EQUITY RESEARCH IN BANKING SECTOR

Research Project submitted In Part Completion of Masters of Management Studies University of Mumbai By Amit Kanowjia

Under the guidance of Mr. Nikesh Ruparel

Vidyalankar Institute of Technology Wadala (E), Mumbai ± 400 037

JULY 2010

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DECLARATION
I hereby declare that the project work entitled ³Equity Research in Banking Sector ³ submitted to ³Vidyalankar Institute of Technology, wadala(E), Mumbai-400037 ³ is a record of an original work done by me under the guidance of ³Mr. Nikesh Ruparel³ and this project work is submitted in partial fulfillment of the requirement for the award of the degree of Masters of Management Studies (MMS). The results embodied in this report have not been submitted to any other University or Institute for the award of any degree or diploma.
Amit Kanowjia

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ACKNOWLEDGEMENT

I take this opportunity to sincerely thanks and express my gratitude to my project guide Mr. Nikesh Ruparel for guiding me throughout my entire project. The experience and the knowledge acquired over the interactions with the guide have been invaluable to say the least and will help me a great deal in my future education and career. I would also like to thank my co-guide Mr. Jitendra Bapna for valuable input on coordination in my project. My project was completed in a very supportive and interactive environment and has been great learning experience. Last but not the least I would like to thanks my family and friends for all the support they have provided me.

Amit Kanowjia

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TABLE OF CONTENT

Sr. No. 1 2 2.1 2.2 2.3 3 3.1 3.2 3.3 3.4 3.5 4 4.1 4.2 4.3 4.4 4.5 4.6 5 5.1 5.2 5.3 5.4 6 7 8

Contents Introduction to Equity Fundamental Analysis Qualitative Factor- Industry Qualitative Factor- Company Quantitative Factor-Ratios Technical Analysis Introduction to Technical Charts Introduction to Trendline Introduction to Support & Resistance Introduction to Indicators Moving Averages Analysis of Banking Sector The Indian Banking Sector Recent development in Banking sector SWOT Analysis of Banking sector Banking Structure in India Types of Banks & Banking activities Income & Expenses profile of Banks Analysis of Banks Analysis of Punjab National Bank Analysis of Union Bank of India Analysis of Kotak Mahindra Bank Analysis of Yes Bank Recommendations Conclusion Bibliography
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Page No. 6 8 10 12 14 21 23 27 29 31 32 33 34 36 38 41 42 45 48 50 57 65 72 80 81 82

EXECUTIVE SUMMARY

Indian Economy being one of the fastest developing economies in the world, Companies in India are growing at farter rate as compared to their growth rate a decade back. Many Indian companies are expanding their business globally with mergers and acquisitions. As companies grow their shareholders are benefitted with good dividend and capital appreciation on investment in equity shares of such companies. Number of companies listed in stock exchange (BSE & NSE) has been increasing every year with new IPO¶s coming in the market. In India people are realizing that equity has potential to give highest return as compared to other investment avenues however people are not aware how to do equity valuation, they just invest in shares based on tips given by brokers, friends or family members. Investing in equity shares based on tips is not the true investment but it is clear gambling with your money which many of us would not like to do with our hard earned money. Equity valuation begins with analysis of the sector in which you want make investment; if the sector looks positive then analyze various companies in the sector. A Company is analyzed fundamentally to check its performance and financial strength. Technical analysis is used to decide the right price to buy a stock so that higher return on investment can be generated. In this report I have explained How to do fundamental analysis & technical analysis with analysis of banking sector and few banks in the sector.

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INTRODUCTION TO EQUITY What is Equity?
In accounting and finance, equity is the residual claim or interest of the most junior class of investors in assets, after all liabilities are paid. If valuations placed on assets do not exceed liabilities, negative equity exists. In an accounting context, Shareholders' equity (or stockholders' equity, shareholders' funds, shareholders' capital or similar terms) represents the remaining interest in assets of a company, spread among individual shareholders of common or preferred stock. At the start of a business, owners put some funding into the business to finance assets. This creates liability on the business in the shape of capital as the business is a separate entity from its owners. Businesses can be considered to be, for accounting purposes, sums of liabilities and assets; this is the accounting equation. After liabilities have been accounted for, the positive remainder is deemed the owner's interest in the business. This definition is helpful to understand the liquidation process in case of bankruptcy. At first, all the secured creditors are paid against proceeds from assets. Afterward, a series of creditors, ranked in priority sequence, have the next claim/right on the residual proceeds. Ownership equity is the last or residual claim against assets, paid only after all other creditors are paid. In such cases where even creditors could not get enough money to pay their bills, nothing is left over to reimburse owners' equity. Thus owners' equity is reduced to zero. Ownership equity is also known as risk capital, liable capital and equity.

What is Equity Shares?
Total equity capital of a company is divided into equal units of small denominations, each called a share. For example, in a company the total equity capital of Rs 2,00,00,000 is divided into 20,00,000 units of Rs 10 each. Each such unit of Rs 10 is called a Share. Thus, the company then is said to have 20, 00,000 equity shares of Rs 10 each. The holders of such shares are members of the company and have voting rights.

EQUITY INVESTMENT
Equity investments generally refers to the buying and holding of shares of stock on a stock market by individuals and firms in anticipation of income from dividends and capital gain as the value of the stock rises. It also sometimes refers to the acquisition of equity (ownership) participation in a private (unlisted) company or a startup (a company being created or newly created). When the investment is in infant companies, it is referred to as venture capital investing and is generally understood to be higher risk than investment in listed going-concern situations.
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How to invest in Equity Shares?
Investors can buy equity shares of a company from Security market that is from Primary market or Secondary market. The primary market provides the channel for sale of new securities. Primary market provides opportunity to issuers of securities; Government as well as corporate, to raise resources to meet their requirements of investment and/or discharge some obligation. Investors can buy shares of a company through IPO (Initial Public Offering) when it is first time issued to the public. Once shares are issued to the public it is traded in the secondary market. Stock exchange only acts as facilitator for trading of equity shares. Anyone who wishes to buy shares of a company can buy it from an existing shareholder of a company.

Why should one invest in Equity in particular?
When you buy a share of a company you become a shareholder in that Company .Equities have the potential to increase in value over time. It also provides your portfolio with the growth necessary to reach your long term investment goals. Research studies have proved that the equities have outperformed most other forms of investments in the long term. Equities are considered the most challenging and the rewarding, when compared to other investment options. 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. It is important for investors to note that while equity shares give highest return as compared to other investment avenues it also carries highest risk therefore it is important to find µ real value¶ or µ intrinsic value¶ of the security before investing in it. The intrinsic value of a security being higher than the security¶s market value represents a time to buy. If the value of the security is lower than its market price, investors should sell it. To be able to value equity, we need to first understand how equity is to be analyzed. Equity Share of any company can be analyzed through 1. Fundamental Analysis 2. Technical Analysis

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FUNDAMENTAL ANALYSIS

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Introduction Fundamental analysis is a technique that attempts to determine a security¶s value by focusing on underlying factors that affect a Company¶s actual business and its future prospects. Fundamental analysts attempt to study everything that can affect the security's value, including macroeconomic factors (like the overall economy and industry conditions) and company-specific factors (like financial condition and management). Fundamental analysis of a business involves analyzing its financial statements and health, its management and competitive advantages, and its competitors and markets. Fundamental analysis is performed on historical and present data, but with the goal of making financial forecasts. A fundamental analyst believes that analyzing strategy, management, product, financial stats and many other readily and not-so-readily quantifiable numbers will help choose stocks that will outperform the market. There are several possible objectives:
y y y y

To conduct a company stock valuation and predict its probable price evolution, To make a projection on its business performance, To evaluate its management and make internal business decisions, To calculate its credit risk.

Fundamental analysis serves to answer questions, such as: y Is the company¶s revenue growing? y Is it actually making a profit? y Is it in a strong-enough position to beat out its competitors in the future? y Is it able to repay its debts? y Is management trying to "cook the books"?

Fundamentals: Quantitative and Qualitative
As mentioned in the introduction, fundamentals can include anything related to the economic well-being of a company. Obvious items include things like revenue and profit, but fundamentals also include everything from a company¶s market share to the quality of its management. The various fundamental factors can be grouped into two categories: quantitative and qualitative. y Qualitative ± related to or based on the quality or character of something, often as opposed to its size or quantity. y Quantitative ± capable of being measured or expressed in numerical terms.

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QUALITATIVE FACTOR ± THE INDUSTRY
Each industry has differences in terms of its customer base, market share among firms, industry-wide growth, competition, regulation and business cycles. Learning about how the industry works will give an investor a deeper understanding of a company's financial health. y Customers Some companies serve only a handful of customers, while others serve millions. In general, it's negative if a business relies on a small number of customers for a large portion of its sales because the loss of each customer could dramatically affect revenues. For example, think of a military supplier who has 100% of its sales with the Indian government. One change in government policy could potentially wipe out all of its sales. For this reason, companies will always disclose in their annual report if any one customer accounts for a majority of revenues.

y

Market Share Understanding a company's present market share can tell volumes about the company's business. The fact that a company possesses an 85% market share tells you that it is the largest player in its market by far. Furthermore, this could also suggest that the company possesses some sort of "economic moat," in other words, a competitive barrier serving to protect its current and future earnings, along with its market share. Market share is important because of economies of scale. When the firm is bigger than the rest of its rivals, it is in a better position to absorb the high fixed costs of a capital-intensive industry.

