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I am thankful to ‘Angel Broking ltd’ Pune, for giving me an opportunity to do my internship in
their esteemed organization. I am thankful to Mr. Mudassar Maner Assistant unit manager, for
providing help in order to carry out the project.

I take this opportunity to express my deep sense of gratitude to my project guide Mr. Ratikanta
Ray, course coordinator Mrs. Vanita Kaur and academic Director Mr. S. N. Tiwari.

Thank you

Firoz Parekh


I Zubin Parekh, hereby declare that all the Information furnished in this project report titled
BROKING LTD’ is my original work containing authentic facts and figures.

This piece of work is only submitted to Indian Institute of Management Training, in
partial fulfillment of PGDBM Course.



in Firoz Parekh

The project “FUNDAMENTAL ANALYSIS OF BANKING STOCKS” being carried out for
ANGEL BROKING LTD, For analyzing investment opportunities available in banking stocks
listed on stock exchange for long term prospect to the investors.

As with the most analysis, the goal of the fundamental analysis is to derive a forecast and profit
from the future price movements of stock price.

At company level, the fundamental analysis involves examination of the financial data,
management, business concept and competition. At the industry level, there might be an
examination of the supply and demand forces for the product offered. For the national economy,
the fundamental analysis might focus on economic data to assess the present and future growth
of the economy.

The fundamental analysis combines economic, industry and company analysis to derive a stock’s
current fair value and forecast future value. If fair value is not equal to current stock price, the
researcher believes that the stock is either over or under valued and the market price will
gravitate towards fair value.

1 Introduction
1.1 About the organization 6
1.2 About the topic 13
1.3 Aim of the study 14

1.4 Objective of the study 15
1.5 Scope of the study 16
2 Research Methodology
2.1 Method of data collection 19
2.2 Sample of study 20
2.3 Hypothesis 21
2.4 About Questionnaire 22
2.5 Data analysis 23
3 Data analysis And Interpretation
3.1 Indian Economy 31
3.2 Banking Sector 39
3.3 Company Analysis 47
4 Conclusions, Suggestion And
Recommendation 65
4.1 Conclusions 66
4.2 Suggestion 67
4.3 Recommendation
5 Bibliography 69
6 Annexure
Questionnaire 72

1.1About The Organization
Angel Broking's tryst with excellence in customer relations began in 1987. Today, Angel has
emerged as one of the most respected Stock-Broking and Wealth Management Companies in
India. With its unique retail-focused stock trading business model, Angel is committed to
providing ‘Real Value for Money’ to all its clients.

The Angel Group is a member of the Bombay Stock Exchange (BSE), National Stock Exchange
(NSE) and the two leading Commodity Exchanges in the country: NCDEX & MCX. Angel is
also registered as a Depository Participant with CDSL. It is the only 100% retail stock broking
house offering a gamut of retail centric services like:
► E-broking,
► Investment Advisory,
► Wealth Management Services,
► Portfolio Management Services &
► Commodities

The Angel Group of Companies was brought to life by Mr. Dinesh Thakkar. He ventured into
stock trading with an intention to raise capital for his own independent enterprise. However, he
recognised the opportunity offered by the stock market to serve individual investors. Thus
India’s first retail-focused stock-broking house was established in 1987. Under his leadership,
Angel became the first broking house to embrace new technology for faster, more effective and
affordable services to retail investors.

The Angel group is managed by a team of 5100+ direct employees. It has a nationwide network
comprising 21 Regional centers, 175 branches, 3 PCG (Private Client Group), 6810+ registered
sub brokers and business associates and 12720+ active trading terminals which cater to the
requirements of 589700+ retail clients.

Angel Broking has been awarded the prestigious ‘Major Volume Driver’ award consecutively for
5 years, from 2005 to 2009 from Bombay stock exchange of India .

Central Support & Registered Office:
G-1, Akurti Trade centre, Road No-7, MIDC, Marol,
Andheri (E)
Mumbai- 40093.

Corporate Office:
612, Acme Plaza,
Opp. Sangam Cinema,
Andheri (E),
Mumbai -4000059.

Regional Offices:
(1) Ahmedabad (6) Lucknow (11) Rajkot
(2) Bangaluru (7) Jaipur (12) Nashik
(3) Chennai (8) Kanpur (13) New Delhi
(4) Hyderabad (9) Kolkata (14) Pune
(5) Indore (10) Surat (15) Visakhapatnam

Private Client Group Offices:
(1) Ahmedabad
(2) Surat
(3) Mumbai

Sub-Broker Marketing Office:
Acme Plaza,
Andheri (E), Mumbai.

Angel Group of Companies:

Angel Broking Ltd.
Member on the BSE and Depository Participant with CDSL
Angel Capital & Debt Market Ltd.
Membership on the NSE Cash and Futures & Options Segment
Angel Commodities Broking Ltd.
Member on the NCDEX & MCX
Angel Securities Ltd.
Member on the BSE

Angel’s Moto:
To have complete harmony between quality-in
process and continuous improvement to deliver
exceptional service that will delight our Customers
and Clients.

Angel’s Business Philosophy:
●Ethical practices & transparency in all our dealings

●Customers interest above our own

●Always deliver what we promise

●Effective cost management

Angel’s CRM Policy: Customer is king

“A Customer is the most Important Visitor on our
premises. He is not dependent on us, but we are
dependent on him. He is not an interruption in our
work. He is the purpose of it. He is not an outsider
in our business. He is part of it. We are not doing
him a favour by serving him. He is doing us a
favour by giving us an opportunity to do so.”
- Mahatma Gandhi

Angel’s Quality Assurance Policy:

We are committed to providing world-class
products and services which exceed the
expectations of our customers, achieved by
teamwork and a process of continuous

Angel’s Online Trading Software:
Angel Broking has four unique Products to suit Individual needs

Angel Investor Angel Trade Angel Diet Angel Anywhere
Browser based Browser based Application based Application based
Static rates refresh Streaming quotes Streaming quotes Streaming quotes

that works behind
most of the firewalls
4 exchanges on single 4 exchanges on single 4 exchanges on single BSE & NSE on single
screen screen screen screen
Suitable for Investors Suitable for Investors Suitable for Traders Suitable for Traders
& Traders
For people who invest For frequent investors For day traders with For traders with high
infrequently with a & traders who wants high volumes & volume and frequent
long term perspective to access markets frequent trading trading, who are
and who do not need from different inclined towards
to check the rates terminals trading based on
constantly charts & technical

Key People:

Mr. Dinesh Thakkar
Founder Chairman & Managing Director.

He is among the first generation stock broker who is credited for conceptualizing and then
subsequently promoting Angel Group in 1987. He was attracted towards the stock market due to
its prospects of fast growth. He proved his skill and abilities through efficient trading of stocks
by using advanced and innovative tools of technical analysis.

He started his operation as a sub broker from a small office at Dalal Street with a client base of
just around 25 clients and total staff strength of 3 employees. With his 100% focus on the retail
clientele coupled with his expertise in investment advisory services, he has scaled much greater
heights as is evident from its nationwide presence today.
Today team Angel has over 5100+ direct employees. It has a nationwide network comprising 21
Regional centers, 175 branches, 3 PCG (Private Client Group), 6810+ registered sub brokers and
business associates and 12720+ active trading terminals which cater to the requirements of
589700+ retail clients.

Mr. Lalit Thakkar
Director- Research.

Mr. Lalit Thakkar is the motivating force behind Angel’s highly acclaimed Research team. He’s
been a part of the senior management team since the Angel Group’s inception. His technical and
fundamental outlook has provided impetus to Angel’s market research team. Research-based &
personalized advisory services are Angel’s forte, and Mr. Lalit Thakkar has undoubtedly been
the brain behind it.

1.2About The Topic
STOCK EXCHANGE” involves analyzing banks financial statements and health, its
management and competitive advantages, and its competitors and markets.

Fundamental analysis is performed on historical and present data, but with the goal of making
financial forecasts. The objective of the analysis is to determine what stock to buy and at what
price. Fundamental analysis maintains that markets may misprice a security in the short run but
that the "correct" price will eventually be reached. Profits can be made by trading the mispriced
security and then waiting for the market to recognize its "mistake" and reprice the security.

Investors may use fundamental analysis within different portfolio management styles.

1) Buy and hold investors believe that latching onto good businesses allows the investor's
asset to grow with the business. Fundamental analysis lets them find 'good' companies, so
they lower their risk and probability of wipe-out.
2) Investor may use fundamental analysis to correctly value 'good' and 'bad' companies.
Even 'bad' companies' stock goes up and down, creating opportunities for profits.
3) Investor may also consider the economic cycle in determining whether conditions are
'right' to buy fundamentally suitable companies.
4) Value investors restrict their attention to under-valued companies, believing that 'it's hard
to fall out of a ditch'. The value comes from fundamental analysis.
5) Investor may use fundamental analysis to determine future growth rates for buying high
priced growth stocks.

