A STUDY ON TECHNICAL ANALYSIS ON BANKING

STOCKS

Mr. B Sharan
Roll No: 18M183

(Finance & Marketing)

PGDM 2018-20

Project Report
Submitted
To

DHRUVA COLLEGE of MANAGEMENT

(Approved by AICTE, Ministry of HRD, Govt. of India)

Dhruva Tara'k Junction, N H: 44, Hyderabad-501 401

India

In partial fulfillment of PGDM Program

2020

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 DECLARATION

I do hereby give the undertaking that the present study is a bonafidework and I have not
submitted it for the award of any degree or diploma in any other college or university.

………………….

(B Sharan)

18M183

Date:

Place: Hyderabad

Attested by

………………….

Prof. Gokul Krishna

Faculty Guide

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CONTENTS

CONTENTS

Chapter Topic Pages

Executive Summary

1 Introduction (include list of literature review,

company profile)

2 Objective(s) of the study

3 Methodology

4 Analysis and Findings

5 Recommendations

6 Bibliography / References

7 Annexures

1. About the company

2. Literature Survey)
3. Annexures

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ACKNOWLEDGEMENT

This journey of two months has been a great one. This of course would not have been possible
without the support and guidance of certain people.
First, I would like to thank my Company Guide, Mr.viswanth Reddy(Branch Manager), for
always being there for me whenever I was stuck somewhere during the work; his valuable
insights have always helped
The other notables mention would be of my College Guide, Prof Gokul Krishna for extending his
cooperation in doing this project.
I also thank all the employees in KARVY for their cooperation and valuable opinions in
successful completion of my project.

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Executive Summary

I B Sharan (18M183) of Dhruva college of Management Hyderabad have

completed my two months of Summer Internship Program at Karvy Stock
Broking Company in Hyderabad. So I hereby submit my executive summary
report.

Organization Details

Karvy Group, an indomitable player in the financial realm since 3 decades with
rich experience provides a wide range of services. Karvy Stock Broking limited
Company is one of the companies under Karvy Group of companies. It was
established in the year 1983 and the current chairman of the company is Mr. C
.Parthsarathy.

The company is registered with the two major stock exchanges i.e. NSE
(National Stock Exchange) and BSE (Bombay Stock Exchange) to provide
broking services to the clients.

Products Offered by Karvy are

 Equity Derivatives
 PAN card
 Mutual funds
 Margin funding
 Commodity
 Currency
 Tax Saving Instruments
 Online Investment platform

Competitors

The major Competitors for Karvy Stock Broking Limited are:

 Religare
 India bulls

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  Motilal Oswal Securities
 Kotak securities
 Sherkhan

Literature Review

Chitra, 2011
in her research found that technical analysis is a study of the stock market
relating to factors affecting the supply and demand of stocks and also helps in
understanding the intrinsic value of shares and to know whether the shares are
undervalued or overvalued. The stock market indicators would help the investor
to identify major market turning points
Sudheer, 2012
in his research found that technical analysis is study of predicting prices of
securities for future the main aim of technical analysis is to generate returns by
letting person decide when to enter and when to exit in the security. Bottom line
is to buy at tough (deep decline) and to sell at peek to get substantial amount of
return or profit.
Varathan N & Tamilenthi, 2012
concluded that technical analysis of securities is a study of past price and volume
trends to judge the direction of future price movements of scripts. The goal is to
produce predictions of price direction and magnitude such that large gains from
the relatively few correct predictions are more than enough to offset the many
smaller losses from incorrect predictions, leading to a positive return in the long
run through proper risk control and money management with the tools.

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OBJECTIVE
To understand the tools of technical analysis that can be used in forecasting the
stock prices.
Methodology

Primary data
Discussion with Investors
Discussion with experts
Live trading in the market.

