A

SYNOPSIS ON

“A STUDY ON EQUITY ANALYSIS WITH REPECT TO BANKING

SECTOR”

AT

INDIABULLS SECURITIES LIMITED

IN PARTIAL FULFILLMENT FOR THE AWARD OF

MASTERS OF BUSINESS ADMISSION

SUBMITTED BY

BACHU PRAVALIKA

(227317672112)

SAANVI PG COLLEGE FOR WOMEN

ALMASGUDA (V), NEAR CHAMPAPET, SAROORNAGAR (M),

HYDERABAD 500058.

AFFILIATED TO

OSMANIA UNIVERSITY, HYD

BATCH: 2017-2019

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 ABSTRACT

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

balance sheet, the amount of the funds contributed by the owners (the stockholders)
plus the retained earnings (or losses). Also referred to as "shareholders' equity". In the
context of margin trading, the value of securities in a margin account minus what has
been borrowed from the brokerage.In the context of real estate, the difference between
the current market value of the property and the amount the owner still owes on the
mortgage.

It is the amount that the owner would receive after selling a property and paying off
the mortgage. In terms of investment strategies, equity (stocks) is one of the principal
asset classes. The other two are fixed-income (bonds) and cash/cash-equivalents.
These are used in asset allocation planning to structure a desired risk and return
profile for an investor's portfolio. The term's meaning depends very much on the
context.

In finance, in general, you can think of equity as ownership in any asset after all debts
associated with that asset are paid off. For example, a car or house with no
outstanding debt is considered the owner's equity because he or she can readily sell
the item for cash. Stocks are equity because they represent ownership in a company.

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INTRODUCTION

WHAT IS EQUITY?

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.

EQUITY ANALYSIS:-

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 ANALYSIS ON BANKING SECTOR

The main aim of this project is to analyze current growth trend of scripts of
banking in equity market. Based on the study of Indianeconomy.Research studies
have proved 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.

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Since 1990 till date, 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 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.Compared to most other forms of investments, investing in
equity shares offers the highest rate of return, if invested over a longer duration.

Each investment alternative has its own strengths and weaknesses. Some options seek
to achieve superior returns (like equity), but with corresponding higher risk. Other
provide safety (like PPF) but at the expense of liquidity and growth. Other options
such as FDs offer safety and liquidity, but at the cost of return.

Mutual funds seek to combine the advantages of investing in arch of these alternatives
while dispensing with the shortcomings. Indian stock market is semi-efficient by
nature and, is considered as one of the most respected stock markets, where
information is quickly and widely disseminated, thereby allowing each security’s
price to adjust rapidly in an unbiased manner to new information so that, it reflects the
nearest investment value.

And mainly after the introduction of electronic trading system, the information flow
has become much faster. But sometimes, in developing countries like India,
sentiments play major role in price movements, or say, fluctuations, where investors
find it difficult to predict the future with certainty.

Banks are the major part of any economic system. They provide a strong base to
Indianeconomy as well. Even in the share markets, the performance of banks shares is
ofgreat 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 report revolves
around all factors, their understanding and a theoretical and technical analysis

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NEED FOR THE STUDY

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.

OBJECTIVESOF THESTUDY

The major objectives of the study:-

 To study and compare the performance of the banks in the banking sector.
 To help the investors for choosing to make their investments in banking sector.
 To calculate the risk-return stock of banking sector.
 To understand the concept of investing in equity shares.
 Comparative analysis of 4 selected banks.

SCOPEOFTHESTUDY

The scopes of the project are limited to understanding the basics of fundamental
analysis and technical analysis and apply it to take a decision of investing in banking
sector.