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Industry Growth One way of examining a company's growth potential is to first examine whether the amount of customers in the overall market will grow. This is crucial because without new customers, a company has to steal market share in order to grow. In some markets, there is zero or negative growth, a factor demanding careful consideration. For example, a manufacturing company dedicated solely to creating audio compact cassettes might have been very successful in the '70s, '80s and early '90s. However, that same company would probably have a rough time now due to the advent of newer technologies, such as CDs and MP3s. The current market for audio compact cassettes is only a fraction of what it was during the peak of its popularity.

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y

Competition Simply looking at the number of competitors goes a long way in understanding the competitive landscape for a company. Industries that have limited barriers to entry and a large number of competing firms create a difficult operating environment for firms. One of the biggest risks within a highly competitive industry is pricing power. This refers to the ability of a supplier to increase prices and pass those costs on to customers. Companies operating in industries with few alternatives have the ability to pass on costs to their customers. A great example of this is Wal-Mart. They are so dominant in the retailing business, that Wal-Mart practically sets the price for any of the suppliers wanting to do business with them. If you want to sell to Wal-Mart, you have little, if any, pricing power.

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Regulation Certain industries are heavily regulated due to the importance or severity of the industry's products and/or services. As important as some of these regulations are to the public, they can drastically affect the attractiveness of a company for investment purposes. In industries where one or two companies represent the entire industry for a region (such as utility companies), governments usually specify how much profit each company can make. In these instances, while there is the potential for sizable profits, they are limited due to regulation. In other industries, regulation can play a less direct role in affecting industry pricing. For example, the drug industry is one of most regulated industries. And for good reason - no one wants an ineffective drug that causes deaths to reach the market. As a result, the Food and Drug Administration (FDA) requires that new drugs must pass a series of clinical trials before they can be sold and distributed to the general public. However, the consequence of all this testing is that it usually takes several years and millions of dollars before a drug is approved. Keep in mind that all these costs are above and beyond the millions that the drug company has spent on research and development. All in all, investors should always be on the lookout for regulations that could potentially have a material impact upon a business' bottom line. Investors should keep these regulatory costs in mind as they assess the potential risks and rewards of investing.

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QUALITATIVE FACTOR ± THE COMPANY
Before diving into a company's financial statements, let¶s take a look at some of the qualitative aspects of a company. Following are the qualitative factors of the company that investor should be aware of ± y Business Model

One of the most important questions that should be asked is what exactly does the company do? This is referred to as a company's business model. Its how a company makes money? You can get a good overview of a company's business model by checking out its website or annual report. y Competitive Advantage

Another business consideration for investors is competitive advantage. A company's long-term success is driven largely by its ability to maintain a competitive advantage and keep it. Powerful competitive advantages, such as Reliance¶s brand name and Microsoft's domination of the personal computer operating system, create a moat around a business allowing it to keep competitors at bay and enjoy growth and profits. When a company can achieve competitive advantage, its shareholders can be well rewarded for decades. y Management

A company relies upon management to steer it towards financial success. Some believe that management is the most important aspect for investing in a company. It makes sense - even the best business model is doomed if the leaders of the company fail to properly execute the plan. Every public company has a corporate information section on its website. Usually there will be a quick biography on each executive with their employment history, educational background and any applicable achievements. Don't expect to find anything useful here. Let's be honest: We're looking for dirt, and no company is going to put negative information on its corporate website. Instead, here are a few ways for you to get a feel for management: 1. Management Discussion and Analysis (MD&A) The Management Discussion and Analysis is found at the beginning of the annual report. In theory, the MD&A is supposed to be frank commentary on the management's outlook. Sometimes the content is worthwhile, other times it's boilerplate. One tip is to compare what management said in past years with what they are saying now. Is it the same material rehashed? Have strategies actually been implemented? If possible, sit down and read the last five years of MD&As.
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2. Ownership and Insider Sales Just about any large company will compensate executives with a combination of cash, restricted stock and options. It is a positive sign that members of management are also shareholders. The ideal situation is when the founder of the company is still in charge. Examples include Mukesh Ambani & Ajim Premji When you know that a majority of management's wealth is in the stock, you can have confidence that they will do the right thing. As well, it's worth checking out if management has been selling its stock. This has to be filed with the Securities and Exchange Board of India (SEBI), so it's publicly available information. Talk is cheap - think twice if you see management unloading all of its shares while saying something else in the media.

3. Past Performance Another good way to get a feel for management capability is to check and see how executives have done at other companies in the past. You can normally find biographies of top executives on company web sites. Identify the companies they worked at in the past and do a search on those companies and their performance.
4. Conference Calls

Some of the big market capitalisation companies have conference calls do that management can address critical issues such as performance review, critical developments etc. The excerpts of these are later displayed on the company¶s web sites so as to enable investors to access these.

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QUANTITATIVE FACTOR
Now as we know the qualitative factor of fundamental analysis, let¶s proceed to the quantitative factor of fundamental analysis. Quantitative factor include analysis of financial statement of the company. RATIO ANALYSIS Financial ratios are tools for interpreting financial statements to provide a basis for valuing securities and appraising financial and management performance. In general, there are 4 kinds of financial ratios that a financial analyst will use most frequently, these are:
y y y y

Performance ratios Working capital ratios Liquidity ratios Solvency ratios

These 4 financial ratios allow a good financial analyst to quickly and efficiently address the following questions or concerns: Performance ratios
y y

What return is the company making on its capital investment? What are its profit margins?

Working capital ratios
y y

How quickly are debts paid? How many times is inventory turned?

Liquidity ratios
y

Can the company continue to pay its liabilities and debts?

Solvency ratios (Longer term)
y y

What is the level of debt in relation to other assets and to equity? Is the level of interest payable out of profits?

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Following are some ratios which are used to analyze companies¶ performance 1. Current Ratio: Current ratio is calculated in order to work out firm¶s ability to pay off its short-term liabilities. This ratio is also called working capital ratio. This ratio explains the relationship between current assets and current liabilities of a business. Where current assets are those assets which are either in the form of cash or easily convertible into cash within a year. Similarly, liabilities, which are to be paid within an accounting year, are called current liabilities. Current Ratio = Current Assets/Current Liabilities Current Assets include Cash in hand, Cash at Bank, Sundry Debtors, Bills Receivable, Stock of Goods, Short-term Investments, Prepaid Expenses, Accrued Incomes etc. Current Liabilities include Sundry Creditors, Bills Payable, Bank Overdraft, Outstanding Expenses etc. Objective and Significance: Current ratio shows the short-term financial position of the business. This ratio measures the ability of the business to pay its current liabilities. The ideal current ratio is supposed to be 2:1 i.e. current assets must be twice the current liabilities. In case, this ratio is less than 2:1, the short-term financial position is not supposed to be very sound and in case, it is more than 2:1, it indicates idleness of working capital.

2. Liquid Ratio: Liquid ratio shows short-term solvency of a business in a true manner. It is also called acid-test ratio and quick ratio. It is calculated in order to know how quickly current liabilities can be paid with the help of quick assets. Quick assets mean those assets, which are quickly convertible into cash. Liquid Ratio = Liquid Assets/Current Liabilities Where liquid assets include Cash in hand, Cash at Bank, Sundry Debtors, Bills Receivable, Short-term Investments etc. In other words, all current assets are liquid assets except stock and prepaid expenses. Current liabilities include Sundry Creditors, Bills Payable, Bank Overdraft, Outstanding Expenses etc

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3. Debt-Equity Ratio: Debt equity ratio shows the relationship between long-term debts and shareholders funds¶. It is also known as µExternal-Internal¶ equity ratio. Debt Equity Ratio = Debt/Equity Where Debt (long term loans) include Debentures, Mortgage Loan, Bank Loan, Public Deposits, Loan from financial institution etc. Equity (Shareholders¶ Funds) = Share Capital (Equity + Preference) + Reserves and Surplus ± Fictitious Assets Objective and Significance: This ratio is a measure of owner¶s stock in the business. Proprietors are always keen to have more funds from borrowings because: (i) Their stake in the business is reduced and subsequently their risk too (ii) Interest on loans or borrowings is a deductible expenditure while computing taxable profits. Dividend on shares is not so allowed by Income Tax Authorities. The normally acceptable debt-equity ratio is 2:1.

4. Fixed Assets Ratio: Fixed Assets Ratio establishes the relationship of Fixed Assets

to Long-term Funds. Fixed Assets Ratio = Long-term Funds/Net Fixed Assets Where Long-term Funds = Share Capital (Equity + Preference) + Reserves and Surplus + Long- term Loans ± Fictitious Assets Net Fixed Assets means Fixed Assets at cost less depreciation. It will also include trade investments. Objective and Significance: This ratio indicates as to what extent fixed assets are financed out of long-term funds. It is well established that fixed assets should be financed only out of long-term funds. This ratio workout the proportion of investment of funds from the point of view of long-term financial soundness. This ratio should be equal to 1. If the ratio is less than 1, it means the firm has adopted the impudent policy of using short-term funds for acquiring fixed assets. On the other hand, a very high ratio would indicate that long-term funds are being used for short-term purposes, i.e. for financing working capital.