Secondary data.
Data has been collected from trading of equity market in NSE, various books,
journals, magazines and websites.
The research is based on tools of technical analysis and involves the calculation
of MA, & RSI

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Introduction
In India we can see only 2.75cr people do trading, which is very much less than 5% out of the
total population. As we can also see the companies that has performed outstanding in the stock
market with giving extraordinary profits to the traders in the long term. For example take the
example of Eicher motors which was 3,279.45 in the year 2013 May 14th has risen to 29,208 on
5 May 4, 2018. The figures show that it has increased 10times to the previous price and given
huge profits to the customers who had invested then.

Stock Markets:
Once new securities have been sold in the primary market, they are traded in the secondary
market-where one investor buys shares from another investor at the prevailing market price or at
whatever prices both the buyer and seller agree upon. The secondary market or the stock
exchanges are regulated by the regulatory authority. In India, the secondary and primary markets
are governed by the Security and Exchange Board of India (SEBI).

Stock Exchange:
Stock Exchanges are an organized marketplace, either corporation or mutual organization, where
members of the organization gather to trade company stocks or other securities. The members
may act either as agents for their customers, or as principals for their own accounts.
A stock exchange facilitates stock brokers to trade company stocks and other securities. A stock
may be bought or sold only if it is listed on an exchange. Thus, it is the meeting place of the
stock buyers and sellers. India's premier stock exchanges are the Bombay Stock Exchange and
the National Stock Exchange.

BSE (Bombay Stock Exchange)

In 1956, the Government of India recognized the Bombay In 1956, the Government of India
recognized the Bombay Stock Exchange as the first stock exchange in the country under the
Securities Contracts (Regulation) Act. The most decisive period in the history of the BSE took
place after 1992. In the aftermath of a major scandal with market manipulation involving a BSE
member named Harshad Mehta, BSE responded to calls for reform with intransigence. The foot-
dragging by the BSE helped radicalize the position of the government, which encouraged the
creation of the National Stock Exchange (NSE), which created an electronic marketplace.
BSE's popular equity index - the S&P BSE SENSEX - is India's most widely tracked stock
market benchmark index. It is traded internationally on the EUREX as well as leading exchanges
of the BRCS nations (Brazil, Russia, China and South Africa).

NSE (National Stock Exchange):

The National Stock Exchange of India Limited was the first exchange in India to provide
modern, fully automated electronic trading. It was set up by a group of Indian financial
institutions with the goal of bringing greater transparency to the Indian capital market. As of

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March 2016, the National Stock Exchange had accumulated $1.41 trillion in total market
capitalization, making it the world's 12th-largest stock exchange. The flagship index, the NIFTY
50, represents about 63% of total market capitalization listed on the exchange.
The National Stock Exchange has been a pioneer in Indian financial markets, being the first
electronic limit order book to trade derivatives and ETFs. The exchange supports more than
3,000 VSAT terminals, making the NSE the largest private wide-area network in the country.
Ashok Chawla is the Chairman of the Board of Directors and Vikram Limaye is the Managing
Director and CEO of the exchange

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BANKING SECTOR IN INDIA
As per the Reserve Bank of India (RBI), India’s banking sector is sufficiently capitalised and
well regulated. The financial and economic conditions in the country are far superior to any other
country in the world. Credit, market and liquidity risk studies suggest that Indian banks are
generally resilient and have withstood the global downturn well.
Banks can be broadly categorized into:
 Public Sector Banks
 Commercial banks
 Regional Rural Banks
 Private Sector Banks
 Foreign Banks
 Co-operative Banks and
 Term lending Institution
The digital payments system in India has evolved the most among 25 countries with India’s
Immediate Payment Service (IMPS) being the only system at level 5 in the Faster Payments
Innovation Index (FPII).
In August 2017, Global rating agency Moody's announced that its outlook for the Indian banking
system was stable. In November 2017, Global rating agency Moody's upgraded four Indian
banks from Baa3 to Baa2.