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LIMITATIONSOFTHESTUDY

 The study is based on the data is given by the investors and the employee which
may not be 100% correct.
 Moreover, very few investors and agents have a detail knowledge of the study.
 The study is confined to only one sector.
 The project has been limited to investment analysis of banking sector only.
DATAANALYSIS ANDINTERPRETION

DATA COLLECTION

Fundamental Analysis:

Fundamental analysisrefers to the study of the core underlying elements that influence
the economy of a particular entity. It is a method of study that attempts to predict
price action and market trends by analyzing economic indicators, government policy
and societal factors within a business cycle framework. The fundamental analysis of a
company involves the following parameters:

1. Macroeconomic Analysis
2. Industry Analysis
3.Company analysis

How does an investor determine if a stock is undervalued, overvalued, or trading at

fair market value? With fundamental analysis, this may be done by applying the
concept of intrinsic value. If all the information regarding a corporation's future
anticipated growth, sales figures, cost of operations, and industry structure, among
other things, are available and examined, then the resulting analysis is said to provide
the intrinsic value of the stock. To a fundamentalist, the market price of a stock tends
to move towards its intrinsic value. If the intrinsic value of a stock is above the
current market price, the investor would purchase the stock. However, if the investor

6
found through analysis that the intrinsic value if a stock was below the market price
for the stock, the investor would sell the stock from their portfolio or take a short
position in the stock.

1. Macroeconomic Analysis:

Change in rates by RBI:

Looking at the changing scenario, RBI keeps on changing rates such as Repo Rate,
Reverse Repo Rate and Cash Reserve Ratio. These rates have a direct relation with
Bank’s performance and in turn share prices are linked with bank’s performance.
Thus, a change in these rates or even a speculation of change in these rates affects
share prices.

Global Analysis:

Any change in global economy or in other words, global changes also affects Indian
Economy. For example: The recession was first observed in USA and later on it
caught its lead in other countries too. When it entered India, the share market crashed
literally. It affected many banks as ICICI and others, resulting in loss of people’s
confidence towards banks.

Change in Governments Policy:

The government takes desired steps and keeps on reviewing its policies, rules,
regulations and procedures. A change in FDI and FII inflow restrictions, entry exit
barriers for foreign banks in India, EXIM regulations, change in Basel norms, etc.

7
form a part of important government policies. For example if government allows
entry of foreign banks in India, then competition would rise, and it may happen that
those foreign banks may outperform and leave our own banks far behind. Thus, some
restriction would follow and this will definitely affect share prices.

Effect of Inflation on banking operations:

Several economists have found that countries with high inflation rates have
inefficiently small banking sectors and equity markets. This effect suggests that
inflation reduces bank lending to the private sector, which is consistent with the view
that a sufficiently high rate of inflation induces banks to ration credit.

Effect of monetary policy on Banking Sector:

Monetary policy affects banking sector in many ways. One way is through
creditMarkets. Because of imperfect information, incomplete contracts and imperfect
bankCompetition, monetary policy may affect banks’ loan supply. In particular,
expansive Monetary policy may increase banks’ loan supply directly (bank lending
channel), or Indirectly by improving borrowers’ net worth and, hence, by reducing the
agency costs of lending.

2. Industry Analysis:

Life Cycle Analysis:

Bank plays an important role in the economic development of the country. The entire
commercial and industrial activities are well knitted with the banks. One cannot
imagine the cessation of the banking activities even for a day. There may be an
economic crisis in the country if the banks stop functioning for some days.

In the early days, the banking business was confined to receiving of deposits and
lending of money. But the modern bankers undertake wide variety of functions to
assist their customers. Banks are like any other business in that they produce goods

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and services to customers. Like any other businesses, their products have life cycles.
Cheques are in a decline phase of their life cycle and use of cheques is declining
rapidly and being replaced by electronic bill pay and debit cards. Internet Banking and
Electronic Bill pay are in their growth phase as more and more customers are using
these services. Cards or Cheque Cards are in their maturity phase as they are accepted
by nearly everyone. So overall, the banking industry is in a GROWTH PHASE, as
new measures are being adopted overtime so as to make transactions speedy and easy.