Investors can use either a top-down or bottom-up approach.
1)The top-down investor starts his analysis with global economics, including both international
and national economic indicators, such as GDP growth rates, inflation, interest rates, exchange
rates, productivity, and energy prices. He or she narrows his search down to industry analysis of
total sales, price levels, the effects of competing products, foreign competition, and entry or exit
from the industry. Only then does he narrow his search to the best business in that area i.e. the
company analysis.

2) The bottom-up investor starts with specific businesses, regardless of their industry.

1.3 Aim of the study

The aim of study of the Researcher is to research the “FUNDAMENTAL ANALYSIS OF

1.4 Objective of the study

1) To know the current trend of Stock Market in India.
2) To study the performance of Banking Sector in India.
3) To obtain the knowledge about how to select the companies for investment by doing
fundamental analysis.
4) To analyze the performance of Bank through examination of the financial data,
management, business concept and competition.
5) To study the awareness of investors/traders about the banking stocks listed on Indian
Stock exchange.
6) To understand about risk, return, volatility and liquidity attributes of different stocks of
banks listed on stock exchange.
7) To understand and analyze the quality of assets, net interest margin (NIM), non
performing assets (NPAs) and capital adequacy ratio (CAR) of the different banks listed
on Stock exchange.
8) To predict the future trend of Indian stock Markets.

1.5 Scope of the study
1) The Fundamental Analysis of Banking stocks are useful to researcher in order to analyze
the banking industry in India. It is useful in order to analyze banks financial statements
and health, its management and competitive advantages, and its competitors and markets.
2) This report will help Angel Broking in order to provide the advice/tips regarding
investments to their clients.
3) The study will help the fund managers of mutual fund companies in order to make
investments in banking stocks for maximizing their schemes return.
4) The study will help the individual investors to make investments in banking stocks.

What is research methodology?
Research methodology comprises defining and redefining the problem, formulating hypothesis
or suggestion solution, collecting, organizing and evaluating the data, making deduction and
reaching to conclusions and determines whether the formulated hypothesis is right or wrong.

The search for knowledge through objective and systematic method of finding solution to a
problem is research. The systematic approach concerning generalization and the formulation of a
theory is also research. As such the term research refers to the systematic method consisting of
enunciating the problem, formulating a hypothesis, collecting the facts or data , analyzing, the
facts and reaching certain conclusions either in the form of solutions towards the concerned
problem or in certain generalizations for some theoretical formulation.

2.1 Method of data collection
The task of data collection begins after a research problem has been defined and research design
plan chalked out. While deciding about the method of data collection to be used for the study, the
researcher has kept in mind two types of data viz., primary and secondary.

The primary data are those which are collected afresh and for the first time, and thus happen to
be original in character.

The secondary data, on the other hand, are those which have already been collected by someone
else and which have already been passed through the statistical process.

Collection of Primary Data
1) Observation Method.
2) Questionnaires for investors.
3) Telephonic Interviews.
4) Live trading in the stock Market.

Collection of Secondary Data
1) Websites like moneycontrol, angelbroking, etc

2) Magazines related to stock market like Dalal street, money life etc.

3) Various book related to stock market like Dalal Street investment journal’s ‘Stock market

4) Book related to Securities analysis and portfolio management.

2.2 Sample of study
The sample size of 50 was taken by the researcher, which included the investors, traders,
research analyst and the employees of ‘Angel Broking’.

Type No. of people
Investor 40
Trader 04
Research Analyst 01
Employee of Angel Broking 05

2.3 Hypothesis
Hypothesis simply means a mere assumption or some supposition to be proved or disproved. But
for the researcher hypothesis is a formal question that he intends to resolve. Thus a hypothesis
may be defined as a proposition or a set forth as an explanation for the occurrence of some
specified group of phenomena either asserted merely as a provisional conjecture to guide some
investigation or accepted as highly probable in the light of established facts. Quite often a
research hypothesis is a predictive statement, capable of being tested by scientific methods, that
relates an independent variable to some dependent variable.

2.4 About Questionnaire
Collection of data through Questionnaire method is quite popular. In this method a questionnaire
is sent to the persons or samples concerned with a request to answer the question and return the
questionnaire. A questionnaire consists of a number of questions printed or typed in a definite
order on a form or set of forms.

The researcher with the help of his internal guide prepared a questionnaire having 20 statements.
The type of questionnaire prepared was ‘close-ended’ and the answers were either ‘Yes’ or ‘No’
or ‘multiple choice’ type. The questions asked were easy to understand and in a proper sequence.

2.5 Data analysis
The Data after collection has to be processed and analyzed in accordance with the outline laid
down for the purpose drawn while developing the research plan.

After analyzing the data, the researcher accomplished the task of drawing inferences followed by
report writing. It is only through interpretation that the researcher can expose relations and
process that underlie his findings.

The researcher selected the stratified sampling method for the collecting the data for the
observation. The sample was limited to 20 due to the time constraint.


1) Where do you invest your money?

50 people who replied to this question.

Investment types No. of respondents Percentage

Stock market 10 20

Bank F.D 15 30

Mutual funds 20 40

Real estate 5 10

Total 50 100

Table. 1

No. of respondents


Stock market
Bank F.D

Graph 1


From the above table & pie chart, it represent that only 20% of the respondent invest in Stock
market & 40% in Mutual Funds,10% in Real estate and Bank F.D 30%.The chances of risk and

losses are maximum in the Stock Market & Mutual Funds. Even the returns are more in Stock
Market, Mutual Funds and Real Estates but due to safety people prefer Bank F.D.

2) How will you decide a company for investment?

Selection of company for No. of Respondents Percentage

Own Decision 5 10

Broker Advice 20 40

Speculation 10 20

Research Reports 15 30

50 100

Table 2

No. of Respondents

20% 15%

Own Decision
Broker Advice
Research Reports

Graph 2

Interpretation: From the above table & pie chart it represents that 40% of people take Advice
of Broker for investment in stocks, and 20% of people invest on the basis of speculation, and
30% on basis of Research Reports by Technical analyst and 10% invest on their own decision.
But many experts feel that if people invest money in stock market by Research Report then
chances of profit is high and losses are minimum because Research Report give good suggestion
and already they have calculated risk in stocks so it will be beneficial while investment. If
investment on the basis of speculation the chances of losses are high and profits minimum. If the

investor do not have, knowledge of stock market so they should ask to the Broker who will
advice in better way because these people have good knowledge about the markets.

3) What kind of trading you do?

Types of Trading No. of Respondent Percentage

Intra day 22 44

Short term 11 22

Medium Trading 5 10

Long term Trading 12 24

50 100

Table 3

No. of Respondent


44% Intra day
Short term
Medium Trading
Long term Trading


Graph 3
Interpretation: From the above Graph & Pie chart it represent that 44% people do intraday
trading in which the profit and risk both are high but many research suggest that it is always
better to investment money in long term than short term or medium term or intraday. If we
invest money on long-term basis then returns are good & the risk is minimum. Therefore, it is
always good invest money for long-term basis.

4) What are the factors you consider while selecting of company?

Factor consider for No. of Respondents Percentage
selection of company

Fundamental Analysis 22 44

Technical Analysis 15 30

Both 5 10

Speculation 8 16

50 100

Table 4

No. of Respondents


44% Fundamental Analysis
Technical Analysis

10% speculation


Graph 4

Interpretation: From the above Graph & Pie chart it represent that 44% of people take the
help of fundamental research and 30% of people take the help of technical analysis by which
the risk can be calculated and profit can be maximize. However, even that 16% of people
invest on the basis of speculation, which is risky. 10% people invest money by both (i.e.
fundamental and technical call) by which prediction can be good.

5) Where will you most prefer to invest your money?

Most prefer companies No. of Respondents Percentage

Large cap 25 50

Mid cap 15 30

Small cap 10 20

50 100

Table 5

No. of Respondents


Large cap
Mid cap
Small cap


Graph 5

Interpretation: From the above Graph & table, we can say that 50% percent of people like to
invest money in Blue Chips companies because the volumes of trading and good results are
more. Therefore, the profit is more. Mid cap and small, give minimum profit than blue chips or
large cap.

6) Which sector you prefer the most for investments?

Like to invest in sectors No. of Respondent Percentage

I.T 25 50

Banking 15 30

Others 10 20

50 100

Table 6

No. of Respondent



Graph 6

Interpretation: From the above Graph & chart, we can say that 50% of people prefer I.T. Sector
for investment because of the strong fundamentals and it have large market capitalization than
others. After that, 30% of people prefer banking sector it has large market capitalization and after
that, 20% people like to invest other companies.