Market Size:
The Indian banking system consists of 27 public sector banks, 26 private sector banks, 46 foreign
banks, 56 regional rural banks, 1,574 urban cooperative banks and 93,913 rural cooperative
banks, in addition to cooperative credit institutions. Public-sector banks control more than 70 per
cent of the banking system assets, thereby leaving a comparatively smaller share for its private
peers. Banks are also encouraging their customers to manage their finances using mobile phones

Banking Sector in the Stock Market

There are total 40 banks that are traded in the stock exchange. The entire index of the banks is represented
by “Bank Nifty”. It comprises of 12 banks which includes public sector banks as well as the private sector
banks. The graph of the bank nifty is shown below.

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Banks that form the Index are
1. HDFC Bank
2. ICICI Bank
3. Kotak Mahindra Bank
4. State Bank Of India
5. Indusind Bank
6. Axis Bank
7. RBL Bank
8. Federal Bank
9. Bank Of Baroda
10.IDFC Bank
11.Yes Bank
12.Punjab National Bank

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Public Sector banks in Stock Market

There are 21 Public sector banks listed before the merger of Vijaya bank, Dena bank and Bank of

Baroda. The list of banks, their current market price and their market capitalization is listed below in

the table

SNO BANK CMP(RS) Market Cap(Cr)

1 ALLAHABAD BANK 49.85 5012
2 ANDHRA BANK 23.6 634
3 BANK OF BARODA 121.6 36870
4 BANK OF INDIA 90.15 8978
5 BANK OF MAHARASHTRA 15.75 550
6 CANARA BANK 284.4 19352
7 CENTRAL BANK OF INDIA 20.6 2583
8 CORPORATION BANK 25.3 910
9 INDIAN BANK 259.8 8193
10 INDIAN OVERSEAS BANK 12.15 555
11 ORIENTAL BANK OF COMMERCE 94.35 4802
12 PUNJAB AND SIND BANK 27.25 1559
13 PUNJAB NATIONAL BANK 79.55 21349
14 STATE BANK OF INDIA 361.25 56028
15 SYNDICATE BANK 41.9 5316
16 UCO BANK 18.35 675
17 UNION BANK OF INDIA 81.05 10616
18 UNITED BANK OF INDIA 10.55 7465

The entire public sector banks have an index called Nifty PSU Bank which is currently at 3205.65 as of
28th june 2019.

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Private Sector Banks in Stock Market
There are 19 Private Sector Banks that are been traded in Indian stock Exchange. Prices of the banks and
their market capitalization are listed below

sno bank cmp market cap(CR) As on 12/07/19

1 Axis Bank 754 154402
2 Bandhan Bank 561 8686
3 City Union Bank 204 15020
4 DCB Bank 236.5 6244
5 Dhanalakshmi bank 18 348
6 Federal Bank 106 21109
7 HDFC Bank 2390 516824
8 ICICI Bank 427 275505
9 IDFC FIRST Bank 43 8038
10 IndusInd Bank 1517 77386
11 JK Bank 39 907
12 Karnataka Bank 101 2871
13 Karur Vysya Bank 69 5462
14 Kotak Mahindra Bank 1482 198272
15 Lakshmi Vilas Bank 65 1936
16 RBL Bank 605 162
17 South India Bank 13 2370
18 Standard Chartered Bank 55 1339
19 Yes Bank 94 17460

The entire private sector banks have an index called Nifty PVT Bank which is currently at 16,913.20 as of
12th july 2019

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Technical Analysis
There are two primary methods used to analyze securities and make investment decisions:
fundamental analysis and technical analysis. Fundamental analysis involves analyzing a -
company’s financial statements to determine the fair value of the business, while technical
analysis assumes that a security’s price already reflects all publicly-available information and
instead focuses on the statistical analysis of price movements
Technical analysis may appear complicated on the surface, but it boils down to an analysis of
supply and demand in the market to determine where the price trend is headed. In other words,
technical analysis attempts to understand the market sentiment behind price trends rather than
analyzing a security’s fundamental attributes. If you understand the benefits and limitations of
technical analysis, it can give you a new set of tools or skills that will enable you to be a better
trader or investor over the long-term.
Technical Analysis is the forecasting of future financial price movements based on an
examination of past price movements. Like weather forecasting, technical analysis does not
result in absolute predictions about the future. Instead, technical analysis can help investors
anticipate what is “likely” to happen to prices over time. Technical analysis uses a wide variety
of charts that show price over time