Porter’s five forces analysis:

1. Threat of New Entrants. The average person can't come along and start up a bank,
but there are services, such as internet bill payment, on which entrepreneurs can
capitalize. Banks are fearful of being squeezed out of the payments business, because
it is a good source of fee-based revenue. Another trend that poses a threat is
companies offering other financial services. Also, the possibility of a mega bank
entering into the market poses a real threat.

2. Power of Suppliers. The suppliers of capital might not pose a big threat, but the
threat of suppliers luring away human capital does. If a talented individual is working
in a smaller regional bank, there is the chance that person will be enticed away by
bigger banks, investment firms, etc.

3. Power of Buyers. The individual doesn't pose much of a threat to the banking
industry, but one major factor affecting the power of buyers is relatively high
switching costs. If a person has a mortgage, car loan, credit card, checking account
and mutual funds with one particular bank, it can be extremely tough for that person
to switch to another bank. In an attempt to lure in customers, banks try to lower the
price of switching, but many people would still rather stick with their current bank.
On the other hand, large corporate clients have banks wrapped around their little
fingers. Financial institutions - by offering better exchange rates, more services, and

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exposure to foreign capital markets - work extremely hard to get high-margin
corporate clients.

4. Availability of Substitutes. There are plenty of substitutes in the banking industry.

Banks offer a suite of services over and above taking deposits and lending money, but
whether it is insurance, mutual funds or fixed income securities, chances are there is a
non-banking financial services company that can offer similar services. On the
lending side of the business, banks are seeing competition rise from unconventional
companies. Sony, General Motors and Microsoft all offer preferred financing to
customers who buy big ticket items

5. Competitive Rivalry. The banking industry is highly competitive. The financial

services industry has been around for hundreds of years and just about everyone who
needs banking services already has them. Because of this, banks must attempt to lure
clients away from competitor banks. They do this by offering lower financing,
preferred rates and investment services. The banking sector is in a race to see who can
offer both the best and fastest services, but this also causes banks to experience a
lower ROA. They then have an incentive to take on high-risk projects. In the long run,
we're likely to see more consolidation in the banking industry. Larger banks would
prefer to take over or merge with another bank rather than spend the money to market
and advertise to people.

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DATA ANALYSIS

To study the financial performance of the following selected Banks:

1. STATE BANK OF INDIA

STATE BANK OF INDIA COMPANY PROFILE

Company Information
Headquarters: Mumbai, India
Year of Incorporation: 1806
Base interest rate: 9.75%
No. of branches: Over 14,000
No. of ATMs: Over 10,000

State Bank of India (SBI) is the India’s oldest and largest bank by revenue, assets and
market capitalization. SBI has launched various cost-effective channels, such as SBI
Tiny Card(biometrically enabled card), Kiosk banking (internet enabled
kiosk/computer with biometric validation) and cell phone messaging channel. The
bank also has more than 170branches in ~30 foreign countries, including multiple
locations in the US, Canada, and Nigeria.

“The objective of the lending rate cut is to improve demand for assets which in our
view could have a positive cascading effect on related industries”

KEY MANAGEMENT

MD & CEO: Mr. PratipChaudhari

Managing Director: Mr. Hemant G. Contractor
Managing Director: Mr. Diwakar Gupta
Managing Director: Mr. A. Krishna Kumar

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The State Bank Group includes a network of eight banking subsidiaries and several
nonbanking Subsidiaries the Eight Banking subsidiaries are as follows:

 State Bank of Bikaner and Jaipur (SBBJ)

 State Bank of Hyderabad (SBH)
 State Bank of India (SBI)
 State Bank of Indore (SBIR)
 State Bank of Mysore (SBM)
 State Bank of Patiala (SBP)
 State Bank of Saurashtra (SBS)
 State Bank of Travancore (SBT)

Banking segments of SBI

Treasury: Includes investmentportfolio and tradingin foreign exchangecontracts

andderivative contracts.
Corporate/Wholesale: Comprises of lending activities of Corporate Accounts Group,
Mid Corporate Accounts Group and Stressed Assets ManagementGroup.
Retail :Comprises of branches in National Banking Group, which includes personal
banking activities, including lending activities tocorporate customers.
Other Services: NRI Services, ATM Services, Demat Services, E-Pay/E-Rail
Broking Services.