3.1 Indian Economy
Indian Economy has covered a long ground since it was liberalized in 1991.In 2006, India was
universally rated as the rapidly rising economic power in Asia, second only to China. Both India
and China have now become not only powerful engines of growth in Asia but also drivers for the

world economic expansion. The economy of India is the twelfth largest in the world by market
exchange rates and the fourth largest in the world by GDP measured on purchasing power parity
(PPP) basis. India had prominently established itself as the world's second-fastest growing major

Agriculture is the predominant occupation in India, accounting for about 60% of employment.
The service sector makes up a further 28% and industrial sector around 12%. For output, the
agricultural sector accounts for 17% of GDP; the service and industrial sectors make up 54% and
29% respectively. Major agricultural products include rice, wheat, oilseed, cotton, jute, tea,
sugarcane, potatoes, cattle, water buffalo, sheep, goats, poultry and fish. Major industries include
textiles, chemicals, food processing, steel, transportation equipment, cement, mining, petroleum,
machinery and software design.

The following factors are taken in order to analyze Indian economy
1. Economic growth
2. Inflation
3. Interest rate
4. Foreign exchange reserve
5. Foreign direct investments (FDI)
6. Foreign Institutional investors (FII)
7. Fiscal deficit
8. Political stability
9. Domestic saving rate
10. Foreign Exchange rates
11. Index of Industrial production
12. Balance of payment
13. Foreign Trade

1.Economic growth
Economic growth decelerated in 2008-09 to 6.7 per cent. This represented a decline of
2.1 per cent from the average growth rate of 8.8 per cent in the previous five years (2003-
04 to 2007-08). The five years of high growth has raised the expectations of the people.
Few remember that during the preceding five-year period from 1998-99 to 2002-03
average growth was only 5.4 per cent, while the highest growth rate achieved during the
period was 6.7 per cent (in 1998-99). Per capita GDP growth, a proxy for per capita

income, which broadly reflects the improvement in the income of the average person,
grew by an estimated 4.6 per cent in 2008-09. Though this represents a substantial
slowdown from the average growth of 7.3 per cent per annum during the previous five
years, it is still significantly higher than the average 3.3 per cent per annum income
growth during 1998-99 to 2002-03.

The overall growth of GDP at factor cost at constant prices in 2008-09, as per revised
estimates released by the Central Statistical Organization (CSO) (May 29, 2009) was 6.7 per
cent. This is lower than the 7 per cent projection in the Mid-Year Review 2008-09 (Economic
Division, Department of Economic Affairs (DEA), December 2008) and the advance estimate of
7.1 per cent, released subsequently by CSO in February 2009. With the CSO drastically reducing
their estimate of GDP from agriculture (based on third advance estimates), and given that the
DEA’s 7 per cent estimate assumed normal agricultural growth, it would have had to be adjusted
for any shortfall. The growth of GDP at factor cost (at constant 1999-2000 prices) at 6.7 per cent
in 2008-09 nevertheless represents a deceleration from high growth of 9.0 per cent and 9.7 per
cent in 2007-08 and 2006-07 respectively.

A noteworthy development during the year was a sharp rise in Wholesale Price Index
(WPI) inflation followed by an equally sharp fall, with the WPI inflation falling to
unprecedented level of close to zero per cent by March 2009. This was driven largely by
the rapid rise and equally rapid fall in global commodity prices during January 2008 to
March 2009. Global food prices also went through a similar cycle, but have not declined
to the same extent. Though domestic food prices are partially delinked from global
prices, these global developments affected domestic prices to some extent. Domestic food
price inflation, as measured by the WPI food sub-index, though declining, remains much
higher than overall inflation. The inflation for the week ended 20th June 2009 was at ‐

3.Interest rate
The policy stance of the Reserve Bank of India (RBI) in the first half of the year was
oriented towards controlling monetary expansion, in view of the apparent link between
monetary expansion and inflationary expectations partly due to the perceived liquidity
overhang. In the first six months of 2008-09, year-on-year growth of broad money was
lower than the growth of reserve money, The Government also took various fiscal and
administrative measures during the first half of 2008-09 to rein in inflation.
The RBI responded to the emergent situation by facilitating monetary expansion

through decreases in the CRR, repo and reverse repo rates, and the statutory liquidity ratio
(SLR). The repo rate was reduced by 400 basis points in five tranches from 9.0 in August 2008
to 5.0 per cent beginning March 5, 2009. The reverse-repo rate was lowered by 250 basis points
in three tranches from 6.0 (as was prevalent in November 2008) to 3.5 per cent from March 5,
2009. The reverse-repo and repo rates were again reduced by 25 basis points each with effect
from April 21, 2009. SLR was lowered by 100 basis points from 25 per cent of net demand and
time liabilities (NDTL) to 24 per cent with effect from the fortnight beginning November 8,
2008. The CRR was lowered by 400 basis points in four tranches from 9.0 to 5.0 per cent with
effect from January 17, 2009.

The average PLR was 12.5 per cent in April 2008, it increased to 13.9 per cent in September
2008 and thereafter declined to 12.0 per cent in March 2009.

4. Foreign exchange rate
The surge in the supply of foreign currency in the domestic market led inevitably to a rise
in the price of the rupee. The rupee gradually appreciated from Rs. 46.54 per US dollar in August
2006 to Rs. 39.37 in January 2008, a movement that had begun to affect profitability and
competitiveness of the export sector. The global financial crisis however reversed the rupee
appreciation and after the end of positive shock around January 2008, rupee began a slow

A major factor, which affected the emerging economies almost simultaneously, was the
unwinding of stock positions by the FIIs to replenish cash balances abroad. The decline in rupee
became more pronounced after the fall of Lehman Brothers in September 2008, requiring RBI
intervention to reduce volatility. It is pertinent to note that a substantial part of the movement in
the rupee-US dollar rate during this period has been a reflection of the movement of the dollar
against a basket of currencies. The rupee stabilized after October 2008, with some volatility.
With signs of recovery and return of FII flows after March 2009, rupee has again been
strengthening against US dollar.

For the year as a whole, the nominal value of the rupee declined from Rs. 40.36 per US dollar in
March 2008 to Rs. 51.23 per US dollar in March 2009, reflecting a 21.2 per cent depreciation
during the fiscal 2008-09. The exchange rate was Rs. 51.20 per US dollar in March 2009. The
annual average exchange rate during 2008-09 worked out to Rs. 45.99 per US dollar compared to
Rs. 40.26 per US dollar in 2007-08.

5.Foreign direct investments (FDI)
During 2008-09, the total FDI equity inflows stood at Rs. 1,22,919 crore (US$ 27,309
million) against Rs. 98,664 crore (US$ 24,579 million) during 2007-08 signifying a growth of 25
per cent in terms of rupee and 11 per cent in terms of US dollar. The distribution of FDI within
the industrial sector between mining, manufacturing, electricity and construction.

Sectors attracting highest FDI flows
(Rs. crore)
Sector 2007-08 2008-09 Change
(per cent)
in 2008-09
Services 26589.3 28410.7 6.9
Housing & real estate 8749.3 12621.2 44.3
Telecommunications 5102.6 11726.9 129.8
Construction 6 989.3 8791.9 25.8
Computer software & hardware 5623.3 7328.5 30.3
Automobiles 2697.0 5211.7 93.2
Power 3877.5 4381.8 13.0
Metallurgical industries 4686.0 4156.7 -11.3
Information & broadcasting 1290.3 3492.4 170.7
Chemicals (except fertilizers) 917.6 3427.1 273.5
Grand total all FDI equity flows 98664 122919 24.6

6.Foreign Institutional investors (FII)
Portfolio investment includes foreign institutional investors (FIIs) investment, issue of
global depository receipts (GDRs)/American depository receipts (ADRs) and offshore funds.
Net portfolio inflows into India was US$ 7.0 billion in 2006-07 and US$ 29.4 billion in 2007-
08. Portfolio investment by FIIs however witnessed large net outflows of US$ 12.4 billion during
April-December 2008 (as against net inflows of US$ 24.5 billion in April-December 2007) due
to large scale sale of equities by FIIs in the Indian stock market. As per data available for the full
year 2008-09, FII outflows amounted to US$ 15 billion vis-à-vis net inflow of US$ 20.3 billion
during the year 2007-08. The FII flows have exhibited significant volatility as measured by the
ratio of net inflows to total inflows during 2003-04 to 2008-09. It remained in the range of 6.4
per cent to 40.2 per cent. During April-December 2008, net inflows turned negative
while the total inflows were sizeable at US$ 109.9 billion.

