FINAL PROJECT REPORT

FUNTIONAL SPECIALIZATION

EQUITY ANALYSIS ON BANKING SECTOR

Submitted By
Mr. Ashley Joney Joseph
Finance Specialization
Roll No. 22
ACADEMIC YEAR: 2018-2020

Under the Guidance of

Dr. Meera Hirapurkar

Faculty Guide

UNIVERSITY OF MUMBAI
NCRD’s Sterling Institute of Management Studies,

Plot No 93/93A, Sector 19, Near SeawoodsDarave Railway Station,

Nerul (E), Navi Mumbai-400706

I
 NCRD’S
STERLING INSTITUTE OF MANAGEMENT STUDIES
Plot No. 93/93 A, Sector – 19, Nerul (East), Navi Mumbai – 400 706

Institute Certificate

This is to certify that Mr Ashley Joney Joseph MMS SEM IV Roll No. 22 in Finance

Specialization, studying in this institute has completed the Final Project (Functional

specialization) titled “Equity analysis on banking sector” . under our guidance.

Dr. Meera Hirapurkar Dr. Prashant Gundawar

Faculty Guide Director

Place :Nerul, Navi Mumbai

Date :

II
 ACKNOWLEDGEMENT

It gives me great pleasure to express my boundless sense of gratitude to every person who
directly or indirectly helped me in completing this piece of work. This study has helped me to
judge the difference between classroom studies and practical reality of management in an
organization.

I am also very grateful to the management of my college where I have been studying, for
allowing me to do the course and project.

I also would like to convey my special thanks to Dr. Meera Hirapurkar for helping in this
project and taking a keen interest in solving my every small problem, clearing all my doubts
and helping me to think, behave and act from manager’s point of view.

My journey could not have been completed without the help of my parents and friends who
have supported me fully in this project in all aspects, so I am grateful to them.

Date:

Place:

Ashley Joney Joseph

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 NCRD’s Sterling Institute of Management Studies,

Plot No 93/93A, Sector 19, Near SeawoodsDarave Railway Station,

Nerul (E), Navi Mumbai-400706

DECLARATION

I, ASHLEY JONEY JOSEPH hereby declare that the project work entitled “EQUITY
ANALYSIS ON BANKING SECTOR” is the original work done by me under the guidance
of Dr. Meera Hirapurkar, Faculty Member, NCRD’s Sterling Institute of Management Studies.

Signature

Ashley Joney Joseph

Finance Specialization
Roll No: 22

Batch 2018-2020

IV
 INDEX

Chapter No: Particulars Page No:

Cover Page I

Institutional Certificate II

Acknowledgement III

Declaration IV

Executive Summary V

1 Introduction 1

2 Banking sector in India 9

3 Literature Review 21

4 Objective of the study 23

5 Conceptual Framework 26

6 Research Methodology 30

7 Data analysis and Interpretation 31

8 Conclusions 43

9 Suggestions and recommendations 44

Bibliography 45

Annexure 46

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 EXECUTIVE SUMMARY

The field of equity research is very vast and one has to look into various aspects of the
functioning of the company to get to any conclusion about the possible performance of the
company in the market. Investors like warren buffet made a fortune out of investments in the
stock market, which is quite impossible without proper research about the companies. The field
of equity research is full of challenges. In a world that is shrinking in size due to information
technology and blurring boundaries between nations, the stock market (or the equity market),
which is considered to be in its infant stage, is all set to grow in size.
The project on “Equity Analysis” was carried out by self study. This is limited learning and
devotion time towards equity analysis but it also provided an insight on what various services
such broking houses provide and what efforts are required to manage such an organizations.

The project initiated with understanding the mannerisms of the stock market trading followed
by the dynamics of the banking sector. Some of the major players in banking sector were then
chosen for further analysis. These companies were further studied in detail with respect to their
financial and the management’s further plans regarding the functioning of the company, their
expansion plans.

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 Chapter 1

Introduction to topic

Equity

Equity is the ownership interest of investors in a business firm. Investors can own equity shares
in a firm in the form of common stock or preferred stock. Equity ownership in the firm means
that the original business owner no longer owns 100% of the firm but shares ownership with
others. On a company's balance sheet, equity is represented by the following accounts: common
stock, preferred stock, paid-in capital, and retained earnings. Equity can be calculated by
subtracting total liabilities from total assets.

Equity Analysis

Stock analysis is a term that refers to the evaluation

of a particular trading instrument, an investment
sector or the market as a whole. Stock analysts
attempt to determine the future activity of an
instrument, sector or market. There are two basic
types of stock analysis:
1. fundamental analysis and
2. Technical analysis.

Fundamental analysis concentrates on data from sources including financial records, economic
reports, company assets and market share. Technical analysis focuses on the study of past
market action to predict future price movement.

