps://en.wikipedia.org/wiki/Crorehttps://en.wikipedia.org/wiki/Slogan


54/109


5ig 3.b

Ty2$ ,


55/109


5ig 3.c

Ty2$


56/109


N&'*$r of $'2"oy$$s , +8!9=8 ()*=

6$*sit$ , www.icicibank.com.

)*+,+

)+)+ +.+

N% %& S'!(")

Promoters 'inancialInstittions /eneralP"lic

NBanks%tal'nds 0thers Central/ovt

Shar$ Ho"!in Patt$rn of ICICI

5ig 3.d

0. Data Ana"ysis J Int$r2r$tation

0. I. Si'2"$ 9o-in A-$ra$ of SBI


http://www.icicibank.com/http://www.icicibank.com/http://www.icicibank.com/http://www.icicibank.com/


57/109


.

1..

*...

*1..

,...

,1..

...

1..

SIM*LE MO+ING A+ERAGE %& SBI

Close Price S%A2.3

5ig 2.I.a

Int$r2r$tation

The chart shows 3) day moving average of SBI limited for a period of one year from

anuary )*2 to ?ecember )*2.The chart shows that the market are in increasing trend

at the beginning but from une the trend is flat and finally there is a sudden decline at the

end of /ovember . It is always good to sell when the S7A curve goes up crossing the

closing price and can buy when the closing price goes up crossing the S7A curve. So it is

good to buy in the month of 7arch.

0. I. R$"ati-$ Str$nth In!$: of SBI



58/109


.

*.

,.

.

4.

1.

).

5.

6.

7.

*..

RSI %& SBI

5ig 2.I.bInt$r2r$tationThe chart shows the Relative Strength Inde' of State Bank of India for a period of one

year from anuary )*2 till ?ecember )*2.The RSI indicates the buy and sell signal for

the best profitable investment and to minimi#e the loss. The buy signal is in the month of

uly and August. The sell signal is in the month of 7arch! 7ay and /ovember.

0. I. Rat$ of Chan$ of SBI



59/109


-*..

-6.

-).

-4.

-,.

.

,.

4.

).

ROC 14 D!) %& SBI

5ig 2.I.c

Int$r2r$tation,

The chart shows *2 day Rate of %hange in price of State Bank of India during one year

period from anuary )*2 till ?ecember )*2.The Rate of %hange helps in identifying

the overbought and over sold conditions during the period. The stock has reached

overbought condition during 7ay and this has made the price to fall. The oversold

condition was reali#ed during ?ecember and this has made the price to raise.

0. II. Si'2"$ 9o-in A-$ra$ of ICICI



60/109


.

,..

4..

)..

6..

*...

*,..

*4..

*)..

*6..

,...

SIM*LE MO+ING A+ERAGE OF ICICI

Close Price S%A2.3

5ig 2.I.d

Int$r2r$tation

The chart shows 3)days moving average of I%I%I Bank >td. for a period of one year

from anuary )*2 till ?ecember )*2. The chart shows that market is good since

beginning and a ma0or decline is in the month of ?ecember. It is always good to sell

when the S7A curve goes up crossing the closing price.

0. II. R$"ati-$ str$nth in!$: of ICICI



61/109


.

*.

,.

.

4.

1.

).

5.

6.

7.

*..

RSI OF ICICI

5ig 2.I.e

Int$r2r$tation

The chart shows the Relative Strength Inde' of I%I%I Bank >td. for a period of one year

from anuary )*2 till ?ecember )*2.The RSI indicates the buy and sell signal for the

best profitable investment and to minimi#e the loss. 4hen the value is near 3) we can

buy and when the value is near 8) we can sell. The buy signal is in 5ebruary and

?ecember. The sell signal is in 7arch! 7ay and /ovember.

0. II. Rat$ of %han$ of ICICI



62/109


-*..

-6.

-).

-4.

-,.

.

,.

4.

ROC 14DAYS OF ICICI

5ig 2.I.f

Int$r2r$tation,

The chart shows *2 day Rate of %hange in price of I%I%I Bank >td. during one year



overbought condition during 7arch and this has made the price to fall. The oversold

condition was reali#ed during ?ecember and this has made the price to rise.



63/109


0. III. Si'2"$ 9o-in A-$ra$ of HDFC

.

,..

4..

)..

6..

*...

*,..