6.Fiscal deficit
From a macroeconomic perspective, low levels of budget deficits and public debt
are generally considered as key ingredients for economic growth, reducing poverty and
improving social outcomes. This owes to the stabilization models attributing resource-
expenditure imbalances as the trigger for economic problems of many emerging/developing
economies. The fiscal reforms initiated in 1990s as a part of economic liberalization reflected
this view point. Fiscal consolidation began in the early 1990s with fiscal deficit declining from
6.6 per cent of GDP in 1990-91 to 4.1 per cent of GDP in 1996-97; however it faltered and
started deteriorating in 1997- 98 and reached a level of 6.2 per cent of GDP in 2001-02. It was

against this background, that operationalization of the Fiscal Responsibility and Budget
Management Act of 2003 (FRBMA) assumed urgency leading to the notification of the Rules
under the Act in July, 2004. In the post-FRBMA period, progress in fiscal consolidation was
more or less close to the targets envisaged there under.

With the release of provisional actual data on expenditure for the Union Government for 2008-09
and the revised estimates of GDP at market prices for 2008-09, the fiscal deficit to GDP ratio for
2008- 09 works out to 6.2 per cent, while the revenue and primary deficit are estimated to be 4.6
per cent and 2.6 per cent respectively. Consequently, the fiscal measures taken together provided
a fiscal stimulus of about 3.5 per cent of GDP. Further, below the line items can also be said to
have contributed a stimulus of about 1.3 per cent of GDP, even though these merely offset the
effect of the increase in the prices of oil and fertilizer imports on domestic income and

The revenue and expenditure sides in the Interim Budget 2009-10, which was presented on
February 16, 2009, were conditioned by the foregoing developments. Fiscal deficit for 2009-10
was estimated to go up to 5.5 per cent of GDP, thus providing a continuing stimulus, relative to
2008-09, of 2.8 per cent of GDP.

8. Domestic saving rate
A notable feature of the growth of the Indian economy from 2002-03 has been the rising
trend in the gross domestic capital formation (GDCF). Gross capital formation (GCF), which
was 25.2 per cent of the GDP in 2002-03, increased to 39.1 per cent in 2007-08. Much of this
increase is attributable to a rise in the rate of investment by the corporate sector. The rise in the
rate of investment has been on account of various factors, the most important being the
transformation in the investment climate, coupled with an optimistic outlook for the growth
prospects for the Indian economy. The growth in capital formation in recent years has been
amply supported by a rise in the savings rate. The gross domestic savings as a percentage of
GDP at current market prices stood at 37.7 per cent in 2007-08 as compared to 29.8 per cent in
2003-04. Private sector savings dominated Rs. 17,097 in 2007-08. While there has been an
increase in levels of per capita income and consumption, there has been a perceptible slowdown
in their growth rate (Figure 1.1). The growth in per capita GDP decelerated from 8.1 per cent in
2006- 07 to 4.6 per cent in 2008-09, while the per capita consumption growth declined from 6.9
per cent in 2007-08 to 1.4 per cent in 2008-09.

9.Foreign exchange reserve

Foreign exchange reserves are an important component of the balance of payments and an
essential element in the analysis of an economy's external position. The level of India's foreign
exchange reserves comprising foreign currency assets (FCA), gold, SDRs and reserve tranche
position (RTP) in the IMF, which had touched a low of US$ 5.8 billion at end-March 1991,
peaked at US$ 314.6 billion at end-May 2008. The reserves declined thereafter to US$ 247.7

billion at the end of November 2008 and were at US$ 252.0 billion at the end of March 2009.
Fallout of the global crisis and strengthening of the US dollar vis-à-vis other international
currencies has been responsible for the decline. The foreign exchange reserves stood at US$ 252
billion at end-March 2009.

10. Index of Industrial production
Though the growth of the industrial sector started to slowdown in the first half of 2007-08, the
overall growth during the year remained as high as 8.5 per cent. The industrial sector witnessed a
sharp slowdown during 2008-09 as a consequence of successive shocks, the most important
being the knock-on effects of the global financial crisis. The pace of slowdown accelerated in the
second half of 2008-09 with the sudden worsening of the international financial situation and the
global economic outlook. The year 2008-09 thus closed with the industrial growth at only 2.4 per
cent as per the Index of Industrial Production (IIP).

11. Balance of payment
The overall balance of payments (BoP) situation remained resilient in 2008-09 despite signs of
strain in the capital and current accounts, due to the global crisis. During the first three quarters
of 2008-09 (April-December 2008), the current account deficit (CAD) was US$ 36.5 billion (4.1
per cent of GDP) as against US$ 15.5 billion (1.8 per cent of GDP)for the corresponding period
of 2007-08. The capital account balance declined significantly to US$ 16.09 billion (1.8 per cent
of GDP) as compared to US$ 82.68 billion (9.8 per cent of GDP) during the corresponding
period in 2007-08.

A positive development was higher private transfers and software earnings and increase in
nonresident deposit flows and foreign direct investment vis-à-vis the corresponding period last
year. Higher FDI flows in 2008-09 were also a reflection of the confidence of foreign investors
in the growth prospects of the Indian economy.
Together with lower crude oil prices and decline in imports, the overall impact on the balance of
payments was somewhat muted. This is reflected in reserve decline of only US$ 20.4 billion on
BoP basis (excluding valuation change) during 2008-09 (April-December 2008). The total
foreign currency assets (FCA) had declined from US$ 299.2 billion on 31.3.2008 to US$ 241.4
billion on 31.3.2009, reflecting a fall of US$ 57.8 billion. However, more than two-thirds of the
decline in FCA was due to a valuation change i.e. appreciation of US dollar against the
international currencies in which reserves is maintained. The foreign exchange reserves stood at
US$ 252 billion at end-March 2009.

12. Foreign Trade
The adverse effect of the global financial crisis was also felt on the export sector, first, on
account of the drying up of international financing and trade credit, followed by a fall in global
demand. During 2008-09, the growth in exports was robust till August 2008. However, in
September 2008, export growth evinced a sharp dip and turned negative in October 2008 and
remained negative till the end of the financial year. The continued decline in export growth was
due to the recessionary trends in the developed markets where the demand had plummeted. For
the year as a whole, the growth in merchandise exports during 2008-09 was 3.6 per cent in US

dollar terms and 16.9 per cent in rupee terms (compared to 28.9 per cent and 14.7 per cent
respectively in 2007-08). The large difference in growth in terms of the US dollar and in terms of
the rupee was on account of the depreciation of rupee vis-à-vis US dollar during the year.

During the period (April-February) in 2008-09, the main drivers of exports growth were
engineering goods and chemicals and related products. Petroleum products and textile exports
witnessed a positive but low growth. However, handicrafts, primary products and gems and
jewellery exports registered negative growth. The negative impact on the growth of India’s
exports becomes more evident from the fact that merchandise exports to the United States, which
was the largest market, declined by 1.6 per cent during 2008-09 (April-February). On the other
hand, merchandise exports to Asia (including ASEAN) grew by 6.9 per cent and to Europe by
10.2 per cent during this period. India’s merchandise exports to South Asian countries also
declined by 5.2 per cent.

Import growth began to decline from October 2008 (with one month lag from the decline in
export growth) and was negative over the period January to March 2009. For the year as a whole
i.e. 2008-09, the overall import growth was subdued at 14.4 per cent in US dollar terms and 29
per cent in rupee terms. Growth in POL and non-POL imports was 16.9 per cent and 13.2 per
cent respectively (in US dollar terms). During 2008-09 (April-February) fertilizers and edible
oils registered high import growth to meet domestic demand. The growth in the imports of POL
was high in the first half of the year due to the unusually high prices but moderated in the second
half of the year. The trade deficit increased from US$ 88.5 billion (as per customs data) in 2007-
08 to US$ 119.1 billion in 2008-09.

The impact of global recession was relatively less on India’s services exports till December
2008, though the growth rate of services export moderated to 16.3 per cent during April-
December 2008-09. A negative growth in insurance and a sharp fall in the growth of travel
services was registered during this period. Software services grew at 26 per cent, while financial
services registered a robust growth of 45.7 per cent despite the global financial crisis and fall in
growth rate in world financial services exports. Business services growth was, however at a
lower rate of 3.9 per cent.

3.2 Banking Sector

Banking in India has its origin as early as the Vedic period. It is believed that the transition from
money lending to banking must have occurred before Manu, the great Hindu jurist, who has
devoted a section of his work to deposits and advances and laid down the rules relating to rates
of interest.

During the Mogul period, the indigenous bankers played a very important role in lending money
and financing foreign trade and commerce. During the days of the East India Company, it was
the turn of the agency houses to carry on the banking business. The General Bank of India was
the first joint stock Bank to be established in the year 1786.
The others which followed were the Bank of Hindustan and the Bengal Bank. The bank of
Hindustan is reported to have continued till 1906 while the other two failed in the meantime.