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 Main difference between two types of analysis:

Fundamental analysis Technical analysis

Focuses on what actually happens in the

Focuses on what ought to happen in a market.
market

Factors involved in price analysis:

Charts are based on market action involving:
1. Supply and Demand
1. Pricing
2. Seasonal cycles
2. Volume
3. Weather
3. Open interest( futures only)
4. Government policy

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FUNDAMENTAL ANALYSIS

Fundamental analysis is a method of forecasting the future price movements of a financial

instrument based on economic, political, environmental and other relevant factors and statistics
that will affect the basic supply and demand of whatever underlies the financial instrument. It
is the study of economic, industry and company conditions in an effort to determine the value
of a company’s stock. Fundamental analysis typically focuses on key statistics in company’s
financial statements to determine if the stock price is correctly valued. The term simply refers
to the analysis of the economic well-being of a financial entity as opposed to only its price
movements. Fundamental analysis is the cornerstone of investing. The basic philosophy
underlying the fundamental analysis is that if an investor invests re.1 in buying a share of a
company, how much expected returns from this investment he has. The fundamental analysis
is to appraise the intrinsic value of a security. It insists that no one should purchase or sell a
share on the basis of tips and rumors. The fundamental approach calls upon the investors to
make his buy or sell decision on the basis of a detailed analysis of the information about the
company, about the industry, and the economy. It is also known as “top-down approach”. This
approach attempts to study the economic scenario, industry position and the company
expectations and is also known as “economic-industry-company approach (EIC
approach)”.

Thus the EIC approach involves three steps:

1. Economic analysis
2. Industry analysis
3. Company analysis

Economic analysis

The level of economic activity has an impact on investment in many

ways. If the economy grows rapidly, the industry can also be
expected to show rapid growth and vice versa. When the level of
economic activity is low, stock prices are low, and when the level
of economic activity is high, stock prices are high reflecting the

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prosperous outlook for sales and profits of the firms. The analysis of macroeconomic
environment is essential to understand the behavior of the stock prices.

Industry analysis

Industry analysis is a market assessment tool used by businesses and analysts to understand the
competitive dynamics of an industry. It helps them get a sense of what is happening in an
industry, i.e., demand-supply statistics, degree of competition within the industry, state of
competition of the industry with other emerging industries, future prospects of the industry
taking into account technological changes, credit system within the industry, and the influence
of external factors on the industry.

Industry analysis, for an entrepreneur or a company, is a method that helps it to understand its
position relative to other participants in the
industry. It helps them to identify both the
opportunities and threats coming their way and
gives them a strong idea of the present and future
scenario of the industry. The key to surviving in this
ever-changing business environment is to
understand the differences between yourself and
your competitors in the industry and using it to your full advantage.

Company analysis

Company analysis is a process carried out by investors to evaluate securities, collecting info
related to the company’s profile, products and
services as well as profitability. It is also referred as
‘fundamental analysis.’ A company analysis
incorporates basic info about the company, like the
mission statement and apparition and the goals and
values. During the process of company analysis, an

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investor also considers the company’s history, focusing on events which have contributed in
shaping the company.
Also, a company analysis looks into the goods and services proffered by the company. If the
company is involved in manufacturing activities, the analysis studies the products produced by
the company and also analyzes the demand and quality of these products. Conversely, if it is a
service business, the investor studies the services put forward.

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 Technical analysis

Technical analysis is a means of examining and predicting price movements in the financial
markets, by using historical price charts and market statistics. It is based on the idea that if a
trader can identify previous market patterns, they can form a fairly accurate prediction of future
price trajectories.

It is one of the two major schools of market analysis, the other being fundamental analysis.
Whereas fundamental analysis focuses on an asset’s ‘true value’, with the meaning of external
factors and intrinsic value both considered, technical analysis is based purely on the price charts
of an asset. It is solely the identification of patterns on a chart that is used to predict future
movements.

Technical analysts have a wide range of tools that they can use to find trends and patterns on
charts. These include moving averages, support and resistance levels, Bollinger bands, and
more. All of the tools have the same purpose: to make understanding chart movements and
identifying trends easier for technical traders.

Pros of technical analysis

Being able to identify the signals for price trends in a market is a key component of any trading
strategy. All traders need to work out a methodology for locating the best entry and exit points
in a market, and using technical analysis tools is a very popular way of doing so.

In fact, technical analysis tools are so commonly used, that many believe they have created
self-fulfilling trading rules: As more and more traders use the same indicators to find support
and resistance levels, there will be more buyers and sellers congregated around the same price
points, and the patterns will inevitably be repeated.

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 Cons of technical analysis

There will always be an element of market behavior that is unpredictable. There is no definitive
guarantee that any form of analysis – technical or fundamental – will be 100% accurate.
Although historical price patterns give us an insight into an asset’s likely price trajectory, that
is no promise of success.

Traders should use a range of indicators and analysis tools to get the highest level of assurance
possible, and have a risk management strategy in place to protect against adverse movements.

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 Chapter 2

Introduction to Banking sector of India

Modern banking in India originated in the last decade of the 18th century. Among the
first banks were the Bank of Hindustan, which was established in 1770 and liquidated in 1829–
32; and the General Bank of India, established in 1786 but failed in 1791.