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Data Analysis and Interpretation

For the month of Jan 2018

Date Open High Low Close

03-Jan-2018 20,621.61 20,664.80 20,531.00 20,561.05

04-Jan-2018 20,617.38 20,651.21 20,449.01 20,498.72

05-Jan-2018 20,516.95 20,516.95 20,243.95 20,301.17
13-Jan-2018 20,395.50 20,425.85 20,114.17 20,184.74
14-Jan-2018 20,163.85 20,217.62 19,629.22 19,691.81
17-Jan-2018 19,714.42 19,720.43 19,158.43 19,224.12
11-Jan-2018 19,279.77 19,431.56 19,003.60 19,196.34
12-Jan-2018 19,353.34 19,574.63 19,048.56 19,534.17
13-Jan-2018 19,492.30 19,522.38 19,136.27 19,182.82
14-Jan-2018 19,198.04 19,447.82 18,811.96 18,860.44
17-Jan-2018 18,911.43 19,018.94 18,779.38 18,882.25

18-Jan-2018 18,983.20 19,120.62 18,933.47 19,162.05

19-Jan-2018 19,153.31 19,167.13 18,898.56 18,978.32
20-Jan-2018 18,892.43 19,170.26 18,794.73 19,046.54
21-Jan-2018 19,014.15 19,135.34 18,932.40 19,014.53
24-Jan-2018 19,165.69 19,194.46 18,998.38 19,151.28
25-Jan-2018 19,227.42 19,340.99 18,949.44 18,969.45
27-Jan-2018 19,156.69 19,156.69 18,656.05 18,684.43
28-Jan-2018 18,715.62 18,723.12 18,235.45 18,395.97
31-Jan-2018 18,226.21 18,395.16 18,038.48 18,327.76

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Analysis

In this month market opened at above 20,000 points and created its all time
high on first trading days at 20,664. Market movement of this month was 2400 to
2500 points. Market made its all tile low at last trading days of the month at 18,038
points.

Reasons

 High inflation rate

 All foreign market had negative during this month
 RBI quarterly review of credit policy.

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 For the month of Feb 2018

Date Open High Low Close

01-Feb-2018 18,425.18 18,452.13 17,982.17 18,022.22

02-Feb-2018 18,216.91 18,313.00 18,042.61 18,160.62

03-Feb-2018 18,113.73 18,466.21 18,134.61 18,449.31

04-Feb-2018 18,450.14 18,542.20 17,926.98 18,015.15

14-Feb-2018 18,135.02 18,180.94 17,977.01 18,037.19

15-Feb-2018 18,141.51 18,141.51 17,742.18 17,775.70

16-Feb-2018 17,723.99 17,864.32 17,515.35 17,592.77

17-Feb-2018 17,603.29 17,636.88 17,362.59 17,463.04

11-Feb-2018 17,519.13 17,752.56 17,295.62 17,728.61

14-Feb-2018 17,940.16 18,227.62 17,857.12 18,202.20

15-Feb-2018 18,260.15 18,361.66 18,050.48 18,273.80

16-Feb-2018 18,273.13 18,358.84 18,216.12 18,300.90

17-Feb-2018 18,345.12 18,532.61 18,233.79 18,513.82

18-Feb-2018 18,564.15 18,690.97 18,159.82 18,211.52

21-Feb-2018 18,238.54 18,457.49 18,152.66 18,438.31

22-Feb-2018 18,390.72 18,457.90 18,187.33 18,296.16

23-Feb-2018 18,233.77 18,377.48 18,150.01 18,178.33

24-Feb-2018 18,135.12 18,135.12 17,559.70 17,632.41

25-Feb-2018 17,775.15 17,812.44 17,469.97 17,700.91

28-Feb-2018 17,811.15 18,296.53 17,718.88 17,823.40

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Analysis

In first fortnight market made its all time low at 17,295 on 11th February of
this month and in second fortnight made its all time high at 18,690 on 18th February of
this month. Market movement of this month was 1200 to 1300 points. After that
market crashed and gave closing on 28th February at 18,823 points whish was 700
points down than the last month.