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5. Working Capital Turnover Ratio: Working capital turnover ratio establishes a

relationship between net sales and working capital. This ratio measures the efficiency of utilization of working capital. Working Capital Turnover Ratio = Net Sales or Cost of Goods Sold/Net Working Capital Where Net Working Capital = Current Assets ± Current Liabilities Objective and Significance: This ratio indicates the number of times the utilisation of working capital in the process of doing business. The higher is the ratio, the lower is the investment in working capital and the greater are the profits. However, a very high turnover indicates a sign of over-trading and puts the firm in financial difficulties. A low working capital turnover ratio indicates that the working capital has not been used efficiently.

6. Stock Turnover Ratio: Stock turnover ratio is a ratio between cost of goods sold and
average stock. This ratio is also known as stock velocity or inventory turnover ratio. Stock Turnover Ratio = Cost of Goods Sold/Average Stock Where Average Stock = [Opening Stock + Closing Stock]/2 Cost of Goods Sold = Opening Stock + Net Purchases + Direct Expenses ± Closing Stock Objective and Significance: Stock is a most important component of working capital. This ratio provides guidelines to the management while framing stock policy. It measures how fast the stock is moving through the firm and generating sales. It helps to maintain a proper amount of stock to fulfill the requirements of the concern. A proper inventory turnover makes the business to earn a reasonable margin of profit.

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7. Debtors¶ Turnover Ratio: Debtors turnover ratio indicates the relation between net credit sales and average accounts receivables of the year. This ratio is also known as Debtors¶ Velocity.
Debtors Turnover Ratio = Net Credit Sales/Average Accounts Receivables Where Average Accounts Receivables = [Opening Debtors and B/R + Closing Debtors and B/R]/2 Credit Sales = Total Sales ± Cash Sales Objective and Significance: This ratio indicates the efficiency of the concern to collect the amount due from debtors. It determines the efficiency with which the trade debtors are managed. Higher the ratio, better it is as it proves that the debts are being collected very quickly.

8. Capital Turnover Ratio: Capital turnover ratio establishes a relationship between net

sales and capital employed. The ratio indicates the times by which the capital employed is used to generate sales. It is calculated as follows: Capital Turnover Ratio = Net Sales/Capital Employed Where Net Sales = Sales ± Sales Return Capital Employed = Share Capital (Equity + Preference) + Reserves and Surplus + Long-term Loans ± Fictitious Assets. Objective and Significance: The objective of capital turnover ratio is to calculate how efficiently the capital invested in the business is being used and how many times the capital is turned into sales. Higher the ratio, better the efficiency of utilisation of capital and it would lead to higher profitability.

9. Net Profit Ratio: Net Profit Ratio shows the relationship between Net Profit of the
concern and Its Net Sales. Net Profit Ratio can be calculated in the following manner: Net Profit Ratio = Net Profit/Net Sales x 100 Where Net Profit = Gross Profit ± Selling and Distribution Expenses ± Office and Administration Expenses ± Financial Expenses ± Non Operating Expenses + Non Operating Incomes. And Net Sales = Total Sales ± Sales Return
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Objective and Significance: In order to work out overall efficiency of the concern Net Profit ratio is calculated. This ratio is helpful to determine the operational ability of the concern. While comparing the ratio to previous years¶ ratios, the increment shows the efficiency of the concern.

10. Return on Investment or Return on Capital Employed: This ratio shows the relationship between the profit earned before interest and tax and the capital employed to earn such profit. Return on Capital Employed = Net Profit before Interest, Tax and Dividend/Capital Employed x 100 Where Capital Employed = Share Capital (Equity + Preference) + Reserves and Surplus + Long-term Loans ± Fictitious Assets Or Capital Employed = Fixed Assets + Current Assets ± Current Liabilities Objective and Significance: Return on capital employed measures the profit, which a firm earns on investing a unit of capital. The profit being the net result of all operations, the return on capital expresses all efficiencies and inefficiencies of a business. This ratio has a great importance to the shareholders and investors and also to management. To shareholders it indicates how much their capital is earning and to the management as to how efficiently it has been working. This ratio influences the market price of the shares. The higher the ratio, the better it is.

11. Return on Equity: Return on equity is also known as return on shareholders¶
investment. The ratio establishes relationship between profit available to equity shareholders with equity shareholders¶ funds. Return on Equity = Net Profit after Interest, Tax and Preference Dividend/Equity Shareholders¶ Funds x 100 Where Equity Shareholders¶ Funds = Equity Share Capital + Reserves and Surplus ± Fictitious Assets Objective and Significance: Return on Equity judges the profitability from the point of view of equity shareholders. This ratio has great interest to equity shareholders. The
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return on equity measures the profitability of equity funds invested in the firm. The investors favour the company with higher ROE.

12. Earning Per Share: Earning per share is calculated by dividing the net profit (after interest, tax and preference dividend) by the number of equity shares. Earning Per Share = Net Profit after Interest, Tax and Preference Dividend/No. Of Equity Shares Objective and Significance: Earning per share helps in determining the market price of the equity share of the company. It also helps to know whether the company is able to use its equity share capital effectively with compare to other companies. It also tells about the capacity of the company to pay dividends to its equity shareholders.

13. Price/Earning Ratio: This ratio shows the relationship between market price per share and earning per share. In other words, if a company is reporting a profit of Rs.200 per share, and the stock is selling for Rs.2000 per share, the P/E ratio is 10 because you are paying ten-times earnings (Rs.2000 per share divided by Rs.200 per share earnings = 10 P/E.) This ratio is calculated to find out the possibility of capital appreciation in future. Price Earning Ratio = Market Price per Equity Share/ Earning per Share.

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TECHNICAL ANALYSIS

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INTRODUCTION Should I buy today? What will prices be tomorrow, next week, or next year? Wouldn't investing be easy if we knew the answers to these seemingly simple questions? technical analysis has the answers to these questions. Technical analysis is the process of analyzing a security's historical prices in an effort to determine probable future prices. This is done by comparing current price action (i.e., current expectations) with comparable historical price action to predict a reasonable outcome. Simply put, technical analysis is the study of prices, with charts being the primary tool. Technical analysts are sometimes referred to as chartists because they rely almost exclusively on charts for their analysis. Technical analysis is applicable to stocks, indices, commodities, futures or any tradable instrument where the price is influenced by the forces of supply and demand. Price refers to any combination of the open, high, low or close for a given security over a specific timeframe. The time frame can be based on intraday (tick, 5-minute, 15-minute or hourly), daily, weekly or monthly price data and last a few hours or many years. Technicians, as technical analysts are called, are only concerned with two things: 1. What is the current price? 2. What is the history of the price movement? The price is the end result of the battle between the forces of supply and demand for the company's stock. The objective of analysis is to forecast the direction of the future price. By focusing on price and only price, technical analysis represents a direct approach. Technicians believe it is best to concentrate on what and never mind why. Why did the price go up? It is simple, more buyers (demand) than sellers (supply). After all, the value of any asset is only what someone is willing to pay for it.

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What is Chart?
A price chart is a sequence of prices plotted over a specific timeframe. In statistical terms, charts are referred to as time series plots.

(Current Chart for Minnesota Mining & Manufacturing)
On the chart, the y-axis (vertical axis) represents the price scale and the x-axis (horizontal axis) represents the time scale. Prices are plotted from left to right across the x-axis with the most recent plot being the furthest right. The price plot for MMM extends from January 1, 1999 to March 13, 2000.

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What are the different Charts used in Technical Analysis?
1. Line Chart The line chart is one of the simplest charts. It is formed by plotting one price point, usually the close, of a security over a period of time. Connecting the dots, or price points, over a period of time, creates the line.

(Current Chart for Sun Microsystems)
Some investors and traders consider the closing level to be more important than the open, high or low. By paying attention to only the close, intraday swings can be ignored. Line charts are also used when open, high and low data points are not available. Sometimes only closing data are available for certain indices, thinly traded stocks and intraday prices

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2. Bar Chart Perhaps the most popular charting method is the bar chart. The high, low and close are required to form the price plot for each period of a bar chart. The high and low are represented by the top and bottom of the vertical bar and the close is the short horizontal line crossing the vertical bar. On a daily chart, each bar represents the high, low and close for a particular day. Weekly charts would have a bar for each week based on Friday's close and the high and low for that week.

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3. Candlestick Chart Originating in Japan over 300 years ago, candlestick charts have become quite popular in recent years. For a candlestick chart, the open, high, low and close are all required. A daily candlestick is based on the open price, the intraday high and low, and the close. A weekly candlestick is based on Monday's open, the weekly high-low range and Friday's close.

Many traders and investors believe that candlestick charts are easy to read, especially the relationship between the open and the close. White (clear) candlesticks form when the close is higher than the open and black (solid) candlesticks form when the close is lower than the open. The white and black portion formed from the open and close is called the body (white body or black body). The lines above and below are called shadows and represent the high and low.

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INTRODUCTION TO TRENDLINE
Trendlines are an important tool in technical analysis for both trend identification and confirmation. A trendline is a straight line that connects two or more price points and then extends into the future to act as a line of support or resistance. Trends in charts are found to take decision regarding buying, selling or holding the stock. When a stock is in uptrend it is good stock to buy and when a stock is in down trend it is advisable to sell that particular stock or wait for trend in the stock to change before taking buying decision. Following charts show Uptrend and Downtrend movement in stocks

The above chart of GoodYear Tire shows uptrend movement in stock. The trendline is formed by joining previous lowest closing prices of the stock.