The largest and the oldest bank which is still in existence is the State Bank of India (S.B.I). It
originated and started working as the Bank of Calcutta in mid-June 1806. In 1809, it was
renamed as the Bank of Bengal. This was one of the three banks founded by a presidency
government; the other two were the Bank of Bombay in 1840 and the Bank of Madras in 1843.
The three banks were merged in 1921 to form the Imperial Bank of India, which upon India's
independence, became the State Bank of India in 1955. For many years the presidency banks
had acted as quasi-central banks, as did their successors, until the Reserve Bank of India was
established in 1935, under the Reserve Bank of India Act, 1934.

In 1960, the State Banks of India was given control of eight state-associated banks under the
State Bank of India (Subsidiary Banks) Act, 1959. These are now called its associate banks. In
1969 the Indian government nationalized 14 major private banks; one of the big banks
was Bank of India. In 1980, 6 more private banks were nationalized. These nationalized banks
are the majority of lenders in the Indian economy. They dominate the banking sector because
of their large size and widespread networks.

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The Indian banking sector is broadly classified into scheduled and non-scheduled banks. The
scheduled banks are those included under the 2nd Schedule of the Reserve Bank of India Act,
1934. The scheduled banks are further classified into:

Nationalized banks; State Bank of India and its associates;

1. Regional Rural Banks (RRBs);

2. Foreign banks;

3. Other Indian private sector banks.

The term commercial banks refer to both scheduled and non-scheduled commercial banks
regulated under the Banking Regulation Act, 1949.

Generally the supply, product range and reach of banking in India is fairly mature-even though
reach in rural India and to the poor still remains a challenge. The government has developed
initiatives to address this through the State Bank of India expanding its branch network and
through the National Bank for Agriculture and Rural Development (NABARD) with facilities
like microfinance.

As per the Reserve Bank of India (RBI), India’s banking sector is sufficiently capitalized 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.
Indian banking industry has recently witnessed the roll out of innovative banking models like
payments and small finance banks. RBI’s new measures may go a long way in helping the
restructuring of the domestic banking industry.
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).*

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Types of Bank

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 Market Size
The Indian banking system consists of 18 public sector banks, 22 private sector banks, 46
foreign banks, 53 regional rural banks, 1,542 urban cooperative banks and 94,384 rural
cooperative banks as of September 2019. In FY07-18, total lending increased at a CAGR of
10.94 per cent and total deposits increased at a CAGR of 11.66 per cent. India’s retail credit
market is the fourth largest in the emerging countries. It increased to US$ 281 billion on
December 2017 from US$ 181 billion on December 2014.
Government Initiatives

 As per Union Budget 2019-20, the government has proposed fully automated GST
refund module and an electronic invoice system that will eliminate the need for a
separate e-way bill.
 Under the Budget 2019-20, government has proposed Rs 70,000 crore (US$ 10.2
billion) to the public sector bank.
 Government has smoothly carried out consolidation, reducing the number of Public
Sector Banks by eight.
 As of September 2018, the Government of India has made the Pradhan Mantri Jan
Dhan Yojana (PMJDY) scheme an open ended scheme and has also added more
incentives.
 The Government of India is planning to inject Rs 42,000 crore (US$ 5.99 billion) in
the public sector banks by March 2019 and will infuse the next tranche of
recapitalization by mid-December 2018.

Achievements
Following are the achievements of the government in the year 2017-18:

 As on March 31, 2019 the number of debit and credit cards issued were 925 million
and 47 million, respectively.
 As per RBI, as of October 25, 2019, India recorded foreign exchange reserves of
approximately US$ 442.58 billion.
 India ranks among the top seventh economies with a GDP of US$ 2,73 trillion in 2018
and economy is forecasted to grow at 7.3 per cent in 2018.

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  To improve infrastructure in villages, 204,000 Point of Sale (PoS) terminals have
been sanctioned from the Financial Inclusion Fund by National Bank for Agriculture
& Rural Development (NABARD).
 The number of total bank accounts opened under Pradhan Mantri Jan Dhan Yojana
(PMJDY) reached 333.8 million as on November 28, 2018.

Road Ahead
Enhanced spending on infrastructure, speedy implementation of projects and continuation of
reforms are expected to provide further impetus to growth. All these factors suggest that
India’s banking sector is also poised for robust growth as the rapidly growing business would
turn to banks for their credit needs.
Also, the advancements in technology have brought the mobile and internet banking services
to the fore. The banking sector is laying greater emphasis on providing improved services to
their clients and also upgrading their technology infrastructure, in order to enhance the
customer’s overall experience as well as give banks a competitive edge.
India’s digital lending stood at US$ 75 billion in FY18 and is estimated to reach US$ 1
trillion by FY2023 driven by the five-fold increase in the digital disbursements.

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 Total Money Supply

In India, the measures and definition of money stock have continuously evolved since
independence (1947). The First Working Group 1961 (FWG) of RBI for the first time threw
some light on the concept of money supply in India emphasizing the role of money as a liquid
asset and a medium of exchange.