Reasons

 Previous bull trend(First fortnight)

 Budget declared
 Tsunami in Japan

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 For the month of March 2018

Date Open High Low Close

01-Mar-2018 17,982.28 18,478.68 17,964.39 18,446.50
03-Mar-2018 18,318.32 18,603.57 18,253.62 18,489.76
04-Mar-2018 18,622.70 18,736.97 18,448.69 18,486.45
14-Mar-2018 18,361.65 18,361.65 18,058.71 18,222.67
15-Mar-2018 18,277.34 18,466.81 18,266.62 18,439.65
16-Mar-2018 18,522.80 18,583.30 18,303.80 18,469.95
17-Mar-2018 18,430.84 18,430.84 18,261.26 18,327.98
11-Mar-2018 18,248.11 18,368.43 18,133.29 18,174.16
14-Mar-2018 18,167.17 18,463.84 18,155.43 18,439.48
15-Mar-2018 18,113.79 18,326.33 17,920.55 18,167.64
16-Mar-2018 18,263.68 18,444.47 18,263.68 18,358.69
17-Mar-2018 18,227.16 18,354.27 18,174.02 18,149.87
18-Mar-2018 18,251.18 18,259.61 17,849.53 17,878.81
21-Mar-2018 17,984.72 18,014.73 17,792.17 17,839.05
22-Mar-2018 17,929.16 18,041.38 17,878.80 17,988.30
23-Mar-2018 17,972.04 18,218.28 17,950.17 18,213.16
24-Mar-2018 18,286.42 18,373.97 18,269.32 18,350.74
25-Mar-2018 18,480.69 18,858.30 18,480.69 18,815.64
28-Mar-2018 18,799.71 19,024.18 18,799.57 18,943.14
29-Mar-2018 18,949.57 19,226.21 18,944.82 19,120.80
30-Mar-2018 19,178.77 19,357.17 19,178.77 19,290.18
31-Mar-2018 19,339.75 19,575.16 19,284.35 19,445.22

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Analysis

After great T-sunami in Japan and Budget market was recovery in this month.
In tis month market made its all time high at 19,575 on 31st March and all time
low at 19,792 points on 21st March. This month market gave good return to the
investor because when market was closed 31st march at 19,792 points it was 1300
points up than the last month closing.

Reasons

 Positive impact of Budget

 FIIs offloading ` 8700 cr. Between January to March

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2017-18

 Starting with good result of Indian corporate.

 Heavily investment of FIIs in Indian bourses
 Goldman Sachs controversy makes all the financial market floundering at the
end of the month.
 Crisis in European country make fall in the Sensex
 Fear of higher inflation rate(13.73 per cent).
 Higher industrial production.
 Acquisitions, Mergers, IPOs, new orders make rise in the Sensex.
 Less than expected hike in interest rate.
 Opening ceromany of CWG proves that india is economically powerful.
 Dismal IIP numbers.
 Industrial growth was declined to 4.4 per cent.
 Higher inflation rate.
 RBIs quarterly review of credit policy.
 Announcement of Union Budget.
 Tsunami in Japan.

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 Sensex
25000
20000
15000
10000
5000 Sensex
0

15
Inflation & Repo rate
10

5 Inflation %

Repo rate
0 %
July

October
August

November

Fabruary
April
May

September

January

March
June

Decenber

IIP & Crude Oil

400
300
200 IIP

100
Crude Oil
0 (in $)
October
August
April

Fabruary
June

Decenber

20