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The above chart of MERK&CO shows downtrend movement in stock. The trendline is formed by joining previous highest closing prices of the stock. Note: Trendline as it shows the uptrend or downtrend movement in stock, breakout in the trendline indicates the trend reversal in the stock. Breakout in downtrend line give bullish signal and it is the time to buy that particular stock whereas breakout in uptrend line give bearish signal, it is advisable to sell the stock as the trend in the stock has changed and the stock may further fall in price.

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INTRODUCTION TO SUPPORT AND RESISTANCE
Support and resistance represent key junctures where the forces of supply and demand meet. In the financial markets, prices are driven by excessive supply (down) and demand (up). Supply is synonymous with bearish, bears and selling. As demand increases, prices advance and as supply increases, prices decline. When supply and demand are equal, prices move sideways as bulls and bears slug it out for control. What is Support? Support is the price level at which demand is thought to be strong enough to prevent the price from declining further. The logic dictates that as the price declines towards support and gets cheaper, buyers become more inclined to buy and sellers become less inclined to sell. By the time the price reaches the support level, it is believed that demand will overcome supply and prevent the price from falling below support. What is Resistance? Resistance is the price level at which selling is thought to be strong enough to prevent the price from rising further. The logic dictates that as the price advances towards resistance, sellers become more inclined to sell and buyers become less inclined to buy. By the time the price reaches the resistance level, it is believed that supply will overcome demand and prevent the price from rising above resistance.

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The above chart of PHILLIP MORRIS shows that the stock has Resistance at 51.5 with double top confirmation and it has Support at 45.5 with double bottom confirmation. Breakout in the resistance level gives bullish signal, it is the right time to buy the stock as the stock is expected to rise further whereas breakout in the support level is bearish sign for the stock and investors are advised to sell the stock when it¶s price goes below support level as it is expected that the stock may further fall in price. Note: When a resistance level is successfully penetrated, that level becomes a support level. Similarly when a support level is successfully penetrated, that level becomes a resistance level.

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INTRODUCTION TO INDICATORS
An indicator is a series of data points that are derived by applying a formula to the price data of a security. Price data includes any combination of the open, high, low or close over a period of time. Some indicators may use only the closing prices, while others incorporate volume and open interest into their formulas. The price data is entered into the formula and a data point is produced. An indicator offers a different perspective from which to analyze the price action. Regardless of the complexity of the formula, indicators can provide unique perspective on the strength and direction of the underlying price action. Why use indicators? Indicators serve three broad functions: to alert, to confirm and to predict. y An indicator can act as an alert to study price action a little more closely. If momentum is waning, it may be a signal to watch for a break of support. Or, if there is a large positive divergence building, it may serve as an alert to watch for a resistance breakout. y Indicators can be used to confirm other technical analysis tools. If there is a breakout on the price chart, a corresponding moving average crossover could serve to confirm the breakout. Or, if a stock breaks support, a corresponding low in the On-Balance-Volume (OBV) could serve to confirm the weakness. y Some investors and traders use indicators to predict the direction of future prices. Following are various indicators used in Technical Analysis y y y y y y y y Average Directional Index (ADX) Average True Range (ATR) Bollinger Bands Commodity Channel Index (CCI) Moving Average Moving Average Convergence Divergence (MACD) Relative Strength Index(RSI) Stochastic Oscillator

31

Moving Averages
Moving averages are one of the most popular and easy to use tools available to the technical analyst. By using an average of prices, moving averages smooth a data series and make it easier to spot trends. This can be especially helpful in volatile markets. Moving Averages like other indicators are mainly used to confirm the trend reversal and take decision regarding Buying, Selling or Holding the stock. If current stock price is above Moving Average Line then it is good stock to buy or hold. Breakout in the Moving Average Line gives indication of buying or selling the stock.

The above chart of Sun Microsystems, Inc. shows 50 day SMA (Simple Moving Average) and 200 day SMA line. The chart shows breakout in 200 day SMA line at 50 which gives bearish signal. Investors are advised to sell the stock at 50 as it is entering the bearish zone. Note: For long term investment horizon use 200 day SMA and for short or medium term investment horizon use 50 day SMA.
32

ANALYSIS OF BANKING SECTOR

33

THE INDIAN BANKING SECTOR
Without a sound and effective banking system in India it cannot have a healthy economy. The banking system of India should not only be hassle free but it should be able to meet new challenges posed by the technology and any other external and internal factors. For the past three decades India's banking system has several outstanding achievements to its credit. It is no longer confined to only metropolitans or cosmopolitans in India; in fact, Indian banking system has reached even to the remote corners of the country. This is one of the main reasons of India's growth process. The government's regular policy for Indian bank since 1969 has paid rich dividends with the nationalization of 14 major private banks of India. Not long ago, an account holder had to wait for hours at the bank counters for getting a draft or for withdrawing his own money. Today, he has a choice. Gone are days when the most efficient bank transferred money from one branch to other in two days. Now it is simple as instant messaging or dial a pizza. Money has become the order of the day.

Post Independence  In 1948, the Reserve Bank of India, India's central banking authority, was nationalized, and it became an institution owned by the Government of India.  In 1949, the Banking Regulation Act was enacted which empowered the Reserve Bank of India (RBI) "to regulate, control, and inspect the banks in India."  The Banking Regulation Act also provided that no new bank or branch of an existing bank may be opened without a license from the RBI, and no two banks could have common directors.

34

Liberalization The new policy shook the Banking sector in India completely. Bankers, till this time, were used to the 4-6-4 method (Borrow at 4%; Lend at 6%; Go home at 4) of functioning. In the early 1990s the then Narsimha Rao government embarked on a policy of liberalization and gave licenses to a small number of private banks, which came to be known as New Generation tech-savvy banks, which included banks such as Global Trust Bank (the first of such new generation banks to be set up) which later amalgamated with Oriental Bank of Commerce, UTI Bank (now re-named as Axis Bank), ICICI Bank and HDFC Bank.

35

RECENT DEVELOPMENT IN BANKING SECTOR
A retrospect of the events clearly indicates that the Indian banking sector has come far away from the days of nationalization. The Narasimhan Committee laid the foundation for the reformation of the Indian banking sector. Constituted in 1991, the Committee submitted two reports, in 1992 and 1998, which laid significant thrust on enhancing the efficiency and viability of the banking sector. As the international standards became prevalent, banks had to unlearn their traditional operational methods of directed credit, directed investments and fixed interest rates, all of which led to deterioration in the quality of loan portfolios, inadequacy of capital and the erosion of profitability. The recent international consensus on preserving the soundness of the banking system has veered around certain core themes. These are: effective risk management systems, adequate capital provision, sound practices of supervision and regulation, transparency of operation, conducive public policy intervention and maintenance of macroeconomic stability in the economy. Until recently, the lack of competitiveness vis-à-vis global standards, low technological level in operations, over staffing, high NPAs and low levels of motivation had shackled the performance of the banking industry. However, the banking sector reforms have provided the necessary platform for the Indian banks to operate on the basis of operational flexibility and functional autonomy, thereby enhancing efficiency, productivity and profitability. The reforms also brought about structural changes in the financial sector and succeeded in easing external constraints on its operation, i.e. reduction in CRR and SLR reserves, capital adequacy norms, restructuring and recapitulating banks and enhancing the competitive element in the market through the entry of new banks. The reforms also include increase in the number of banks due to the entry of new private and foreign banks, increase in the transparency of the banks¶ balance sheets through the introduction of prudential norms and increase in the role of the market forces due to the deregulated interest rates. These have significantly affected the operational environment of the Indian banking sector. To encourage speedy recovery of Non-performing assets, the Narasimhan committee laid directions to introduce Special Tribunals and also lead to the creation of an Asset Reconstruction Fund. For revival of weak banks, the Verma Committee recommendations have laid the foundation. Lastly, to maintain macroeconomic stability, RBI has introduced the Asset Liability Management System. The competitive environment created by financial sector reforms has nonetheless compelled the banks to gradually adopt modern technology to maintain their market share. Thus, the declaration of the Voluntary Retirement Scheme accounts for a positive development reducing the administrative costs of Public Sector banks. The developments, in general, have an emphasis on service and technology; for the first
36

time that Indian public sector banks are being challenged by the foreign banks and private sector banks. Branch size has been reduced considerably by using technology thus saving manpower. The deregulation process has resulted in delivery of innovative financial products at competitive rates; this has been proved by the increasing divergence of banks in retail banking for their development and survival. In order to survive and maintain strong presence, mergers and acquisitions has been the most common development all around the world. In order to ensure healthy competition, giving customer the best of the services, the banking sector reforms have lead to the development of a diversifying portfolio in retail banking, and insurance, trend of mergers for better stability and also the concept of virtual banking.

37

SWOT ANALYSIS OF BANKING SECTOR
STRENGTH  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.  Bank lending has been a significant driver of GDP growth and employment. Extensive reach: the vast networking & growing number of branches & ATMs. Indian banking system has reached even to the remote corners of the country.  In terms of quality of assets and capital adequacy, Indian banks are considered to have clean, strong and transparent balance sheets relative to other banks in comparable economies in its region. WEAKNESS  Public Sector Banks need to fundamentally strengthen institutional skill levels especially in sales and marketing, service operations, risk management and the overall organisational performance ethic & strengthen human capital. 

Old private sector banks also have the need to fundamentally strengthen skill levels.  The cost of intermediation remains high and bank penetration is limited to only a few customer segments and geographies. 