Later on, in 1977 the Second Working Group (SWG) of RBI developed four measures of
money stock M1, M2, M3, and M4. However, with the advent of new financial institutions, the
Third Working Group (TWG) felt the need for a broader measure of money supply and
redefined financial institutions to include banking sector, insurance corporations, mutual funds,
non-banking financial companies (NBFCs) accepting deposits from the public and
development financial institutions (DFIs). Consequently, TWG broadened the scope of the
measure of the money stock. For more information on the evolution of methodology of the
compilation of money stock measures, please visit this link.

March 2006 witnessed an unprecedented growth in demand deposits with banks (42% YoY)
and a substantial growth in the money supply (21.1% YoY). The growth in deposits, credit and
money supply went beyond the RBI's projections signaling a caution. This forced the then RBI
governor Y. Venugopal Reddy to increase the reverse repo and the repo rate to 6% and 7%,
respectively.

RBI compiles and publishes data on M1, M2, M3, and the M4 measure of money supply
fortnightly and uses M3 as the official measure of the money supply.

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 Investments/developments

Key investments and developments in India’s banking industry include:

 In October 2019, the Department of Post launched the mobile banking facility for all
post office savings account holders of the CBS (core banking solutions) post office.
 Deposits under Pradhan Mantri Jan Dhan Yojana (PMJDY) stood at Rs 1.06 lakh crore
(US$ 15.17 billion
 In October 2019, Government e-Marketplace (GeM) signed a Memorandum of
Understanding (MoU) with Union Bank of India to facilitate a cashless, paperless and
transparent payment system for an array of services.
 Transactions through Unified Payments Interface (UPI) stood at 1.15 billion in October
2019 worth Rs 1.91 lakh crore (US$ 27.33 billion).

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 In August 2019, the government announced the major mergers of public sector banks
which included United Bank of India and Oriental Bank of Commerce to be merged
with Punjab National Bank, Allahabad Bank will be amalgamated with Indian Bank
and Andhra Bank and Corporation Bank will be consolidated with Union Bank of India.
 The NPAs (Non-Performing Assets) of commercial banks has recorded a recovery of
Rs 400,000 crore (US$ 57.23 billion) in last four years including record recovery of Rs
156,746 crore (US$ 22.42 billion) in FY19.
 The board of Allahabad bank approved the merger with Indian bank for the
consolidation of 10 state-run banks into the large-scale lenders.
 As of September 2018, the Government of India launched India Post Payments Bank
(IPPB) and has opened branches across 650 districts to achieve the objective of
financial inclusion.
 The total value of mergers and acquisition during 2017 in NBFC diversified financial
services and banking was US$ 2,564 billion, US$ 103 million and US$ 79 million
respectively @.
 The total equity funding's of microfinance sector grew at the rate of 42 year-on-year to
Rs 14,206 crore (US$ 2.03 billion) in 2018-19.
 The Indian banking system consists of 20 public sector banks, 22 private sector banks,
44 foreign banks, 44 regional rural banks, 1,542 urban cooperative banks and 94,384
rural cooperative banks, in addition to cooperative credit institutions. As on March 31,
2019, the total number of ATMs in India increased to 2, 21,703 and is further expected
to increase to 407,000 by 2021. As of 2017, 80 per cent of the adult population has bank
accounts. As on March 31, 2019 the number of debit and credit cards issued were 925
million and 47 million, respectively.
 Assets of public sector banks stood at Rs 72.59 lakh crore (US$ 1,038.76 billion) in
FY19. As per Union Budget 2019-2020, Provision coverage ratio of banks reached
highest in 7 years. As per RBI, as of January 10, 2020, India recorded foreign exchange
reserves of approximately US$ 461 .21 billion.
 Deposits as of Jan 2020, stood at Rs 133.24 lakh crore (US$ 1,906.45 billion) and credit
to non-food industries reached Rs 100.23 lakh crore (US$ 1.43 trillion) as on January
31, 2020.
 Indian banks are increasingly focusing on adopting integrated approach to risk
management. The NPAs (Non-Performing Assets) of commercial banks has recorded a
recovery of Rs 400,000 crore (US$ 57.23 billion) in FY2019, which is highest in last

16
 four years. Banks have already embraced the international banking supervision accord
of Basel II, and majority of the banks already meet capital requirements of Basel III,
which has a deadline of March 31, 2019.
 As per Union Budget 2019-20, investment-driven growth requires access to low cost
capital which an requires investments of Rs 20 lakh crore (US$ 286.16 billion) every
year.
 Reserve Bank of India (RBI) has decided to set up Public Credit Registry (PCR) an
extensive database of credit information which is accessible to all stakeholders. The
Insolvency and Bankruptcy Code (Amendment) Ordinance, 2017 Bill has been passed
and is expected to strengthen the banking sector. In June 2019, RBI sets average base
rate of 9.18 per cent for non-banking financial companies and micro finance institutions
borrowers for quarter beginning of July.
 The total equity funding of microfinance sector grew at the rate of 42 year-on-year to
Rs 14,206 crore (US$ 2.03 billion) in 2018 -19.
 Deposits under Pradhan Mantri Jan Dhan Yojana (PMJDY) stood at Rs 1.06 lakh crore
(US$ 15.17 billion) with 37.34 crore accounts registered. In May 2018, the Government
of India provided Rs 6 lakh crore (US$ 93.1 billion) loans to 120 million beneficiaries
under Mudra scheme. As of November 2019, the total number of subscribers was 19
million under Atal Pension Yojana.
 Rising incomes are expected to enhance the need for banking services in rural areas and
therefore drive the growth of the sector. As of September 2018, Department of Financial
Services (DFS), Ministry of Finance and National Informatics Centre (NIC) launched
Jan Dhan Darshak as a part of financial inclusion initiative. It is a mobile app to help
people locate financial services in India.
 The digital payments revolution will trigger massive changes in the way credit is
disbursed in India. Debit cards have radically replaced credit cards as the preferred
payment mode in India, after demonetization. Transactions through Unified Payments
Interface (UPI) stood at 1.2 billion in November 2019 worth Rs 1.89 lakh crore (US$
27.08 billion).
 As per Union Budget 2019-20, the government has proposed fully automated GST
refund module and an electronic invoice system that will eliminate the need for a
separate e-way bill.