SIM*LE MO+ING A+ERAGE OF -DFC

Close Price S%A2.3

5ig 2.I.g

Int$r2r$tation

The chart shows 3)days moving average of -?5% >td. for a period of one year from

anuary )*2 till ?ecember )*2. The chart shows that market is bullish for the entire

year. It is always good to sell when the S7A curve goes up crossing the closing price and

can buy when the closing price goes up crossing the S7A curve



64/109


0. III. R$"ati-$ Str$nth In!$: of HDFC

.

*.

,.

.

4.

1.

).

5.

6.

7.

RSI OF -DFC

5ig 2.I.h

Int$r2r$tation

The chart shows the Relative Strength Inde' of -?5% >td. for a period of one year from

anuary )*2 till ?ecember )*2.The RSI indicates the buy and sell signal for the best



65/109


profitable investment and to minimi#e the loss. The buy signal is in the month of

5ebruary and April. The sell signal is in the month of 7arch and 7ay.

0. III. Rat$ of Chan$ of HDFC

-*.

-1

.

1

*.

*1

ROC 14DAYS OF -DFC

5ig 2.I.i

Int$r2r$tation

The chart shows *2 day Rate of %hange in price of -?5% Bank >td. during one year




66/109



overbought condition during 7arch and 7ay and this has made the price to fall. The

oversold condition was reali#ed during 5ebruary! August and ?ecember and this has

made the price to rise.

0. I4. Si'2"$ 9o-in A-$ra$ of Bank of Baro!a

.

,..

4..

)..

6..

*...

*,..

SIM*LE MO+ING A+ERAGE OF BOB

Close Price S%A2.3

5ig 2.I.0

Int$r2r$tation



67/109


The chart shows 3)days moving average of Bank of Baroda >td. for a period of one year

from anuary )*2 till ?ecember )*2. The %hart shows that market is bullish trend and

then stabili#es only in the month of une. It is always good to sell when the S7A curve

goes up crossing the closing price and can buy when the closing price goes up crossing

the S7A curve. Sell at une and Buy at /ovember.

0. I4. R$"ati-$ Str$nth In!$: of Bank of Baro!a

.

*.

,.

.

4.

1.

).

5.

6.

7.

*..

RSI OF BOB

5ig 2.I.k

Int$r2r$tation



68/109


The chart shows the Relative Strength Inde' of Bank of Baroda >td. for a period of one

year from anuary )*2 till ?ecember )*2.The RSI indicates the buy and sell signal for

the best profitable investment and to minimi#e the loss. The buy signal is in the month of

5ebruary and Fctober. The sell signal is in the month of 7arch! 7ay and /ovember.

0. I4. Rat$ of Chan$ of BOB

-,.

-*1

-*.

-1

.

1

*.

*1

,.

,1

.

ROC 14DAYS OF BOB

5ig 2.I.l

Int$r2r$tationIFIM COLLEGE, BANGALORE68


69/109


The chart shows *2 day Rate of %hange in price of Bank of Baroda >td. during one year



overbought condition during 7arch and this has made the price to fall. The oversold

condition was reali#ed during the month of 5ebruary and this has made the price to rise.

3. Fin!ins

Stat$ Bank of In!ia )3.a+,

ICICI )3.*+,

INDICATOR BUY SELL

S7A 7arch /ovember

RSI uly and August 7ay and /ovember

RF% ?ecember 7ay

INDICATOR BUY SELLS7A 7arch and Fctober ?ecember

RSI 5ebruary and ?ecember 7arch! 7ay and /ovember

RF% ?ecember 7arch



70/109


HDFC )3.%+,

INDICATOR BUY SELL

S7A 7arch and 7ay August

RSI 5ebruary and April 7arch and 7ay

RF% 5ebruary! August and

?ecember

7arch and 7ay

Bank of Baro!a )3.!+,

INDICATOR BUY SELL

S7A 7arch and /ovember une

RSI 5ebruary and Fctober 7ay and /ovember

RF% 5ebruary 7arch

3. I.SU77ESTIONS



71/109


Technical analysis will improve the investment decision. Technical analysis is simple and

more reliable .The investor should have the knowledge regarding the market terms. So

that they can take ma'imum return from ma'imum investment. In case a trader entering

into the new industry first he has to select stocks to buy in new industry after making

careful study prospects and charts of the stock.