Structural weaknesses such as a fragmented industry structure, restrictions on capital availability and deployment, lack of institutional support infrastructure, restrictive labour laws, weak corporate governance and ineffective regulations beyond Scheduled Commercial Banks (SCBs), unless industry utilities and service bureaus.
38 

Refusal to dilute stake in PSU banks: The government has refused to dilute its stake in PSU banks below 51% thus choking the headroom available to these banks for raining equity capital.  Impediments in sectoral reforms: Opposition from Left and resultant cautious approach from the North Block in terms of approving merger of PSU banks may hamper their growth prospects in the medium term. OPPORTUNITY  The market is seeing discontinuous growth driven by new products and services that include opportunities in credit cards, consumer finance and wealth management on the retail side, and in fee-based income and investment banking on the wholesale banking side. These require new skills in sales & marketing, credit and operations. 

With increased interest in India, competition from foreign banks will only intensify.  Given the demographic shifts resulting from changes in age profile and household income, consumers will increasingly demand enhanced institutional capabilities and service levels from banks. 

New private banks could reach the next level of their growth in the Indian banking sector by continuing to innovate and develop differentiated business models to profitably serve segments like the rural/low income and affluent/HNI segments; actively adopting acquisitions as a means to grow and reaching the next level of performance in their service platforms. Attracting, developing and retaining more leadership capacity 

Foreign banks committed to making a play in India will need to adopt alternative approaches to win the ³race for the customer´ and build a value-creating customer franchise in advance of regulations potentially opening up post 2009.
39 

Reach in rural India for the private sector and foreign banks.  Liberalization of ECB norms: The government also liberalised the ECB norms to permit financial sector entities engaged in infrastructure funding to raise ECBs. This enabled banks and financial institutions, which were earlier not permitted to raise such funds, explore this route for raising cheaper funds in the overseas markets. 

Hybrid capital: In an attempt to relieve banks of their capital crunch, the RBI has allowed them to raise perpetual bonds and other hybrid capital securities to shore up their capital. If the new instruments find takers, it would help PSU banks, left with little headroom for raising equity. THREATS  Threat of stability of the system: failure of some weak banks has often threatened the stability of the system. 

Rise in inflation figures which would lead to increase in interest rates.  Increase in the number of foreign players would pose a threat to the Public Sector Bank as well as the private players.

40

BANKING STRUCTURE IN INDIA

RESERVE BANK OF INDIA

SCHEDULED BANKS

COMMERCIAL BANKS

CO-OPERATIVE BANKS

PRIVATE BANKS (31)

URBAN CO-OPERATIVE (52)

OLD BANKS (23)

STATE CO-OPERATIVE (16)

NEW BANKS (8)

PUBLIC SECTOR BANKS (27)

SBI AND ASSOCIATES (8)

NATIONALIZED BANKS (19)

According to the RBI in March 2009, number of all Scheduled Commercial Banks (SCBs) was 171 of which, 86 were Regional Rural Banks and the number of NonScheduled Commercial Banks including Local Area Banks stood at 5. Taking into account all banks in India, there are overall 56,640 branches or offices, 893,356 employees and 27,088 ATMs. Public sector banks made up a large chunk of the infrastructure, with 87.7 per cent of all offices, 82 per cent of staff and 60.3 per cent of all automated teller machines (ATMs).

41

TYPES OF BANKS AND BANKING ACTIVITIES

Scheduled And Non-Scheduled Banks In India the central banking authority is the Reserve Bank of India. It is also referred to as the Apex Bank. It functions under an act called The Reserve Bank of India Act, 1934. All the banks and other financial institutions operating in India come under the monitoring and control of RBI. RBI controls the banking sector in India through an Act called The Banking Regulations Act 1949. In the past, when there were very few banks, RBI used to include all the scheduled banks in its schedule. Now a day, when the number of banks has gone up substantially, RBI has to change the schedule every now and then, hence irrespective of whether a bank finds its name in the schedule to the RBI Act or not, its schedule status can be found out from its banking license. A Bank that is not a scheduled bank is referred to as non scheduled bank even in it is having banking license. The difference lies in the type of banking activities that a bank can carry out in India. In the case of a scheduled bank, it is licensed by the RBI to carry on extensive banking operations including foreign exchange operations, whereas, a non-scheduled bank can carry out only limited operations. There are a number of factors considered by RBI to declare a bank as a scheduled bank, like the amount of share capital, type of banking activities that the bank is permitted to carry out etc. An example of difference between a scheduled and non-scheduled bank is dealing in Foreign Exchange.

Commercial and Co-operative Banks Commercial banks are by far the most widespread banking institutions in India. They provide major products and services in India. A commercial bank is run on commercial lines, for profits of the organization. A co-operative bank on the other hand is run for the benefit of a group of members of the co-operative body. A co-operative bank distributes only a very small portion of its profit as dividend, retaining a major portion of it in business. All the nationalized banks in India and almost all the private sector banks are commercial scheduled banks. There are a large number of private sector co-operative banks and most of them are non-scheduled banks. In the public sector also, within a state, starting from the State capital, there are State Co-operative Banks and District Central Co-operative Banks at the District level. Under the District Central Co-operative Bank, there are Co-operative Societies.

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At present, In India, the banks can be bifurcated into following categories. 

Public Sector Banks or Nationalized Banks, which are commercial and scheduled. Examples: State Bank of India, Bank of India etc.  Public Sector Banks, which are co-operative and non-scheduled: These are state owned banks like the Maharashtra State Co-operative Bank, Junnar Cooperative Society etc. 

Private Sector Banks, which are commercial and scheduled- These could be foreign banks, as well as Indian Banks. Examples: Foreign Banks- CITI Bank, Standard Chartered Bank etc. Indian Banks- Bank of Rajasthan Limited, VYSYA Bank Limited etc.  Private Sector Banks, which are co-operative and scheduled- These are large co-operative sector banks but which are scheduled banks. Examples: Saraswat Co-operative Bank Limited, Cosmos Co-operative Bank Limited etc.  Private Sector Banks, which are co-operative and non-scheduled-These are small co-operative banks but which are non-scheduled. Examples: Local cooperative banks which operate within a town or a city. Example: Mahesh Sahakari Bank Limited.  Regional Rural Banks. These are state owned. These banks have been established with a view to developing the rural economy by providing, for the purpose of development of agriculture, trade, commerce, industry and other productive activities in the rural areas, credit and other facilities, particularly to the small and marginal farmers, agricultural labourers and artisans and small entrepreneurs  Gramin Banks, that are also state owned. They operate at still smaller level than RRBs and serve at village level.  Foreign banks, These banks have Head Office outside India and branch in India, Besides, the Reserve Bank of India (hereinafter referred to as RBI) acts as the central bank of the country. RBI is responsible for development and supervision of the constituents of the Indian financial system (which comprises banks and non-banking financial institutions) as well as for determining, in conjunction with the central Government, the monetary and credit policies. They are also controlled by RBI.

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Retail Banking Vs Wholesale Banking Whole sale banking typically involves a small number of very large customers such as big corporations and governments, whereas retail banking consists of a large number of small customers who consume personal banking and small business services. Wholesale banking is largely inter-bank; banks use the inter-bank markets to borrow from or lend to other banks/ large customers, to participate in large bond issues and to engage in syndicated lending. Retail banking is largely intra-bank; the bank itself makes many small loans. Most of the Indian public sector banks practice retail banking; they are slowly practicing the concept of wholesale banking. On the other hand, most of the well established foreign banks in India and the recent private sector banks practice wholesale banking alongside retail banking. As a result of this difference, the composition of income for a public sector bank is different. While a major portion of the income for large public sector banks is from lending operations, in the case of any private sector bank in India, the amount of nonoperating income (other than interest income) is substantially higher. The composition of other income is commission on bills/ guarantees/ letters of credit, counseling fees, syndication fees, credit report fees, loan processing fees, correspondent bank charges etc. Global Banking Global Banking activities are an extension of various activities listed above into the international market. Global banking primarily consists of trade in international banking services and establishment of branches and subsidiaries in foreign countries. Special kinds of Bank branches Most Banks in India have special kind of branches. This is done to reap benefits of specialisation as activities done by these braches are quite complex and require specialised knowledge and attention. Types of some special branches are 1. Foreign exchange branches 2. NPA recovery branches 3. Service branches dealing in Clearing house operations/Corporate banking and Industrial finance branches 4. Personal banking branches 5. Housing finance branch 6. SSI branches 7. Agricultural finance branches

44

45

What are the sources of funds for banks in India?
The banks in India generate their funds from two types of sources: Long-Term Sources: 1. Tier one and Tier two Capital in the form of equity/subordinate debts/debentures/preference shares. 2. Internal accrual generated out of profits. 3. Long-term fixed deposits generated from public and corporate clients, financial institutions, and mutual funds, etc. 4. Long-term borrowings from financial institutions like NABARD/SIDBI. Short-Term Sources: 1. Call money market, i.e., funds generated among inter banking transactions where there is online trading of money between bankers. 2. Fixed deposits generated from public and corporate clients, FIs, and MFs, etc. 3. Market-linked borrowings from RBI. 4. Sale of liquid certificate deposits in the open market. 5. Borrowing from RBI under Repo (Repurchase option). 6. Short and medium-term fixed deposits generated from public and corporate clients, mutual funds, and financial institutions, etc. 7. Floating in current and saving accounts. 8. Short-term borrowings from FIs by way of rated papers placed, etc.