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18
19
 Chapter 3

Literature review

Ali Ataullah (2004) Concluded that there is still room for improvement in the efficiency of
banks in both the countries. A step forward for the liberalization programmer , therefore, is
not only to deregulate interest rates and enhance the level of competition but also to
strengthen the instutional structure to support good practices in the banking industry .

Gupta Sumeet&VermaRenu (2008) concluded that management of non-performing assets and

risk emanating from adverse event is the key to higher profitability of the Indian banking.
Transparency and good governance would work as principal guiding force in present
scenario.

GhoshSaibal (2009) concluded that with international standards, Indian banks would need to
improve their technological orientation and expand the possibilities for augmenting their
financial activities in order to improve their profit efficiency in the near future.

Dr. Ibrahim Syed M (2011) concluded that this is diagnostic and exploratory in nature and
makes use secondary data. The study finds and concludes that the scheduled commercial
banks in India have significantly improved their operational performance.

Dr. Pardhan Kumar Tanmaya (2012) Concluded that-The study is based on primary data. The
data has been analyzed by Percentage method. The tool used to collect data from the bank
officials was a structured questionnaire. Responses obtained from the 50 Bank managers /
senior officers.

Dr. Dhanabhakyam M &Kavitha M. (2012) studied that banks have to re-orient their
strategies in the light of their own strength and the kind of market in which their likely to
operate on. In the perspective of this domestic and international development, the banking
sector has to chart perfect for development.

Gupta Shipra (2012) concluded that- Public and Private sector banks both are giving good
service in India .Financial condition of any bank is measured by the help of financial ratio. A
leverage ratio cannot do the job alone it needs to be complemented by other prudential tools
or measures to ensure a comprehensive picture of the buildup of leverage in individual banks
or banking groups as well as in the financial system.

20
Sharma Esha (2012) concluded that- The liberalized policy of the govt. of India permitted
entry to the ICICI in the banking; the industry has witnessed a generation of private players.
That’s why the present paper special emphasis has been laid down on the financial analysis of
the bank by using different research ant statistical tools.

GejalakshamiSandanam& et.al (2012) , Cocluded that the public sector banks performed
remarkably well during the period than that of the private sector banks the overall regression
analysis show that the financial performance of the banking industries strongly .

GoelCheenu&RekhiBhutaniChitwan (2013) concluded that the analysis supports that new

banks are more efficient than old ones. The public sector banks are as not profitable as other
sectors are. It means that efficiency and profitability are inter related.

Davda V. Nishit (2012) Concluded that a review of fundamental analysis research in

accounting the paper has outlined the development of different accounting valuation model
and reviewed related emperical work .

Dr. KoundalVirender (2012) concluded that although various Reforms have produced
favorable effects on commercial banks in India and because of this transformation is taking
place almost in all categories of the banks.

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 Chapter 4

Objectives

The objective of this project is to deeply analyze our Banking Sector for investment purpose
by monitoring the growth rate and performance on the basis of historical data.

The main objectives of the Project study are:

 To study the overall growth of Indian Economy which is growing at a fast pace.

 Detailed analysis of Banking Sector which is gearing towards international standards.

 Analyze the performance of equity shares in banking sector.

Limitation of the study

 Time has been a major constraint throughout the study as it has been only for duration
of 3 months.
 As the data collected by me is through secondary sources such as through internet,
newspaper, books etc. It is not sure that collected data are accurate and complete.
 Due to lack of experience and knowledge of the Finance Industry it can’t be said that
the projection has been made totally correct and accurate.
 Today’s stock market is totally running on the investor’s perception so the conclusion
derived on the basis of fundamental analysis would not be viable in the long run.

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 Investor’s decision approach/objective

Investment success is pretty much a matter of careful selection and timing of stock purchases
coupled with perfect matching to an individual’s risk tolerance. In order to carry out selection,
timing and matching actions an investor must conduct deep security analysis.

Investors purchase equity shares with two basic objectives;

To make capital profits by selling shares at higher prices.

To earn dividend income.