In the first half of the 19th century the East India Company established three banks; the Bank of
Bengal in 1809, the Bank of Bombay in 1840 and the Bank of Madras in 1843. These three
banks also known as Presidency Banks; were independent units and functioned well. These three
banks were amalgamated in 1920 and a new bank, the Imperial Bank of India was established on
27th January 1921. With the passing of The State bank of India act in 1955 the undertaking of the
Imperial Bank of India was taken over by the newly constituted State Bank of India.

The Reserve Bank which is the central bank was created in 1935 by passing Reserve Bank of
India act 1934. In the wake of the Swadeshi Movement, a number of banks with Indian
management were established in the country mainly, Punjab National Bank Ltd., Bank of India

Ltd., Canara Bank Ltd., Indian Bank Ltd., The Bank of Baroda ltd., The Central Bank of India
Ltd. On July 19,1969,14 major banks of the country were nationalized and on 15th April 1980 six
more commercial privet sector banks were also taken over by the Government. Today the
commercial banking system in India may be distinguished into

Public sector banks
a. State Bank of India and its associate banks called the State bank Group
b. 20 nationalized banks
c. Region Rural Banks mainly sponsored by Public sector Banks

Private Sector Banks
a. Old generation private Banks
b. New Generation Banks
c. Foreign Banks in India
d. Scheduled Co-operative Banks
e. Non-scheduled Banks
Co-operative Sector
a. State co-operative Banks
b. Central co-operative Banks
c. Primary Agriculture Credit Societies
d. Land Development Banks
e. Urban co-operative Banks.
f. Primary Agriculture Development Banks
g. Primary Land Development Banks
h. State Land Development Banks.

Development Banks

a. Industrial Finance Corporation of India (IFCI)
b. Industrial Development Bank of India (IDBi)
c. Industrial Credit and Investment Corporation of India (ICICI)
d. Small Industries Development Bank of India (SIDBI)
e. SCICI Ltd.
f. National Bank for Agriculture and Rural Development (NABARD)
g. Export Import Bank of India
h. National housing Bank.

Currently, overall, banking in India is considered as fairly mature in terms of supply, product
range and reach-even though reach in rural India still remains a challenge for the private sector
and foreign banks. Even in the terms of quality of assets and capital adequacy, Indian banks are
considered to have clean, strong and transparent balance sheet as compared to other banks in
comparable economies.

The public sector banks hold over 75% of total assets of the banking industry, with the private
and foreign banks holding 18.2% and 6.5% respectively. The total deposits increased 32.6 times
between 1971 to 1991 compared to 7 times between 1951 to 1971. Despite an increase of rural
branches, from 1,860 or 22% of the total number of branches in 1969 to 32,270 or 48%, only
32,270 out of 5 lakh (500,000) villages are covered by a scheduled bank.

Currently India has 88 scheduled commercial bank (SCBs), 27 public sector banks (that is with
the Government of India holding a stake), 30 private banks and 40 foreign banks. They have
combined network of 53,000 branches and 17,000 ATMs.

Major Reform in Banking Sector
Some of the major reform initiatives in the last decade that have changed the Face of the Indian
banking and financial sector are

● Interest rate deregulation, Interest rates on deposits and lending have been deregulated with
banks enjoying greater freedom to determine their rates.

● Adoption of prudential norms in terms of capital adequacy, asset classification, income
recognition, provisioning, exposure limits, investment fluctuation reserve, etc.

● Reduction in reserve requirements (SLR and CRR), thus releasing more lendable resources
which banks can deploy profitably.

● Government equity in banks has been reduced and strong banks have been allowed to access
the capital market for raising additional capital.

● Banks now enjoy greater operational freedom in terms of opening and swapping of branches,
and banks with a good track record of profitability have greater flexibility in
the recruitment.

● New private sector banks have been set up and foreign banks permitted to expand their
operations in India including through subsidiaries. Banks have also been allowed to set up
Offshore Banking Units in Special Economic Zones.

● New areas have been opened up for bank financing: insurance, credit cards,
Infrastructure financing, leasing, gold banking, besides of course investment banking, asset
management, factoring, depository services etc.

● New instruments have been introduced for greater flexibility and better risk management: e.g.
interest rate swaps, forward rate agreements, cross currency forward contracts, forward cover to
hedge inflows under foreign direct investment, liquidity adjustment facility for meeting day-to-
day liquidity mismatch.

● Universal Banking has been introduced. With banks permitted to diversify into long-term
finance and DFIs into working capital, guidelines have been put in place for the
Evolution of universal banks in an orderly fashion.

● Adoption of global standards. Prudential norms for capital adequacy, asset classification,
income recognition and provisioning are now close to global standards. RBI has introduced Risk
Based Supervision of banks (against the traditional transaction based approach). Best
international practices in accounting systems, corporate governance, payment and settlement
systems, etc. are being adopted.

● The limit for foreign direct investment in private banks has been increased from 49% to 74%
and the 10% cap on voting rights has been removed. In addition, the limit for
Foreign institutional investment in private banks is 49%.

● RBI guidelines have been issued for putting in place risk management systems in banks. Risk
Management Committees in banks address credit risk, market risk and
operational risk. Banks have specialized committees to measure and monitor various risks and
have been upgrading their risk management skills and systems.

Bank Credit

Bank credit to productive sectors of the economy has a critical role in sustaining the growth
process. While the spread of banking network is a continuous process, the effectiveness of the
banking network also depends on the expansion in the scale of operations and the deepening of
the credit facilities. The total assets of the scheduled commercial banks (SCBs) have increased
from a level of Rs. 3.46 million on March 31, 2007 to Rs. 4.33 million on March 31, 2008. All
categories, namely, public sector banks, old private sector banks, new private sector banks and
foreign banks have increased their asset base.

The first six months of the financial year 2008-09 witnessed inflationary pressures in the
Indian economy with RBI continuing to address monetary expansion through revisions in policy
rates. The second half of 2008-09 was however a period when the RBI initially took steps to ease
the liquidity crunch in the money market in September /October 2008, followed up with steps to
facilitate continued credit flows to the productive sectors of the economy. Reduction in policy
rates were also announced to enhance the liquidity in the system and for reducing the cost of
credit to business and industry.

During 2008-09 (March 27, 2009 over March 28, 2008), there was a moderation in the credit
growth of SCBs to 17.3 per cent from a level of 22.3 percent in the corresponding period of the
previous year. In terms of absolute values also, the slowdown was noticeable, in as much as the
expansion in bank credit during 2007-08 was of the order of Rs. 4,30,724 crore which
decelerated to Rs. 4,08,099 crore in 2008-09. Non-food credit growth as at end-March 2009 grew
by 17.5 per cent as compared to 23.0 per cent growth as at end-March 2008.

Credit-Deposit (C-D RATIO)

The behavior of the credit-deposit (C-D) ratio also reflected the changes in the monetary sector;
C-D ratio which was at 73.9 as of March 31, 2007, marginally declined to 73.8 as of March 31,
2008. In 2008-09, it peaked to 75.2 as of October 10, 2008, but declined thereafter. It stood at
72.3 as of March 27, 2009.

Statutory liquidity ratio (SLR)

Investment by SCBs in statutory liquidity ratio (SLR) securities as per cent of their net
demand and time liabilities (NDTL) continued to be higher than the stipulated level. As
compared to the level of 27.8 per cent at end-March 2008, it increased to a level of 28.1 per cent
at end-March 2009. As per information from RBI, after adjusting for Liquidity Adjustment
Facility (LAF) collateral securities on an outstanding basis, the scheduled commercial banks’
holding of SLR securities amounted to 26.7 per cent of NDTL, at end-March 2009, which was
higher than the prescribed 24.0 per cent level.