After analy#ing the past performance of selected stocks! it is found that the performance

of the stocks of Bank of Baroda can be bought because their market is in bullish trend

and the stocks of -?5% are in neutral condition and it is good to wait for the perfect

market. The stocks of SBI and I%I%I are in increasing trend since beginning and there is a

sudden down trend at the end and it can be bought in the buy signal using the technical

indicators.

The investors can take their investment decisions by considering the simple indicators. In

S7A! the investor can buy the stock when the closing price goes up crossing the S7A

curve and should sell when the S7A curve goes above the closing price. In RSI! the

investor can buy at the level of 3) and sell at the level of 8). These indicator can be

followed for making a profitable trade.

Investment Rules

• Invest for long term in e&uity markets.

• Align your thought process with the business cycle of the company.

• Set the purpose for investment.

• ?isciplined investment during market volatility helps attains profits.

•


72/109


@. CONCLUSION

Technical analysis is a techni&ue which gives an idea about future share prices of selected

companies in which we invest. Fn the basis of the knowledge of technical analysis one

can make 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. The more

accurate prediction of stock prices of selected companies the investor to carry out

fundamental analysis of stock prices! they can predict of future trend of stock prices.

Fn the basis of prediction of four companies different pattern of stock prices of these

companies give an idea of future trend of these companies could be analy#ed with the

right technical analysis tools! technical analysis of utmost importance to predict trend of

short and medium term price movement and help the investors to select the right plan and

decisions to invest in the remunerative stocks.

Ann$:&r$



73/109


The calculation of simple moving average! Relative strength inde' and Rate of change is

done for two years it is shown here

CALULATION OF SI9PLE 9O4IN7 A4ERA7E

ICICI SBI -DFC BOB

D!"

C.%)"

*(/"

SMA3

0

C.%)"

*(/"

SMA3

0

C.%)"

*(/"

SMA3

0

C.%)"

*(/"

SMA3

0

*-8an-*4 *.75(4 *5)1( ))1(.1 )15(5

,-8an-*4 *.51(* *54,(1 )1)(61 )1.(,

-8an-*4 *.)5 *5*)(* ))(1 )47(71

)-8an-*4 *.4.(5

*)65()

1 )), )5(7

5-8an-*4

*.47(7

1

*)17(5

1 ))4(51 )*)(51

6-8an-*4

*.14(.

1 *)11(4 ))4()1 ),7(61

7-8an-*4 *.1*(1 *)7(* ))(.1 ),.(*1

*.-8an-*4

*.,4(1

1

*).6(6

1 )),(*1 )*,(41

*-8an-*4 *.1)(,

*)4*(7

1 )5,(51 )*5(6

*4-8an-*4

*.5(1

1 *),)(7 )5,(*1 ),.(5

*1-8an-*4

*.16(

1

*)4(1

1 )6.(1 )4

*)-8an-*4

*.).(6

1 *)5 )5(71 )7(61

*5-8an-*4 *.1

*),,(.

1 ))6( ),6(7

,.-8an-*4 *.44(* *)4* ))7(61 ),,(1

,*-8an-*4 *.56(6 *)16() )5)(51 ),(,1

,,-8an-*4

*.65(.

1

*)41(5

1 )55(5 )*()1

,-8an-*4 *.57(*

*)15(.

1 )57(4 ),5(4



74/109


,4-8an-*4

*.15(7

1

*),*(7

1 )5(71 ).,(11

,5-8an-*4

*.*.(.

1

*174(1

1 )47(5 1)7(71

,6-8an-*4

*.*7(*

1

*171(7

1 )41(,1 1)5()

,7-8an-*4

*..*(7

1

*15()

1 )41() 11)(.1

.-8an-*4 754(51

*1*5(1

1 ),(4 1(1

*-8an-*4 766(1 *1,1() ),6(7 146(71

-'e"-*4 7)(5

*467(6

1 ),)(1 1*(41

4-'e"-*4 75.(* *1*) ).(11 14,(1

1-'e"-*4 7))(*1 *1,*(* )5(, 14,(41

)-'e"-*4 715()

*1.4(,

1 )45(1 15(51

5-'e"-*4 7)*(51

*1,)(5

1 )45(7 115(1

*.-'e"-*4 717(11 *1*4( )4(51 1),(

**-'e"-*4 7)7(*

*.,)(16

1 *1*6(1 *).6(71 )41(*

)15(1)6

1).(*

176(5

*,-'e"-*4 777(,1

*.,(*

*1,(5

*).*(*7

5 )41()1

)1)(7,*

5 1)*(5

171(*5

*-'e"-*4 76*(,

*.,.(*6

*477()

1

*17(*.