46

Key players

Andhra Bank

State Bank of India

Allahabad Bank

Vijaya Bank

Punjab National Bank

HDFC Bank

Axis Bank

ICICI Bank

Kotak Mahindra Bank

ABN AMRO

Citibank

Standard Chartered Bank

HSBC Bank

State Bank of Mysore

Bank of Baroda

Union Bank of India

Bank of India

Yes Bank

47

ANALYSIS OF BANKS

48

Punjab National Bank

Union Bank of India

KOTAK MAHINDRA BANK

YES BANK

49

PNB (Punjab National Bank)

50

Profile of PNB
With over 56 million satisfied customers and 5002 offices, PNB has continued to retain its leadership position amongst the nationalized banks. The bank enjoys strong fundamentals, large franchise value and good brand image. Besides being ranked as one of India's top service brands, PNB has remained fully committed to its guiding principles of sound and prudent banking. Apart from offering banking products, the bank has also entered the credit card & debit card business; bullion business; life and non-life insurance business; Gold coins & asset management business, etc. Since its humble beginning in 1895 with the distinction of being the first Indian bank to have been started with Indian capital, PNB has achieved significant growth in business which at the end of March 2010 amounted to Rs 435931 crore. Today, with assets of more than Rs 2,96,633 crore, PNB is ranked as the 3rd largest bank in the country (after SBI and ICICI Bank) and has the 2nd largest network of branches (5002 offices including 5 overseas branches ). Punjab National Bank continues to maintain its frontline position in the Indian banking industry. In particular, the bank has retained its NUMBER ONE position among the nationalized banks in terms of number of branches, Deposit, Advances, total Business, Assets, Operating and Net profit in the year 2009-10. The impressive operational and financial performance has been brought about by Bank¶s focus on customer based business with thrust on CASA deposits, Retail, SME & Agri Advances and with more inclusive approach to banking; better asset liability management; improved margin management, thrust on recovery and increased efficiency in core operations of the Bank.

SHAREHOLDING PATTERN (%)
0.88 0.02 0.01 4.12 Indian Promoters 19.11 Banks,Financial Institutions & Insurance 57.8 FII's Private Corporate Bodies NRI's/Foreign Others

14.7

51

Description

Details

Industry House BSE Code NSE Code Incorporation Year Registered Office ISINNO Phone E-mail URL Industry Chairman Managing Director Executive Director Listing

Bank - Public Government 532461 PNB 1895 7 Bhikaiji Cama Place, New Delhi, New Delhi-110066. INE160A01014
91-11-26102303/26108205/26196487

hosd@pnbindia.com www.pnbindia.com Bank - Public K.R.KAMATH K.R.KAMATH M.V.TANKSALE & NAGESH PYDAH BSE,NSE

52

Profit & Loss
(Rs. in Crores) Particulars Mar-09 Mar-08 Mar-07 Mar-06 Mar-05 Mar-04 INCOME : Interest Earned 19,326.16 14,265.02 11,236.14 9,584.15 8,459.85 7,778.95 Other Income 3,224.42 2,026.46 1,932.71 1,901.00 2,186.36 2,057.16 Total I 22,550.58 16,291.48 13,168.85 11,485.15 10,646.21 9,836.11 II. Expenditure Interest expended 12,295.30 8,730.86 6,022.91 4,917.39 4,453.11 4,154.99 Payments to/Provisions for 2,924.38 2,461.54 2,352.45 2,114.98 2,121.23 1,654.06 Employees Operating Expenses & 663.76 563.61 485.00 455.22 384.44 321.56 Administrative Expenses Depreciation 191.06 170.23 194.80 186.64 183.28 181.45 Other Expenses, Provisions & 1,712.66 1,072.78 1,945.94 1,777.05 1,457.07 1,754.57 Contingencies Provision for Tax 1,701.32 1,264.75 739.21 412.83 494.64 660.79 Fringe Benefit tax 12.68 10.45 8.96 9.00 0.00 0.00 Deferred Tax -41.46 -31.50 -120.50 172.73 142.32 0.00 Total II 19,459.70 14,242.72 11,628.77 10,045.84 9,236.09 8,727.42 III. Profit & Loss Reported Net Profit 3,090.88 2,048.76 1,540.08 1,439.31 1,410.12 1,108.69 Extraordinary Items 1.18 0.70 -254.38 1.89 0.46 0.15 Adjusted Net Profit 3,089.70 2,048.06 1,794.46 1,437.42 1,409.66 1,108.54 Prior Year Adjustments 0.00 0.00 -13.27 0.00 0.00 0.00 Profit brought forward 0.00 15.52 183.49 0.00 0.00 0.00 IV. Appropriations Transfer to Statutory Reserve 772.72 512.19 385.02 359.83 352.53 277.17 Transfer to Other Reserves 1,572.74 1,072.54 850.03 680.28 859.93 711.80 Trans. to Government 737.78 479.55 459.73 215.71 197.66 119.72 /Proposed Dividend Balance carried forward to 7.64 0.00 15.52 183.49 0.00 0.00 Balance Sheet Equity Dividend % 200.00 130.00 100.00 90.00 60.00 40.00 Earnings Per Share-Unit Curr 94.63 62.77 47.26 44.81 43.98 41.28 Earnings Per Share(Adj)-Unit 94.63 62.77 47.26 44.81 43.98 41.28 Curr Book Value-Unit Curr 416.74 341.98 321.65 287.79 248.93 176.81
53

Balance Sheet
(Rs. in Crores) Particulars SOURCES OF FUNDS Capital Reserves Total Deposits Borrowings Other Liabilities & Provisions TOTAL LIABILITIES APPLICATION OF FUNDS Cash & Balances with RBI Balances with Banks & money at Call Investments Advances Fixed Assets Other Assets Miscellaneous Expenditure not written off TOTAL ASSETS Contingent Liability Bills for collection 17,058.25 15,258.15 12,372.03 23,394.55 4,354.89 3,572.57 3,273.49 1,397.14 9,460.20 1,628.83 6,742.28 2,078.23 Mar-09 Mar-08 Mar-07 Mar-06 Mar-05 Mar-04

315.30

315.30

315.30

315.30 9,061.06

315.30 7,846.00

265.30 4,746.50

14,338.33 12,003.04 10,120.16

209,760.50166,457.23139,859.67 119,684.92103,166.89 87,916.40 4,374.36 5,446.56 1,948.86 6,664.87 2,718.29 1,289.06 8,155.88

18,151.15 14,826.64 10,285.14

9,623.64 12,222.24

246,939.64199,048.77162,529.13145,349.79126,268.72102,373.14

63,385.18 53,991.71 45,189.84 41,055.31 50,672.83 42,125.49 154,702.99 119,501.57 96,596.52 74,627.37 60,412.75 47,224.72 2,397.11 5,041.22 0.00 2,315.52 4,409.25 0.00 1,009.82 4,087.43 0.00 1,030.23 3,845.19 0.00 965.23 3,128.88 0.00 899.84 3,302.58 0.00

246,939.64199,048.77162,529.13145,349.79126,268.72102,373.14 103,650.26 96,951.50 66,758.42 53,035.43 43,001.29 32,230.03 7,561.84 7,104.56 7,942.25 5,704.17 4,046.07 4,813.08

Balance sheet
Mar ' 11 Mar ' 10 Mar ' 09 Mar ' 08 Mar ' 07

Sources of funds
Owner's fund Equity share capital 316.81 315.30 315.30 315.30 315.30

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Mar ' 11 Share application money Preference share capital Reserves & surplus 19,720.99

Mar ' 10 15,915.63

Mar ' 09 12,824.59

Mar ' 08 10,467.35

Mar ' 07 9,826.31

Loan funds
Secured loans Unsecured loans Total 3,12,898.73 3,32,936.53 1,39,859.6 2,49,329.80 2,09,760.50 1,66,457.23 7 1,50,001.2 2,65,560.74 2,22,900.39 1,77,239.88 8 -

Uses of funds
Fixed assets Gross block Less : revaluation reserve Less : accumulated depreciation Net block Capital work-in-progress Investments 4,981.60 1,470.76 1,876.01 1,634.84 95,162.35 4,215.21 1,491.99 1,701.74 1,021.48 77,724.47 3,930.36 1,513.74 1,533.25 883.37 63,385.18 3,699.64 1,535.70 1,384.12 779.83 53,991.71 2,247.74 293.85 1,237.92 715.98 45,189.84

Net current assets
Current assets, loans & advances Less : current liabilities & provisions Total net current assets Miscellaneous expenses not written Total 8,259.42 12,328.27 -4,068.85 92,728.34 6,320.07 10,317.69 -3,997.62 74,748.33 5,020.20 18,130.13 -13,109.93 51,158.62 4,380.84 14,798.23 -10,417.38 44,354.15 3,980.80 10,178.51 -6,197.71 39,708.10

Notes:
Book value of unquoted investments Market value of quoted investments Contingent liabilities Number of equity sharesoutstanding (Lacs) 1,38,915.26 3168.12 1,01,340.25 1,11,212.07 3153.03 3153.03 1,04,055.87 74,700.48 3153.03 3153.03