Assumptions of Technical analysis

The assumption that price discounts everything essentially means the market price
of a security at any given point in time accurately reflects all available information,
and therefore representsthe true fair value of the security. This assumption is based
on the idea the market price always reflects the sum total knowledge of all market
participants.
The second basic assumption underlying technical analysis, the notion that price
changes are not random, leads to the belief of technical analysts that market trends,
both short term and long term, can be identified, enabling market traders to profit
from investing according to the existing trend.
The market value is determined by the interaction of the demand and supply.
Technical analysis is based on the premise that price discounts every information
and aspect in the market.
The market discounts everything. The price of the security quoted represents
everything the hopes, the fears, and also the insider information received by the
market players. Inside information may include information regarding issue of
bonus shares and right shares which may support the price.

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The market always moves in a trend. Except for minor deviations the stock prices
moves in trends. The prices may create definite patterns too which may be either
increasing or decreasing which continues for sometime and then it may reverse.
Any person can understand that history may repeat, so is the case with the stock
markets. In the rising markets investors tend to purchase huge volumes which
drives in moving the prices higher. Vice versa in the down trend investors are
eager in selling their stocks which in thus impacts the share price.
The assumption that price discounts everything essentially means the market price
of a security at any given point in time accurately reflects all available information,
and therefore represents the true fair value of the security. This assumption is
based on the idea the market price always reflects the sum total knowledge of all
market participants.
Technical analysis is based on three assumptions:
1. The market discounts everything.
2. Price moves in trends.
3. History tends to repeat itself

Benefits of Technical Analysis:

 Helps to identify a trend which will help the investors to make predictions on the future
prices.
 Allows the investors to see the direction of the trend and allows them to find out the best
time to take a position in the market.
 When it is used in conjunction with the fundamental analysis and company and industry
analysis it minimizes the chances of investor incurring losses
 It will help the technical analysts in taking quick investment decisions as soon as the
trend changes its direction

Technical Indicators
 MACD
 RSI

Moving Averages:
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 Moving averages are one of the type of indicators, which gives the average of particular
set of time frames. Moving averages is a basic mathematical calculation and it gives the
average of closing prices in particular time frames which can set by manually. Moving
average can calculate in days, hours, minutes and years also. We just have to particular
set of time frames and keep move on to next day by leaving the first day if we are doing
this in a day wise. The same pattern follows for rest of time frames also.

By this moving averages, one can indicate or observe that where the trend gets fluctuates
or become sideways, so that trader can easily predict the future by looking at these cures
where exactly prices went wrong.

Here there are few assumptions in moving averages like suppose if a price is more than an
average price it indicates to traders that they have to buy the stock. Because they think
that this stock will further rise and once it become a satisfied value they will sell off the
stock. Likewise when the price is less than average price, traders will try to square off the
stocks. Because trades think that the stocks will further fall in future, so they will sell the
stocks at particular point to stop the further deep loss.

By this indicator, traders will come to know the which stock is going sideways and which
one is stable and which one is going high or low. By this observation, they will make
decisions according to the results from this indicators.

In moving averages we have two types of indicators:

1. Simple moving average

2. Exponential moving average

Simple moving average:

A simple moving average is calculated by the average (mean) price of a security over a
specified number of periods. It places equal value on every price for the time span
selected. While it is possible to create moving averages from the Open, the High, and the
low data points, most moving averages are created using the closing price.
For example: a Five day simple moving average is calculated by adding the closing prices
for the last five days and dividing the total by 5. The calculation is repeated for each price
bar on the chart. The averages are then joined to form a smooth curving line - the moving
average line.