Investment-deposit ratio
The investment-deposit ratio at 34.02 as of March 31, 2006 decreased to 30.3 as of March 31,
2007 and marginally increased to 30.4 on March 31, 2008. During 2008-09, the investment-
deposit ratio peaked to 31.8 on February 13, 2009 and declined thereafter to 30.4 as of March 27,

Interest rate income or spread defined as the difference between interest income and interest
expenses of SCBs as a proportion of total assets could serve as a measure of the cost of financial
intermediation. High interest rate spreads could be indicative of the level of efficiency of the
financial intermediation and also a relatively less competitive Market. Net interest income or
spread was 23 basis points lower at 2.35 per cent during 2007-08 compared to 2.58 per cent in
2006-07. Highest spread during 2007-08 at 3.79 per cent was observed in respect of foreign
banks followed by old private banks (2.43 per cent), new private banks (2.40 per cent) and public
sector banks (2.15 per cent)

Non-performing assets (NPAs)
The gross non-performing assets of SCBs, as proportion of total assets declined to 1.3 per cent
during 2007-08 compared to 1.5 per cent during 2006-07. While this decline reflected an
improvement, in terms of quantum of funds, the situation depicted a different picture. During
2006-07 the amount recovered and written off (Rs. 26,243 crore) was more than the fresh
addition (Rs. 26,211 crore) of NPAs. In contrast, during 2007-08 the amount recovered and
written off (Rs. 28,090 crore) was significantly less than the fresh addition (Rs. 34,420 crore) of

Gross NPAs of SCBs, which had declined by Rs. 611 crore in 2006-07, increased by Rs. 5,949
crore in 2007-08. During 2007-08 a total of 1,86,535 cases for NPA recoveries were referred to
the Lok Adalat for an amount of Rs. 2,142 crore of which 8.2 per cent was recovered. A total of
83,942 cases for NPA recoveries were referred under the SARFESI Act for an amount of Rs.
7,263 crore of which 61 per cent was recovered. A total of only 3,728 cases for NPA recoveries
were referred to the Debt Recovery Tribunals for an amount of Rs. 5,819 crore of which 51.9 per
cent was recovered

Capital adequacy ratio
To prepare banks for the implementation of BASEL-II norms, a three-track approach has been
adopted with regard to capital adequacy rules. On the first track, commercial banks are required
to maintain capital for both credit and market risks as per BASEL-I framework; on the second
track, the cooperative banks are required to maintain capital for credit risk as per BASEL-I
framework and through surrogates for market risk; and the RRBs, on the third track, have to
maintain minimum capital which may not be on par with BASEL-I norms.

With the introduction of stiffer prudential norms by the RBI for maintaining quality of credit
necessitated due to the rapid increase in credit expansion by SCBs in the system, risk-weighted
assets of SCBs at the end-March 2008 increased to Rs. 31,28,093 crore from Rs. 24,12,236 crore
at end- March 2007. Concomitantly, capital funds of SCBs kept pace with the risk-weighted
assets and increased to Rs. 4,06,835 crore at end-March 2008 from the level of Rs. 2,96,191
crore at end-March 2007. The capital to risk-weighted assets ratio (CRAR) during 2007-08
increased from 12.3 per cent as of end-March 2007 to 13.0 per cent as of end- March 2008.
CRAR for foreign and new private sector banks was at 13.1 per cent and 14.4 per cent
respectively as of end-March 2008 compared to 12.4 per cent and 12.0 per cent respectively as of
end- March 2007.

Banks incur large amounts of expenditure on computerization, automation and development of
communication network. The cumulative expenditure during September 1999 to March 2008
was Rs. 15,016 crore. These help in changing the image and outlook of banking sector
significantly by improving the processes and procedures, rapid product development through
alternative delivery channels, reduction in the transaction costs and eventually leading to higher
productivity. The technology is also
being leveraged to expand the banking outreach particularly to rural areas. The number of
branches providing “core banking solutions” (CBS) rose rapidly to 67.0 per cent as of end-March
2008 from 44.4 per cent at end-March 2007. The number of automated teller machines (ATMs)
at the end-March 2008 was 34,789 compared to 27,088 at
end-March 2007.

3.3 Company Analysis
For company analysis the researcher has taken three companies, One Bank from public sector
and two Banks from private sector. These Banks have sizeable share of the Indian Banking

3.3.1 Punjab National Bank Ltd (PNB).
Indust Finance - Banks –Public
BSE Code: 532461 NSE Code: PNBEQ
ry Sector
CMP: RS 640 Target Price:
Rs 750
Market Cap (Rs cr): 20,151 Face value:
Rs 10
Dividend: Book
value: Rs 416

Fifty Two Week High Low stock price
Exchange Name High (Rs.) High Date Low (Rs.) Low Date
NSE 725.00 19/05/2009 286.00 06/03/2009
BSE 717.00 19/05/2009 286.20 06/03/2009

Company Background
Punjab National Bank (PNB), was registered on May 19, 1894 under the Indian Companies Act
with its office in Anarkali Bazaar Lahore. The Bank is the second largest government-owned
commercial bank in India with about 4,500 branches across 764 cities. It serves over 37 million
customers. The bank has been ranked 248th biggest bank in the world by Bankers Almanac,
London. The bank's total assets for financial year 2007 were about US$60 billion. PNB has a
banking subsidiary in the UK, as well as branches in Hong Kong and Kabul, and representative
offices in Almaty, Shanghai, and Dubai.

PNB commenced its operations in Lahore. PNB has the distinction of being the first Indian bank
to have been started solely with Indian capital that has survived to the present. (The first entirely
Indian bank, the Oudh Commercial Bank, was established in 1881 in Faizabad, but failed in
1958.) PNB's founders included several leaders of the Swadeshi movement such as Dyal Singh
Majithia and Lala HarKishen Lal, Lala Lalchand, Shri Kali Prosanna Roy, Shri E.C. Jessawala,
Shri Prabhu Dayal, Bakshi Jaishi Ram, and Lala Dholan Dass. Lala Lajpat Rai was actively
associated with the management of the Bank in its early years

Key Officials
Name Designation
Gautam P Khandelwal Director
M L Bagga Director

Income statement.

Balance Sheet for the last 5 years.
(Rs in Cr.)

Mar ' 09 Mar ' 08 Mar ' 07 Mar ' 06 Mar ' 05
Owners' Fund
Equity Share Capital 315.30 315.30 315.30 315.30 315.30
Share Application Money 0.00 0.00 0.00 0.00 0.00
Preference Share Capital 0.00 0.00 0.00 0.00 0.00
Reserves & Surplus 12,824.59 10,467.35 9,826.31 8,758.68 7,533.50
Loan Funds
Deposits 209,760.50 166,457.23 139,859.67 119,684.92 103,166.89
Borrowings made by the bank 4,374.36 5,446.56 1,948.86 6,687.18 2,718.29
Other Liabilities & Provisions 18,130.13 14,798.23 10,178.51 9,518.93 12,194.80
Total 245,404.88 197,484.67 162,128.65 144,965.01 125,928.78

Cash & Balances with RBI 17,058.25 15,258.15 12,372.03 23,394.56 9,460.20

Money at call and Short Notice 4,354.89 3,572.57 3,273.49 1,397.14 1,628.83

Investments 63,385.18 53,991.71 45,189.84 41,055.31 50,672.83

Advances 154,702.99 119,501.57 96,596.52 74,627.37 60,412.75

Fixed Assets
Gross Block 3,930.36 3,699.64 2,247.74 2,106.92 1,875.65
Less: Revaluation Reserve 1,513.74 1,535.70 293.85 302.38 312.49
Less: Accumulated Depreciation 1,533.25 1,384.12 1,237.92 1,076.69 910.42
Net Block 883.37 779.83 715.98 727.84 652.74
Capital Work-in-progress 0.00 0.00 0.00 0.00 0.00

Other Assets 5,020.20 4,380.84 3,980.80 3,762.79 3,101.44

Miscellaneous Expenses not written off 0.00 0.00 0.00 0.00 0.00
Total 245,404.88 197,484.67 162,128.66 144,965.01 125,928.79
Contingent liabilities 111,212.07 104,055.87 74,700.48 58,739.31 47,047.19
Book Value of Unquoted Investment 0.00 0.00 0.00 0.00 0.00
Market Value of Quoted Investment 0.00 0.00 0.00 0.00 0.00

Key Ratios

Y/E March (Rs FY2008 FY2009 FY2010E FY2011E
NII 5,534 7,01 8,326 9,608

% chg 0.4 27.0 18.4 15.4

Net Profit 2049 3091 3394 3800

% chg 33.0 50.9 9.8 12.0

NIM (%) 3.2 3.3 3.2 3.1

EPS(RS) 65 98 107.6 120.5

P/E Ratio(x) 9.8 6.5 5.9 5.3

P/BV 1.9 1.5 1.3 1.1

RoA(%) 1.1 1.4 1.2 1.2

RoNW 19.6 25.8 23.4 21.9

Valuation & Recommendation

PNB is amongst the more profitable and competitive PSBs, with relatively
Strong Earnings growth and RoE prospects.The positive outlook on the Bank due its superior
CASA ratio and high core income component in Earnings. We believe the bank’s core
competitiveness in retail deposits is underpinned by the relatively high
Concentration of its business in rural areas, especially in North India, that are relatively
Underpenetrated by other banks and we have a positive outlook on its aggressive
Medium-term growth thrust in these areas. At CMP, the stock is trading at 5.3x FY2011E EPS of
Rs120.5 and 1.1x FY2011E Adjusted Book Value of Rs597.4. maintain a BUY on the stock,
with a revised 12-month Target Price of Rs750, implying an upside of 17%.