These two factors are affected by a host of factors. An investor has to carefully understand and
analyze all these factors. There are basically two approaches to study security prices and
valuation i.e. fundamental analysis and technical analysis the value of common stock is
determined in large measure by the performance of the firm that issued the stock. If the
company is healthy and can demonstrate strength and growth, the value of the stock will
increase. When values increase then prices follow and returns on an investment will increase.
However, just to keep the savvy investor on their toes, the mix is complicated by the risk factors
involved. Fundamental analysis examines all the dimensions of risk exposure and the
probabilities of return, and merges them with broader economic analysis and greater industry
analysis to formulate the valuation of a stock.

Equity Analysis on Banking Sector The main aim of this project is to analyze current growth
trend of scripts of banking in equity market. Based on the study of Indian economy Research
studies have proved that investments in some shares with a longer tenure of investment have
yielded far superior returns than any other investment. However, this does not mean all equity
investments would guarantee similar high returns. Equities are high-risk investments. One
needs to study them carefully before investing. Since 1990 till date, Indian stock market has
returned about 17% to investors on an average in terms of increase in share prices or capital
appreciation annually. Besides that on average stocks have paid 1.5 % dividend annually.
Dividend is a percentage of the face value of a share that a company returns to its shareholders
from its annual profits. Compared to most other forms of Investments’, investing in equity
shares offers the highest rate of return, if invested over a longer duration. Each investment

23
alternative has its own strengths and weaknesses. Some options seek to achieve superior returns
(like equity), but with corresponding higher risk. Other provide safety (like PPF) but at the
expense of liquidity and growth. Other options such as FDs offer safety and liquidity, but at
the cost of return. Mutual funds seek to combine the advantages of investing in arch of these
alternatives while dispensing with the shortcomings. Indian stock market is semi-efficient by
nature and, is considered as one of the most respected stock markets, where information is
quickly and widely disseminated, thereby allowing each security’s price to adjust rapidly in an
unbiased manner to new information so that, it reflects the nearest investment value. And
mainly after the introduction of electronic trading system, the information flow has become
much faster. But sometimes, in developing countries like India, sentiments play major role in
price movements, or say, fluctuations, where investors find it difficult to predict the future with
certainty. Banks are the major part of any economic system. They provide a strong base to
Indian economy as well. Even in the share markets, the performance of banks shares is of great
importance. Thus, the performance of the share market, the rise and the fall of market is greatly
affected by the performance of the banking sector shares and this report revolves around all
factors, their understanding and a theoretical and technical analysis.

24
 Chapter 5
Conceptual Framework
The Banking industry plays a dynamic role in the economic development of a country. The
growth story of an economy depends on the toughness of its banking industry. Banks act as
the store as well as the power house of the country‘s wealth. They accept deposits from
individuals and corporate and lends to the businesses. They use the deposits collected for
productive purposes which help in the capital formation in the country
Two decades ago global banking was traditionally characterised by relatively high levels of
controls where regulatory authorities maintained a protected banking environment that
inhibited competition. However, market conditions have undergone extensive changes over
recent years. On the demand side, customer preferences have changed substantially,
becoming more sophisticated and price conscious.
On the supply side, the globalisation of financial markets has been accompanied by
governmental deregulation, financial innovation and automation. These factors imply an
increase in the number of competitors and a tougher operating environment
Following are the innovative services offered by the industry in the recent past:

1. Electronic Payment Services – E Cheques

A new technology is being developed in US for introduction of e-cheque, which will
eventually replace the conventional paper cheque. India, as harbinger to the
introduction of e-cheque, the Negotiable Instruments Act has already been amended
to include; Truncated cheque and E-cheque instruments. Electronic payments can also
be made in the form of Electronic Funds Transfer (EFT), Electronic Clearing Service
(ECS) and through

Real Time Gross Settlement (RTGS). Many banks in India have begun to offer
certain banking services through Internet that facilitate transfer of funds
electronically.

2. Real Time Gross Settlement (RTGS)

Real Time Gross Settlement (RTGS) system, introduced in India since March 2004, is
a system through which electronic instructions can be given by banks to transfer
funds from their account to the account of another bank. As the name suggests, funds
transfer between banks takes place on a ‗Real

25
Time‘ basis. Therefore, money can reach the beneficiary instantaneously and the
beneficiary‘s bank has the responsibility to credit the beneficiary‘s account within
two hours.
3. Electronic Funds Transfer (EFT)
Electronic Funds Transfer (EFT) is a system whereby anyone who wants to make
payment to another person / company etc. can approach his bank and make cash
payment or give instructions / authorization to transfer funds directly from his own
account to the bank account of the receiver / beneficiary. Complete details such as the
receiver‘s name, bank account number, account type (savings or current account),
bank name, city, branch name etc should be furnished to the bank at the time of
requesting for such transfers so that the amount reaches the beneficiaries‘ account
correctly and faster. RBI is the service provider for EFT.

4. Electronic Clearing Service (ECS)

Electronic Clearing Service (ECS) is a retail payment system that can be used to
make bulk payments / receipts of a similar nature especially where each individual
payment is of a repetitive nature and of relatively smaller amount. This facility is
meant for companies and government departments to make/receive large volumes of
payments rather than for funds transfers by individuals.