, )(,1 )1)(*1 1*() 17*(,,

*4-'e"-*4 766(4

*.*5(1)

*451(*

*161(.)

6 )4*(51 )11(4*1 1)(*1

165(4,)

5

*5-'e"-*4

*..7(4

1

*.*)(1,

, *45(4

*155(7,

5 )1.(11

)11(.

1(51 16(711

*6-'e"-*4

*.5(5

1

*.*)(**

1

*477(.

1 *15,(15 )).(11

)14(67

15(5 16*(,

*7-'e"-*4

*..()

1

*.*1(

1

*1.6()

1

*1)5()5

6 ))7(1 )11(.1 1*(41 156(.4

,.-'e"-*4

*..6(4

1 *.*(7 *46*(1

*1),(4,

1 )),(51 )11(.4 1*(4

154(46*

5



75/109


,*-'e"-*4

*.,4(5

1

*.*(7.

5 *1.(* *116(7 ))4(6

)11(*,6

1*6(

15*(4

,4-'e"-*4 *.)(, *.*(,4

*1*.(5

1

*114(1,

5 )5.(,

)11(.4

1,5

1)6(*)

5

,1-'e"-*4 *..(5

*.*(.*

,

*1.)(5

1

*11.(1,

, )5.(6

)14(776

15(1

1)1(16

,)-'e"-*4 *.)(4 *.*,(,6

*1,*()

1

*14)(41

6 )5)(4

)14(6))

5 15(6

1),(.*

5

,6-'e"-*4 *.4(5

*.**(5.

6 *1*(5

*14,(74

6 ))5(1

)14()1*

5 11.()1

117(.16

-%ar-*4

*.,7()

1 *.**(1 *1*6(1

*17(47

5 )))(*1 )14(16 141()

11)(,6*

5

4-%ar-*4 *.)6(

*.*,(

5 *147(5

*1)(41

)5.(41 )14() 15)(11 114(511

1-%ar-*4

*.75(*

1

*.*,(74

6 *15(1

*1()*

5 ))7(* )14(41 )*,(,

114(.6)

5

)-%ar-*4

**()

1

*.*4(1.

, *15)(,

*1*(,7

6 )51(1

)14(,5*

5 )*1(*1

11(1)

5

5-%ar-*4 *,.*(

*.*6(15

1

*)46(5

1

*1*(.,

, 5**(1

)11()

5 )47(1

114(,5

*.-%ar-*4 **7(6

*.,(*.

*)7*(

1

*1(

1 54(1 )15(1 )1,(6

111(746

**-%ar-*4

**76(4

1

*.,7(6

*)51(*

1

*1)(.,

, 5,1(1

)17(65*

5 )45(,1 116(1,1

*,-%ar-*4

*,*.(5

1 *.1(55

*)44(5

1

*15()4

6 5,1(11

)),(146

)4,(*1 1)*(.*

*-%ar-*4

*,*6(,

1 *.4,(76 *)1*(6

*14.(,1

54,(,1 ))1(55 )4(1 1)(7,

*4-%ar-*4

*,*(5

1

*.1.(74

5 *)1(1

*144(56

1 5*(5 ))7(.6 )1)(51

1)6(.

*6-%ar-*4 *,.4(6

*.16(*1

5 *)76(4

*11.(14

1 5(51 )5,(151 )).( 15*(541

*7-%ar-*4

*,*.(,

1

*.))(5

1

*5.5(

1

*115(57

1 55(6 )5)(,7 )).(,1

15)(.6

,.-%ar-*4 *,..(7 *.54(.) *)55(7 *1)(*7 5.(6 )57()* )4*(4 157(4



76/109


6 1 5

,*-%ar-*4 **77 *.6*(6 *5.,()

*1)7(,4

5(61

)6,(61

)11(7

16(*,*

5

,,-%ar-*4

**75(7

1

*.67(64

, *5.,(4

*151(64

6 5*(71

)61()5

)11(61

165(.16

,4-%ar-*4 *,4,(4

*.77(*7

5

*5,1(4

1

*16,(45

, 51.(41

)67(.7*

5 ))1

17.()4*

5

,1-%ar-*4

*,1,(1

1

**.6(7)

*54*(.

1 *17.(. 547()

A Study on equity analysis of selected banking stocks

Documents

Transcript of A Study on equity analysis of selected banking stocks