Exponential moving average

Exponential moving average also called as exponentially weighted moving average is

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 calculated by applying more weight to recent prices relative to older prices. In order to
reduce the lag in simple moving averages, technicians often use exponential moving
averages. The weighting applied to the most recent price depends on the specified period
of the moving average. The shorter the EMA’s period, weight is applied to the most
recent price. For example: a 10-period exponential moving average weighs the most
recent price 18.18% while a 20-period EMA weighs the most recent price 9.52%. As
we’ll see, the calculating and EMA is much harder than calculating an SMA. The
important thing to remember is that the exponential moving average puts more weight on
recent prices. As such, it will react quicker to recent price changes than a simple moving
average. Here’s the calculation formula

EMA (current) = ((Price (current) - EMA (prev)) x (Multiplier) + EMA (prev)

RELATIVE STRENGTH INDEX (RSI)

Relative Strength Index (RSI), which is a comparison between the days that a stock
finishes up and the days it finishes down. The RSI is a reasonably simple model that
anyone can use. It is calculated using the following formula
.
RSI = 100 - [100/ (1 + RS)] ‘
RS = (Avg. of n-day up closes)/(Avg. of n-day down closes)
n = days (most analysts use 9 - 15 day RSI)

STOCK ANALYSIS

HDFC BANK
HDFC Bank Limited is an Indian banking and financial services company headquartered in Mumbai,
Maharashtra. It has 104,154 permanent employees as of 30 June 2019. HDFC Bank is India’s largest
private sector lender by assets.

Technical chart
Simple moving average

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In the above graph, green line indicate the 22 days simple moving average (sma)
taking closing price of stock .The pink line indicate 200 days simple moving
average.
The green line going below pink line at the price point 2150, that is price of stock
is less than the 200 day moving average and it is sell signal.
The green line cross over the pink line and it is moving upwards , then it is buy
signal

Exponential moving averages

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 10
20
40
50
60
70
80
90

30

0
100
RSI
1
13
25
37
49
61
73
85
97
109
121
133

RSI
145
157
169
181
193
205
217
229
241

RSI

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 50

-200
-150
-100
0

-50
100
150
0
1000
1500
2000
2500

500
1

MACD
1
12 13
23 25
34 37
45 49
56 61
67 73
78 85
89 97
100 109
111 121
122 133
133 145
144 157
155 169
166 181
177 193
188 205
199 217
210 229

Series1
Series2
Series1

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ICICI BANK

ICICI Bank Limited is an Indian multinational banking and financial services company headquartered in
Mumbai, Maharashtra with its registered office in Vadodara, Gujarat. As of 2018, ICICI Bank is the
second largest bank in India in terms of assets and market capitalisation

Simple moving average

Exponential moving average

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RSI
100
90
80
70
60
50
Series1
40
30
20
10
0
109
121
133
145
157
169
181
193
205
217
229
1
13
25
37
49
61
73
85
97

CLOSING PRICE

Close Price
500
450
400
350
300
250
200 Close Price
150
100
50
0
118

196
105

131
144
157
170
183

209
222
235
1
14
27
40
53
66
79
92

MACD

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 40.00
35.00
30.00
25.00
20.00
15.00 Series2
10.00 Series1
5.00
0.00

209
105
118
131
144
157
170
183
196
1
14
27
40
53
66
79
92

-5.00
-10.00
-15.00

INDUSIND BANK
IndusInd Bank Limited is a Mumbai based Indian new generation bank, established in 1994. The bank
offers commercial, transactional and electronic banking products and services. IndusInd Bank was
inaugurated in April 1994 by then Union Finance Minister Manmohan Singh

Simple moving average

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Exponentinal moving average

RSI

RSI
100

80

60

40 RSI
20

0
131
105
118

144
157
170
183
196
209
222
235
1
14
27
40
53
66
79
92

Closing price

2500

2000

1500

1000 Series1

500

0
101
121
141
161
181
201
221
1
21
41
61
81

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MACD
150

100

50

0
Series2

100
111
122
133
144
155
166
177
188
199
210
1
12
23
34
45
56
67
78
-50 89 Series1

-100

-150

-200

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