5. Automatic Teller Machine (ATM)

Automatic Teller Machine (ATM) is the most popular devise in India, which enables
the customers to withdraw their money 24 hours a day 7 days a week. It is a devise
that allows customer who has an ATM card to perform routine banking transactions
without interacting with a human teller. In addition to cash withdrawal, ATMs can be
used for payment of utility bills, funds transfer between accounts, deposit of cheques
and cash into accounts, balance enquiry etc.

6. Credit / Debit cards

Credit / Debit cards are being widely used in the country as they provide a convenient
form of making payments for goods and services without the use of cheques and cash.
Banks issue credit cards to their customers. The merchant establishment who accepts
credit / debit card payments will claim the amount from the customer‘s bank through
his own bank. For a customer the question may arise; how is a Debit Card different
from Credit Card? Debit Card is a direct account access card. (Amount transacted

26
gets debited immediately). The amount permitted to be transacted in debit card will
be to the extent of the amount standing to the credit of the card user‘s account. On the
other hand, a credit card involves provision of credit to the card user, which is paid by
the card user on receipt of the bill either in full or partially in installments.

7. Point of Sale Terminal

Point of Sale Terminal is a computer terminal that is linked online to the
computerized customer information files in a bank and magnetically encoded plastic
transaction card that identifies the customer to the computer.

During a transaction, the customer‘s account is debited and the retailer‘s account is
credited by the computer for the amount of purchase.

8. Tele Banking
Tele Banking facilitates the customer to do entire non-cash related banking on
telephone. Under this devise Automatic Voice Recorder is used for simpler queries
and transactions. For complicated queries and transactions, manned phone terminals
are used.

9. Corporate Banking Terminal

Corporate Banking Terminal enables the large corporate customers can log into the
banks database and have access to their accounts/ transactions from their business
houses.

10. Electronic Data Interchange

Electronic Data Interchange is the electronic exchange of business documents like
purchase order, invoices, shipping notices, receiving advices etc. in a standard,
computer processed, universally accepted format between trading partners. EDI can
also be used to transmit financial information and payments in electronic form. EDI
has resulted in huge savings in costs of exchanging trading information.

11. Implications
The banks were quickly responded to the changes in the industry; especially the new
generation banks. The continuance of the trend has re-defined and re-engineered the
banking operations as whole with more customization through leveraging technology.
As technology makes banking convenient, customers can access banking services and

27
do banking transactions any time and from any ware. The importance of physical
branches is going down. Thus the changes have the following implications:

 Anywhere Anytime Anyplace Banking

 Banking at Convenience

 Dismantling of Physical Structure

 Goodbye to Traditional Instruments and Invitation to New Instruments

28
 Chapter 6
Research Methodology

“A research is a careful investigation or enquiry, especially through search for new

facts in any branch of knowledge. It is a systemized effort to gain more knowledge.”

“Research Methodology is a way to systematically solve the research problem.

It includes not only the research methods, but also the logic behind using the methods.”

Research methodology is a way to systematically solve the research problem. The research
methodology includes the various methods and techniques for conducting a research.
Research is an art of scientific investigation. In other words research is a scientific and
systematic search for pertinent information one specific topic. The logic behind taking
research methodology into consideration is that one can have knowledge about the method
and procedure adopted for achievement of objective of the project. The questionnaire method
includes both closed ended & open ended questions. The study is categorized each by
percentage which will be moderate or high awareness of the respondents about banking
systems.

Sources of data:

Primary Data

This has been gathered using questionnaire method for collection of data.

Secondary data
The secondary data is collected from various financial books, magazines and from stocks lists
of various newspapers.

29
 Chapter 7

Data Analysis and Intrepretation

Q1) Age of the correspondents?

Choices %

20-30 70.00

30-40 4.00

40-50 4.00

60 and above 22.00

Age

50 and above

40-50

30-40

20-30

0 10 20 30 40 50 60 70 80

Series 1

Observation

This shows that most of the age groups are between 20-30 years.

2) Education

30
 Choice %

SSC 2

HSC 6

Graduate 70.00

Post Graduates 22.00

Chart Title
80

70

60

50

40

30

20

10

0
SSC HSC Graduate Post Graduates

Education

Observations

In this survey this has found that most of the persons are Graduates.

3) Occupation

Choices %

Government Job 16.00

Service 46.00

31
 Business 10.00

Student 26.00

Occupation

16
26

10

46

Government Job Service Business Student

Observations

In this survey it shows that most of the people work in service sector.

4) Family Size

Choices %

Less than 4 40.00

4-6 38.00

Above 6 22.00

32
 Family Size

40
38

Less than4 4to 6 Above 6

Observation

This shows that Most of the family sizes are below four followed by above six.

Q5) Monthly Income

Choices %

Less than 20000 14.00

20000-40000 70.00

40000 and above 16.00

33
 Chart Title

40000 AND ABOVE

16

20000-40000
70

LESS THAN 20000

14

0 10 20 30 40 50 60 70 80

Income

Observation

The most of the family income they earn between 20000-40000 are 70%

Q6) State the various investments in portfolio?