Balance Sheet of Union Bank of India

------------------- in Rs. Cr. -------------------

55

Mar '07 12 mths Capital and Liabilities: Total Share Capital Equity Share Capital Share Application Money Preference Share Capital Reserves Revaluation Reserves Net Worth Deposits Borrowings Total Debt Other Liabilities & Provisions Total Liabilities 505.12 505.12 0.00 0.00 4,228.16 456.59 5,189.87 85,180.22 4,215.53 89,395.75 8,092.26 102,677.88 Mar '07 12 mths Assets Cash & Balances with RBI Balance with Banks, Money at Call Advances Investments Gross Block Accumulated Depreciation Net Block Capital Work In Progress Other Assets Total Assets Contingent Liabilities Bills for collection Book Value (Rs) 5,917.57 2,508.87 62,386.43 27,981.77 1,487.21 664.49 822.72 2.28 3,058.24 102,677.88 32,894.26 10,537.72 93.71

Mar '08 12 mths 505.12 505.12 0.00 0.00 5,118.19 1,724.40 7,347.71 103,858.65 4,760.49 108,619.14 8,106.43 124,073.28 Mar '08 12 mths 9,454.74 643.10 74,348.29 33,822.63 2,937.45 741.62 2,195.83 4.57 3,604.10 124,073.26 47,413.13 18,280.70 111.33

Mar '09 12 mths 505.12 505.12 0.00 0.00 6,549.26 1,685.98 8,740.36 138,702.83 3,884.90 142,587.73 9,647.43 160,975.52 Mar '09 12 mths 8,992.05 6,992.88 96,534.23 42,996.96 3,220.65 893.35 2,327.30 7.86 3,124.23 160,975.51 63,248.00 22,391.95 139.66

Mar '10 12 mths 505.12 505.12 0.00 0.00 8,302.69 1,615.97 10,423.78 170,039.74 9,215.31 179,255.05 5,483.01 195,161.84 Mar '10 12 mths 12,468.24 3,308.45 119,315.30 54,403.53 3,396.98 1,101.50 2,295.48 9.96 3,360.89 195,161.85 63,675.91 13,227.35 174.37

Mar '11 12 mths 635.33 524.33 0.00 111.00 10,555.35 1,573.84 12,764.52 202,461.29 13,315.97 215,777.26 7,442.67 235,984.45 Mar '11 12 mths 17,610.45 2,487.99 150,986.08 58,399.14 3,598.41 1,319.21 2,279.20 13.58 4,208.00 235,984.44 148,033.99 16,652.20 211.31

Key Ratios
Mar ' 10 Mar ' 09 Mar ' 08 Mar ' 07 Mar ' 06

Per share ratios
Adjusted EPS (Rs) Adjusted cash EPS (Rs) Reported EPS (Rs) Reported cash EPS (Rs) Dividend per share Operating profit per share (Rs) Book value (excl rev res) per share (Rs) Book value (incl rev res) per share (Rs.) 123.78 130.85 123.86 130.93 22.00 191.63 514.77 562.09 97.97 104.03 98.03 104.09 20.00 151.48 41.28 10.23 64.94 70.34 64.98 70.38 10.00 109.81 341.98 390.68 48.82 55.00 48.84 55.02 10.00 74.53 321.65 330.97 45.56 51.48 45.65 51.57 6.00 57.00 287.79 297.38

56

Net operating income per share (Rs) Free reserves per share (Rs)

777.82 63.79

694.81 64.04

505.09 63.79

383.89 64.29

310.53 69.61

Profitability ratios
Operating margin (%) Gross profit margin (%) Net profit margin (%) Adjusted cash margin (%) Adjusted return on net worth (%) Reported return on net worth (%) Return on long term funds (%) 24.63 23.72 15.64 16.52 24.04 24.06 116.11 21.80 20.93 13.76 14.60 23.50 23.52 129.83 21.74 20.67 12.68 13.72 18.99 19.00 111.52 19.41 17.80 12.53 14.10 15.17 15.18 80.76 18.35 16.44 14.50 16.35 15.83 15.86 74.57

Leverage ratios
Long term debt / Equity Total debt/equity Owners fund as % of total source Fixed assets turnover ratio 15.36 6.11 5.89 15.96 5.89 5.64 15.44 6.08 4.35 13.79 6.76 5.48 13.19 7.04 4.75

Liquidity ratios
Current ratio Current ratio (inc. st loans) Quick ratio Inventory turnover ratio 0.61 0.02 20.47 0.27 0.02 9.75 0.29 0.02 9.40 0.39 0.02 11.10 0.39 0.02 10.69 -

Payout ratios
Dividend payout ratio (net profit) Dividend payout ratio (cash profit) Earning retention ratio 20.74 19.62 79.25 23.86 22.47 76.12 23.40 21.61 76.59 30.71 27.26 69.28 14.98 13.26 84.99

57

he above chart of Punjab National Bank shows uptrend in stock. The stock is current (25/6/2010) trading at Rs.1045. It has resistance at Rs.1046 and Support at Rs. 836. As the stock is in uptrend it is good stock to buy but investors are advised to wait for some correction in the stock as stock is trading near the resistance level or Buy the Stock above Rs. 1046.

58

UBI (Union Bank of India)

59

Profile of UBI
The dawn of twentieth century witnesses the birth of a banking enterprise par excellence- UNION BANK OF INDIA- that was flagged off by none other than the Father of the Nation, Mahatma Gandhi. Since that the golden moment, Union Bank of India has this far unflinchingly traveled the arduous road to successful banking........ a journey that spans 88 years. Union Bank of India is firmly committed to consolidating and maintaining its identity as a leading, innovative commercial Bank, with a proactive approach to the changing needs of the society. This has resulted in a wide gamut of products and services, made available to its valuable clientele in catering to the smallest of their needs. Today, with its efficient, value-added services, sustained growth, consistent profitability and development of new technologies, Union Bank has ensured complete customer delight, living up to its image of, ³GOOD PEOPLE TO BANK WITH´. Anticipative banking- the ability to gauge the customer's needs well ahead of real-time - forms the vital ingredient in value-based services to effectively reduce the gap between expectations and deliverables. The key to the success of any organization lie with its people. No wonder, Union Bank's unique family of about 26,000 qualified / skilled employees is and ever will be dedicated and delighted to serve the discerning customer with professionalism and wholeheartedness. Union Bank is a Public Sector Unit with 55.43% Share Capital held by the Government of India. The Bank came out with its Initial Public Offer (IPO) in August 20, 2002 and Follow on Public Offer in February 2006. Presently 44.57 % of Share Capital is presently held by institutions, individuals and others. Over the years, the Bank has earned the reputation of being a techno-savvy and is a front runner among public sector banks in modern-day banking trends. It is one of the pioneer public sector banks, which launched Core Banking Solution in 2002. Under this solution umbrella, All Branches of the Bank have been 1135 networked ATMs, with online Telebanking facility made available to all its Core Banking Customers - individual as well as corporate. In addition to this, the versatile Internet Banking provides extensive information pertaining to accounts and facets of banking. Regular banking services apart, the customer can also avail of a variety of other value-added services like Cash Management Service, Insurance, Mutual Funds and Demat.

60

SHAREHOLDING PATTERN (%)

4.37

0.04 10.37

Indian Promoters Banks,Financial Institutions & Insurance

17.03 55.43 4.02

FII's Private Corporate Bodies NRI's/Foreign Others General Public

61

Description

Details

Industry House BSE Code NSE Code Incorporation Year Registered Office ISINNO Phone E-mail URL Industry Chairman Managing Director Executive Director Listing

Bank - Public Government 532477 UNIONBANK 1922
239 Vidhan Bhavan Marg, Nariman Point Union Bank Bhavan, Mumbai,Maharashtra-400021

INE632A01016
91-22-22024647/22892000/6643/6636 investorservices@unionbankofindia.com

www.unionbankofindia.co.in

Bank - Public M.V.NAIR M.V.NAIR S.C.KALIA & S.RAMAN BSE,NSE

62

Profit & Loss
(Rs. in Crores) Particulars Mar-10 Mar-09 Mar-08 Mar-07 Mar-06 Mar-05

INCOME : Interest Earned 13,302.68 11,889.38 9,214.63 7,382.18 5,863.71 4,969.79 Other Income 2,092.72 1,521.55 1,349.57 1,221.18 819.67 766.71 Total I 15,395.40 13,410.93 10,564.20 8,603.36 6,683.38 5,736.50 II. Expenditure Interest expended 9,110.27 8,075.81 6,360.95 4,591.96 3,489.42 2,905.24 Payments to/Provisions for 1,354.50 1,151.88 845.28 873.68 866.79 806.42 Employees Operating Expenses & 586.27 576.99 387.11 305.68 278.02 239.66 Administrative Expenses Depreciation 160.14 136.58 101.82 86.37 86.13 73.29 Other Expenses, Provisions & 1,351.30 1,113.12 1,008.64 1,365.28 1,068.39 1,100.30 Contingencies Provision for Tax 758.00 618.00 477.15 527.54 187.00 -107.47 Fringe Benefit tax 0.00 12.00 10.00 7.46 32.45 0.00 Deferred Tax 0.00 0.00 -13.78 0.00 0.00 0.00 Total II 13,320.48 11,684.38 9,177.17 7,757.97 6,008.20 5,017.44 III. Profit & Loss Reported Net Profit 2,074.92 1,726.55 1,387.03 845.39 675.18 719.06 Extraordinary Items -0.47 6.82 -0.22 -0.24 0.69 -0.61 Adjusted Net Profit 2,075.39 1,719.73 1,387.25 845.63 674.49 719.67 Prior Year Adjustments 0.00 0.00 0.00 0.00 0.00 0.00 Profit brought forward 0.83 0.65 0.48 0.55 40.99 77.44 IV. Appropriations Transfer to Statutory Reserve 625.00 518.00 418.00 254.00 203.00 216.00 Transfer to Other Reserves 1,124.09 912.89 732.47 386.87 311.04 357.42 Trans. to Government /Proposed 325.03 295.48 236.39 204.59 201.58 182.09 Dividend Balance carried forward to 1.63 0.83 0.65 0.48 0.55 40.99 Balance Sheet Equity Dividend % 55.00 50.00 40.00 35.00 35.00 35.00 Earnings Per Share-Unit Curr 40.14 33.33 26.78 16.19 12.88 15.17 Earnings Per Share(Adj)-Unit 40.14 33.33 26.78 16.19 12.88 15.17 Curr Book Value-Unit Curr 174.37 139.66 111.33 93.71 81.02 68.23
63