3.3.2 ICICI Bank Ltd.
Indus : Finance - Banks - Private
BSE Code: 532174 NSE Code: ICICIBANKEQ
try Sector
CMP: Rs 450 Target Price: Rs
Market Cap (Rs cr): 48,149 Face value:
Rs 10 Dividend: Rs 11
Book value: Rs 445

Fifty Two Week High Low stock price
High (Rs.) High Date Low (Rs.) Low Date

NSE 800.00 19/05/2009 252.30 06/03/2009

BSE 797.00 19/05/2009 252.75 06/03/2009

Company Background
ICICI Bank is India's second-largest bank with total assets of Rs. 3,793.01 billion (US$ 75
billion) at March 31, 2009 and profit after tax Rs. 37.58 billion for the year ended March 31,
2009. The Bank has a network of 1,463 branches and about 4,721 ATMs in India and presence in
18 countries. ICICI Bank offers a wide range of banking products and financial services to
corporate and retail customers through a variety of delivery channels and through its specialized
subsidiaries and affiliates in the areas of investment banking, life and non-life insurance, venture
capital and asset management. The Bank currently has subsidiaries in the United Kingdom,
Russia and Canada, branches in United States, Singapore, Bahrain, Hong Kong, Sri Lanka, Qatar
and Dubai International Finance Centre and representative offices in United Arab Emirates,
China, South Africa, Bangladesh, Thailand, Malaysia and Indonesia. Our UK subsidiary has
established branches in Belgium and Germany.

ICICI Bank was originally promoted in 1994 by ICICI Limited, an Indian financial institution,
and was its wholly-owned subsidiary. ICICI's shareholding in ICICI Bank was reduced to 46%
through a public offering of shares in India in fiscal 1998, an equity offering in the form of
ADRs listed on the NYSE in fiscal 2000, ICICI Bank's acquisition of Bank of Madura Limited in
an all-stock amalgamation in fiscal 2001, and secondary market sales by ICICI to institutional
investors in fiscal 2001 and fiscal 2002. ICICI was formed in 1955 at the initiative of the World
Bank, the Government of India and representatives of Indian industry. The principal objective
was to create a development financial institution for providing medium-term and long-term
project financing to Indian businesses. In the 1990s, ICICI transformed its business from a
development financial institution offering only project finance to a diversified financial services
group offering a wide variety of products and services, both directly and through a number of
subsidiaries and affiliates like ICICI Bank. In 1999, ICICI become the first Indian company and
the first bank or financial institution from non-Japan Asia to be listed on the NYSE.

Key People
Name Designation
K V Kamath Non Executive Chairman
Chanda D Kochhar Managing Director & CEO
Group Compl. Officer & Co.
Sandeep Batra

Income statement.

Balance Sheet for the last 5 years.
(Rs in Cr.)

Mar ' 09 Mar ' 08 Mar ' 07 Mar ' 06 Mar ' 05
Owners' Fund
Equity Share Capital 1,113.29 1,112.68 899.34 889.83 736.75
Share Application Money 0.00 0.00 0.00 0.00 0.02
Preference Share Capital 350.00 350.00 350.00 350.00 350.00
Reserves & Surplus 48,419.73 45,357.53 23,413.92 21,316.16 11,813.20

Loan Funds
Deposits 218,347.82 244,431.05 230,510.19 165,083.17 99,818.78
Borrowings made by the bank 67,323.69 65,648.43 51,256.03 38,521.91 33,544.50
Other Liabilities & Provisions 43,746.43 42,895.38 38,228.64 25,227.88 21,396.16
Total 379,300.96 399,795.07 344,658.12 251,388.95 167,659.41

Cash & Balances with RBI 17,536.33 29,377.53 18,706.88 8,934.37 6,344.90

Money at call and Short Notice 12,430.23 8,663.60 18,414.45 8,105.85 6,585.07

Investments 103,058.31 111,454.34 91,257.84 71,547.39 50,487.35

Advances 208,090.41 215,060.94 188,614.01 143,029.89 88,991.76

Fixed Assets
Gross Block 7,443.71 7,036.00 6,298.56 5,968.57 5,525.65
Less: Revaluation Reserve 0.00 0.00 0.00 0.00 0.00
Less: Accumulated Depreciation 3,642.09 2,927.11 2,375.14 1,987.85 1,487.61
Net Block 3,801.62 4,108.90 3,923.42 3,980.71 4,038.04
Capital Work-in-progress 0.00 0.00 189.66 147.94 96.30

Other Assets 34,384.06 31,129.77 23,551.85 15,642.79 11,115.99

Miscellaneous Expenses not written off 0.00 0.00 0.00 0.00 0.00
Total 379,300.96 399,795.08 344,658.11 251,388.94 167,659.41
Contingent liabilities 840,670.63 401,114.91 199,771.41 134,920.99 107,311.46
Book Value of Unquoted Investment 0.00 0.00 0.00 0.00 0.00
Market Value of Quoted Investment 0.00 0.00 0.00 0.00 0.00

Key Ratios

Y/E March (Rs FY2008 FY2009 FY2010E FY2011E
NII 8,202 9,264 10,235 11,824

% chg 23.6 13.0 10.5 15.5

Net Profit 4,158 3,758 4,065 4,856

% chg 33.7 (9.6) 8.2 19.4

NIM (%) 2.4 2.6 2.6 2.9

EPS(RS) 37.4 33.8 36.5 43.6

P/E Ratio(x) 11.6 12.9 11.9 10.0

P/BV 1.0 1.0 1.0 0.9

RoA(%) 1.1 1.0 1.0 1.1

RoNW 11.7 7.9 8.2 9.3

Valuation & Recommendation

At the CMP, the Bank’s Core Banking business (after adjusting Rs213 per share towards the
value of the subsidiaries) is trading at 0.7x FY2010E ABV of Rs331. Including subsidiaries, the
stock is trading at 1.0x FY2010E ABV of Rs434.3.

The Bank’s Balance Sheet transformation, changed business strategy and strong franchise and
leadership (Top 3 position) in not just Banking, but largely all its major Financial Services
businesses represent substantial value, though it is likely to take a longer period to be unlocked.
The Bank has a sound strategy in place that is being executed decisively and effectively.
Centered around maintaining strong capital adequacy in the current environment, while building
the necessary base for strong CASA mobilization going forward through branch expansion
without diluting the current focus on stringent cost control measures, we believe that the strategy
provides a margin of safety in the current environment and should result in an improved Balance
Sheet mix and Profitability over the next two years, in time to capitalize on a revival in overall
GDP growth. Having a total of955 branches at the end of 3QFY2008, the Bank has added almost
500 branches since then and an additional 580 additions are planned in the coming year.

The Bank’s Capital Adequacy is also amongst the highest at 15.5%, with a substantial 11.8%
Tier 1 capital. The Bank’s substantial branch expansion and large Capital Adequacy, especially
on Tier 1 are a precursor to market share gains that will contribute to substantial Core business
growth, though with a lag effect until the macro-environment starts improving again i.e.
potentially 18-24 months hence. Meanwhile, the Bank has largely exited all its businesses
outside its core competency including small-ticket personal loans in the Domestic Segment and
most non-India related exposures in its International business (80% business of overseas
subsidiaries and 90%in case of overseas branches is India-related), focusing again on replacing
wholesale funds with retail deposits in the international subsidiaries as well. In the short term,
while Asset quality deterioration remains a key concern, increased focus on Treasury as a profit
centre as well as continued focus on cost controls should provide some support to the Bank’s P/L
account. Maintain a Buy on the stock, with a Target Price of Rs750,
Implying an upside of 60%.

3.3.3 HDFC Bank Ltd.
Indus : Finance - Banks - Private
BSE Code : 500180 NSE Code:HDFCBANKEQ
try Sector
CMP: Rs1095 Target
Price: Rs 1500
Market Cap (Rs cr): 46,473 Face
value: Rs 10 Dividend: Rs 10
Book value: Rs 344

Fifty Two Week High Low stock price
Exchange Name High (Rs.) High Date Low (Rs.) Low Date
NSE 1584.00 17/06/2009 774.00 06/03/2009
BSE 1580.00 17/06/2009 774.00 06/03/2009

Company Background
The Housing Development Finance Corporation Limited (HDFC) was amongst the first to
receive an 'in principle' approval from the Reserve Bank of India (RBI) to set up a bank in the
private sector, as part of the RBI's liberalization of the Indian Banking Industry in 1994. The
bank was incorporated in August 1994 in the name of 'HDFC Bank Limited', with its registered
office in Mumbai, India. HDFC Bank commenced operations as a Scheduled Commercial Bank
in January 1995

Mr. Jagdish Capoor took over as the bank's Chairman in July 2001. Prior to this, Mr. Capoor was
a Deputy Governor of the Reserve Bank of India.The Managing Director, Mr. Aditya Puri, has
been a professional banker for over 25 years, and before joining HDFC Bank in 1994 was
heading Citibank's operations in Malaysia.The Bank's Board of Directors is composed of
eminent individuals with a wealth of experience in public policy, administration, industry and
commercial banking. Senior executives representing HDFC are also on the Board. Senior
banking professionals with substantial experience in India and abroad head various businesses
and functions and report to the Managing Director. Given the professional expertise of the
management team and the overall focus on recruiting and retaining the best talent in the industry,
the bank believes that its people are a significant competitive strength.

