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

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 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(Sources referred to like
research papers, annual reports, website)
3. Annexures pertaining to your study like
questionnaire.

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ACKNOWLEDGEMENT

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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

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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
 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 scrips. 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
The research is based on the stock prices of Banking stocks in Bank
. The study aims at analyzing the price movements of selected Banks scripts.
The closing prices of share prices were taken and the future price movement was
analyzed using various tools.
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.
Recommendations

While performing the technical analysis it has been observed that the stock
markets fluctuations are very difficult to understand. So every time we can’t rely
on the technical analysis.

Even some negative news also it can create havoc in the market. Several
economic factors like Inflation, GDP, should be taken into consideration.

We should also have idea about the other countries stock markets like Asian
countries and European countries. Even the political factors also have huge
impact on the stock market.

While conducting technical analysis observing the trends and connecting the
nodes are very important as it predicts the future price and also the movement of
the stocks. Based on this it has been understood that we have to follow all the
factors that has been affecting the stock market, understand the trends of the
stocks and take a wise decisions.

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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

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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 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

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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.

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

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Moving Averages:

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.

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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. Continuing
our example, lets take a nifty 50 chart and we will analyse the chart based on
the smooth line curve.

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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

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.

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The green line cross over the pink line and it is moving upwards , then it is buy
signal

Exponential moving averages

ICICI BANK

Simple moving average

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Exponential moving average

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INDUSIND BANK

Simple moving average

Exponentinal moving average

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