Choices %

Shares 10.85

Debentures/ Bonds 17.45

Mutual Funds 18.87

National savings certificate 7.08

Fixed Deposit 9.91

Real Estate 14.15

Gold/ Silver 16.51

Others 5.19

34
 Chart Title
20
18
16
14
12
10
8
6
4
2
0

Investments

Observations

This shows that people have mostly invested in mutual funds followed by debentures/bonds.

Q7) In which banking sector did you opened your bank account?

Choices %

Private 14.00

Public 62.00

Foreign 2.00

All of the above 22.00

35
 Bank Account

Private
All of the above
14%
22%
Foreign Private
2% Public
Foreign
Public
All of the above
62%

Observation

Here most of the people has opened their accounts in public banks which is around 62
percent.

Q8) Are you satisfied with returns as mentioned by your bank?

Choices %

Yes 60.00

No 14.00

Maybe 26.00

36
 Chart Title
70

60

50

40

30

20

10

0
Yes No Maybe

Satisfaction

Observations

The customers are satisfied with returns as mentioned by their banks.

Q9) Other than account opening which type of facilities have you taken?

Choices %

Home Loan 24.18

Car Loan 5.49

Credit Card Services 35.16

Others 30.16

37
 Chart Title

Others

Credit Card Services

Car Loan

Home Loan

0 5 10 15 20 25 30 35 40

Other Facilities

Observations:

This has been found that people has opt for credit card services.

10) Are you satisfied with government’s decision in merger of public banks?

Choices %

Yes 52.00

No 14.00

Maybe 34.00

38
 Decision

34

52

14

Yes No Maybe

Observation

This shows that people are satisfied in merger of public banks.

11) What type of payments do you prefer to shop?

Choices %

Cash 30.91

Card 40.00

Digital wallets 29.09

39
 Chart Title

Digital wallets

Card

Cash

0 5 10 15 20 25 30 35 40 45

Payment type

Observations:

This shows that the people opt for card payments other than cash.

Q12) Are you satisfied with the digital payment systems in india?

Choices %

Yes 72.00

No 28.00

Satisfaction

Yes No

40
Observations

Here people are satisfied with the digital payment systems in india.

41
 Chapter 8

Conclusion

Indian banks have compared favorably on growth, asset quality and profitability with other
regional banks over the last few years. The banking index has grown at a compounded annual
rate of over 51 per cent since April 2001 as compared to a 27 per cent growth in the market
index for the same period. Policy makers have made some notable changes in policy and
regulation to help strengthen the sector. These changes include strengthening prudential norms,
enhancing the payments system and integrating regulations between commercial and co-
operative banks. However, the cost of intermediation remains high and bank penetration is
limited to only a few customer segments and geographies. While bank lending has been a
significant driver of GDP growth and employment, periodic instances of the “failure” of some
weak banks have often threatened the stability of the system.

Structural weaknesses such as a fragmented industry structure, restrictions on capital

availability and deployment, lack of institutional support infrastructure, restrictive labor laws,
weak corporate governance and ineffective regulations beyond Scheduled Commercial Banks
(SCBs), unless addressed, could seriously weaken the health of the sector.

We found that most of the people are likely to deposit their money in Public banks rather than
private banks as it is considered to be safe.

Most of the people earn between 20000-40000 as this shows in the graph

There was the lac of awareness or governance that some people especially senior citizen
don’t know about digital wallets as they don’t know how to utilize it properly as thy prefer cash
payment methods

42
 Chapter 9

Suggestions

 Here awareness is necessary about digital payments in India as it is popular among the
youths.
 RBI can also create awareness of the frauds happening in ATM’s across India.
 Here bank should keep a certain returns as according to their customers
 The banks should try to attract their customers of their various services provided by
the specific bank.
 People those who are working has to check the various loan offers as per the bank
offers for the certain period of time.

43
 Bibliography

1. https://en.wikipedia.org
2. https://www.readyratios.com/reference/analysis/company_analysis.html
3. https://corporatefinanceinstitute.com/resources/knowledge/strategy/industry-analysis-
methods/

44
Questionnaire

1. State the various Investments in your portfolio

a) Shares
b) Debentures/returns
c) Mutual funds
d) National savings certificate scheme/Public provident fund
e) Fixed deposit
f) Real estate
g) Gold/Silver
h) Others

2. In which banking sector did you open your bank account?

a) Private
b) Public
c) Foreign
d) All of the above

3. Are you satisfied with the returns as mentioned by your bank?

a) Yes

b) No

c) Maybe

4) Other than account opening which type of facilities have you taken?

a) Home loan

b) Car loan

c) Credit card services

45
d) others

5) Are you satisfied with the governments decision in merger of public banks?

a) Yes

b) No

c) Maybe

6) What type of payments do you prefer to shop?

a) Cash

b) Card

c) Digital wallets

7)Are you satisfied with the digital payment system in india?

a) Yes

b) No

8) Rank the following source of information based on usage and reliability?

a) Internet

b) Newspapers/ Magazines

c) TV channels

d) Investment related websites

e) Friends/ relatives

46