Key People
Name Designation
Jagdish Capoor Chairman
Aditya Puri Managing Director
Exe. Vice President (Legal) & Co.
Sanjay Dongre

Income statement.

Balance Sheet for the last 5 years.

(Rs in Cr.)

Mar ' 09 Mar ' 08 Mar ' 07 Mar ' 06 Mar ' 05
Owners' Fund
Equity Share Capital 425.38 354.43 319.39 313.14 309.88
Share Application Money 400.92 0.00 0.00 0.07 0.43
Preference Share Capital 0.00 0.00 0.00 0.00 0.00
Reserves & Surplus 14,226.43 11,142.80 6,113.76 4,986.39 4,209.97
Loan Funds
Deposits 142,811.58 100,768.60 68,297.94 55,796.82 36,354.25
Borrowings made by the bank 2,685.84 4,478.86 2,815.39 4,560.48 5,290.01
Other Liabilities & Provisions 22,720.62 16,431.91 13,689.13 7,849.49 5,264.46
Total 183,270.77 133,176.60 91,235.61 73,506.39 51,429.00

Cash & Balances with RBI 13,527.21 12,553.18 5,182.48 3,306.61 2,650.13

Money at call and Short Notice 3,979.41 2,225.16 3,971.40 3,612.39 1,823.87

Investments 58,817.55 49,393.54 30,564.80 28,393.96 19,349.81

Advances 98,883.05 63,426.90 46,944.78 35,061.26 25,566.30

Fixed Assets
Gross Block 3,956.63 2,386.99 1,917.56 1,589.47 1,290.51
Less: Revaluation Reserve 0.00 0.00 0.00 0.00 0.00
Less: Accumulated Depreciation 2,249.90 1,211.86 950.89 734.39 582.19
Net Block 1,706.73 1,175.13 966.67 855.08 708.32
Capital Work-in-progress 0.00 0.00 0.00 0.00 0.00

Other Assets 6,356.83 4,402.69 3,605.48 2,277.09 1,330.57

Miscellaneous Expenses not written off 0.00 0.00 0.00 0.00 0.00
Total 183,270.78 133,176.60 91,235.61 73,506.39 51,429.00
Contingent liabilities 414,533.93 599,928.79 209,338.61 144,137.86 89,928.65
Book Value of Unquoted Investment 0.00 0.00 0.00 0.00 0.00
Market Value of Quoted Investment 0.00 0.00 0.00 0.00 0.00

Key Ratios

Y/E March (Rs FY2008 FY2009 FY2010E FY2011E
NII 5,228 7,421 9,284 11,592

% chg 40.9 42.0 25.1 24.9

Net Profit 1,590 2,245 2,916 3,514

% chg 39.3 41.2 29.9 20.5

NIM (%) 4.9 4.9 4.6 4.5

EPS(RS) 44.9 52.8 64.6 77.8

P/E Ratio(x) 30.4 25.8 21.1 17.5

P/BV 4.2 4.0 3.1 2.7

RoA(%) 1.4 1.4 1.4 1.3

RoNW 17.7 17.2 16.6 16.1

Valuation & Recommendation

HDFC Bank is among the most competitive banks in the Indian Banking Sector
and is poised to maintain its profitable growth over the long term. The Bank’s
competitive advantages, driving gains in CASA market share and traction in multiple Fee
Revenue streams, can support up to 5% higher core sustainable RoEs vis-à-vis Sectoral averages
over the long term, creating a material margin of safety in our Target valuation multiples. At the
CMP, the stock is trading at 17.3x FY2010E EPS of Rs63 and 2.5x FY2010E ABV of
Rs445.Maintain a Buy on the stock, with a Target Price of Rs1500, implying an upside of

4.1 Conclusion

1) The current trend of Stock Market in India is fluctuating.
2) The performance of Banking Sector in India is better than Banks in other countries.
3) Only fundamental analysis is not useful for selecting the companies for investment
sometimes, technical analysis is also used.
4) The financial data, management, business concept and competition of the banks are
stronger in India than other countries.
5) The investors/traders are aware about the banking stocks listed on Indian Stock exchange.
6) The risk, return, volatility and liquidity attributes of different banks listed on stock
exchange are satisfactory.
7) The quality of assets, net interest margin (NIM), non performing assets (NPAs) and
capital adequacy ratio (CAR) of the different banks listed on Stock exchange are
8) The future of Indian stock Markets is bright.

4.2 Suggestions

1) The investors should study the current trend of Stock Market in India before investing.

2) The Investor has to see the company prospect and details about the company in which they are
going to invest. They should not totally depend on brokers because there can be chances of

3) While investing in banking stocks the investors should check the quality of assets, net interest
margin (NIM), non performing assets (NPAs) and capital adequacy ratio (CAR) of the banks.

4) For the long term period banking sector is good option for the investors.

5) Finally before investing into stock market investor has to study various concepts and he has to
be updated with new trends and news in the market.

6) Investor should not to invest in one sector at a time he has to diversify his portfolio by
investing in various sectors.

4.3 Recommendation
This particular study has been prepared under certain limitation. Some of the limitations in this

study are:

• This study does not take into consideration current and past price of the share while

determining future share price.

• This study majorly focused on the future growth and prospects of the company, which

depends on the performance of the company in future.

• Sample size that is taken is restricted to a Pune city only amounting to 50 only due to

time and constraints.

Therefore, it is recommended to focus on the above limitation and take into account for the

further study.

1) How to do Fundamental Analysis? Dalal Street Investment Journal’s STOCK MARKET
BOOK, by Ramdeo Media Ltd, pg no 101-134.

2) Banking, MANORAMA YEARBOOK 2008, BY Malayalam Manorama Press, pg no 614-

3) Bank On Growth, Dalal Street Investment Journal, Vol. XXIV. No. 06, pg no 66-72.

5. Bibliography
Donald E. Fischer and Ronald J. Jordan, Security Analysis and Portfolio Management,
Sixth Edition, Pearson Education.

C.R. Kothari, Research Methodology Methods and Techniques, Second Edition, New Age
International Publishers.

Sunil Damania, Dalal Street Investment Journal’s STOCK MARKET BOOK, Ramdeo
Media Ltd.

Vol. XXIV. No. 06, Dalal Street Investment Journal, March 2009.

Websites Visited


Questionnaire for soliciting information for the
purpose of

Project Report Carried out at
‘Angel Broking Ltd’
I) Personal Detail:


Age: _____

Gender: Male □ Female

Contact no:


Qualifications: Non Matric □ SSC/HSC

Graduate □ Post

Graduate □

II) Investment::
1. Where do you invest your savings?

□ Bank Fixed deposits
□ Gold/Silver
□ Real Estate
□ Stock Market
□ Mutual fund
2. Do you invest in stock market?

□ Yes
□ No

3. How long have you been investing in stocks?

□New □1 to 5 years

□5 to 10 years □More than 10

4. How frequently do you track your stocks?

□Many times a day □Weekly
□Once in a day □Monthly

5. What is your current portfolio size?

□Below 5 lacs □ 5-15 lacs
□15-25 lacs □ 25-50 lacs
□50 lacs & above

6. What kind of research interests you the most?

□Investment strategy and investment idea
□Short term trading calls
□Daily market view and day trading calls

7. What is your source of stock market information?

□TV channels
□News paper

□Others (specify) ___________________

8. Which stocks do you most prefer to invest?

□Large Cap
□Mid Cap
□Small Cap
□All of the above

9. How do you trade?


10. What kinds of trading you do?

□Short term
□Long term

11. What is your market preference?

□Speculator □Occasional investment
□Regular investor □Trader
12. What is your stock preference?

□High risk return
□Stocks valued less than RS.10
□Stocks recommended by Angel research
□Stocks recommended by other research houses

13. In which segment you trade the most?

□Futures & Options
□All of the above
14. Which analysis do you consider while selecting a stock?

□Fundamental analysis
□Technical analysis
15. Are you aware of fundamental analysis?

16. Which approach you take while doing fundamental analysis?

□Top-down approach
□Bottom-up approach
17. Are you aware about ‘Angel Broking’?

□ No

18. Are you associated with ‘Angel Broking’?

□Angel’s client
19. Do you take Angel’s research while taking decision on buy/sell?

20. Do you intend to invest in stock market with?

□Own funds
□Borrowed funds