Balance Sheet
(Rs. in Crores) Particulars SOURCES OF FUNDS Capital Reserves Total Deposits Borrowings Other Liabilities & Provisions TOTAL LIABILITIES APPLICATION FUNDS Mar-10 Mar-09 Mar-08 Mar-07 Mar-06 Mar-05

505.12 9,918.66

505.12 8,235.24

505.12 6,842.58

505.12

505.12

460.12

4,684.75 4,053.04 3,154.32

170,039.74138,702.83103,858.64 85,180.2274,094.3061,830.59 9,215.31 5,830.61 8,774.89 5,119.56 4,760.49 8,319.87 4,215.53 3,974.40 2,020.95 8,194.06 6,547.02 4,976.65

195,509.44161,337.64124,286.70102,779.6889,173.8872,442.63 OF

Cash & Balances with RBI Balances with money at Call Investments Advances Fixed Assets Other Assets Miscellaneous not written off Expenditure Banks &

12,468.24 3,308.45

8,992.05 6,992.88

9,454.74 643.10

5,917.57 4,387.27 3,647.18 2,508.87 2,003.24 2,924.79

54,403.53 42,996.96 33,822.63 27,981.7725,917.6522,792.79 119,315.30 96,534.23 74,266.91 62,386.4353,379.9640,105.08 2,305.44 3,708.48 0.00 2,335.16 3,486.36 0.00 2,200.40 3,898.92 0.00 825.00 810.42 823.79

3,160.04 2,675.34 2,149.00 0.00 0.00 0.00

TOTAL ASSETS Contingent Liability Bills for collection

195,509.44161,337.64124,286.70102,779.6889,173.8872,442.63 72,338.05 81,147.10 62,517.40 41,703.7640,508.4439,379.41 4,565.80 3,231.72 3,177.02 1,728.81 4,116.48 9,519.12

64

Key Ratios
Mar ' 10 Mar ' 09 Mar ' 08 Mar ' 07 Mar ' 06

Per share ratios
Adjusted EPS (Rs) Adjusted cash EPS (Rs) Reported EPS (Rs) Reported cash EPS (Rs) Dividend per share Operating profit per share (Rs) Book value (excl rev res) per share (Rs) Book value (incl rev res) per share (Rs.) Net operating income per share (Rs) Free reserves per share (Rs) 41.09 44.26 41.08 44.25 5.50 49.70 174.37 206.36 290.37 58.38 34.00 36.70 34.18 36.89 5.00 43.59 1.07 1.08 255.42 47.04 27.47 29.48 27.46 29.48 4.00 33.38 111.33 145.47 200.42 41.91 16.74 18.45 16.74 18.45 3.50 27.32 93.71 102.75 152.27 41.33 13.35 15.05 13.37 15.07 3.50 25.69 81.02 90.24 123.92 26.15

Profitability ratios
Operating margin (%) Gross profit margin (%) Net profit margin (%) Adjusted cash margin (%) Adjusted return on net worth (%) Reported return on net worth (%) Return on long term funds (%) 17.11 16.02 13.47 14.52 23.56 23.55 135.60 17.06 16.00 12.88 13.83 24.34 24.47 147.75 16.65 15.65 13.20 14.17 24.67 24.66 146.45 17.94 16.81 10.62 11.72 17.86 17.86 126.18 20.73 19.35 10.51 11.84 16.47 16.49 107.10

Leverage ratios
Long term debt / Equity Total debt/equity Owners fund as % of total source Fixed assets turnover ratio 19.31 4.92 4.34 19.66 4.83 4.04 18.47 5.13 3.45 18.00 5.26 5.19 18.10 5.23 4.57

Liquidity ratios
Current ratio Current ratio (inc. st loans) Quick ratio Inventory turnover ratio 0.61 0.01 24.65 0.32 0.02 11.26 0.44 0.03 10.78 0.37 0.03 8.82 0.40 0.03 9.29 -

Payout ratios
Dividend payout ratio (net profit) Dividend payout ratio (cash profit) Earning retention ratio 15.66 14.54 84.35 17.11 15.85 82.80 17.04 15.87 82.97 24.20 21.95 75.82 29.85 26.47 70.11

65

The above chart of Union Bank of India shows support at Rs.284, It has broken resistance at Rs.276. The stock is currently trading at Rs.315 (on 23/6/2010).It is a good stock to buy at current price.

66

KOTAK MAHINDRA BANK

67

Profile of Kotak Mahindra Bank

The Kotak Mahindra group is a financial organization established in 1985 in India. It was previously known as the Kotak Mahindra Finance Limited, a non-banking financial company. In February 2003, Kotak Mahindra Finance Ltd, the group's flagship company was given the license to carry on banking business by the Reserve Bank of India (RBI). Kotak Mahindra Finance Ltd. is the first company in the Indian banking history to convert to a bank. The Kotak Mahindra Group was born in 1985 as Kotak Capital Management Finance Limited. This company was promoted by Uday Kotak, Sidney A. A. Pinto and Kotak & Company. Industrialists Harish Mahindra and Anand Mahindra took a stake in 1986, and that's when the company changed its name to Kotak Mahindra Finance Limited. Kotak Mahindra Bank Limited. The Group's principal activity is to provide banking and related services. The Group operates in four business segments: Treasury and Balance Sheet Management Unit (BMU), which includes dealing in money market, forex market, derivatives, investments and primary dealership of government securities; Retail Banking, which includes lending, commercial vehicle finance, personal loans, agriculture finance, other loans and home loans, branch banking, which includes retail borrowings covering savings, current, term deposit accounts and branch banking network/services including distribution of financial products, and credit cards; Corporate Banking, which comprises wholesale borrowings and lendings and other related services to the corporate sector; As of 31-Mar-2010, it had a network of 249 branches.

SHAREHOLDING PATTERN (%)
0.27 2.64 1.29 13.87 48.4 29.4 4.13 Indian Promoters Banks,Financial Institutions & Insurance FII's Private Corporate Bodies NRI's/Foreign Others Others

68

Description

Details

Industry House BSE Code NSE Code Incorporation Year

Bank - Private Private 500247 KOTAKBANK 2003 36-38 A Nariman Bhavan, 227 Nariman Point, Mumbai,Maharashtra-400021

Registered Office

Phone

91-22-66581100 service.bank@kotak.com, bina.chandarana@kotak.com www.kotak.com INE237A01010 Bank - Private SHANKAR ACHARYA (Part Time)

Email

Web ISINNO Industry Chairman

Executive vice UDAY KOTAK Chairman & MD Director Listing ANAND MAHINDRA & ASIM GHOSH BSE,NSE

69

Profit & Loss
(Rs. in Crores) Particulars INCOME : Interest Earned Other Income Total I II. Expenditure Interest expended Payments to/Provisions for Employees Operating Expenses & Administrative Expenses Depreciation Other Expenses, Provisions & Contingencies Provision for Tax Fringe Benefit tax Deferred Tax Total II III. Profit & Loss Reported Net Profit Extraordinary Items Adjusted Net Profit Prior Year Adjustments Profit brought forward IV. Appropriations Transfer to Statutory Reserve Transfer to Other Reserves Trans. to Government /Proposed Dividend Balance carried forward to Balance Sheet Equity Dividend % Earnings Per Share-Unit Curr Earnings Per Share(Adj)-Unit Curr Book Value-Unit Curr Mar-10 Mar-09 Mar-08 Mar-07 Mar-06 Mar-05

3,255.62 3,065.14 2,535.36 1,319.10 718.89 420.30 733.79 575.49 601.08 360.65 293.77 143.70 3,989.41 3,640.63 3,136.44 1,679.75 1,012.66 564.00

1,397.47 1,546.60 1,309.56 699.24 583.48 583.63 519.23 292.98 465.65 502.98 445.48 264.41 90.00 69.56 50.86 34.74 641.72 511.83 413.58 185.14 281.39 190.28 171.79 91.77 0.00 5.70 5.50 3.50 -31.41 -46.05 -73.49 -33.40 3,428.30 3,364.53 2,842.51 1,538.38

338.92 171.39 177.50 29.60 121.66 65.36 2.50 -12.50 894.43

194.82 85.86 107.99 23.46 33.48 38.55 0.00 -5.05 479.11

561.11 -1.92 563.03 0.00 648.94

276.10 0.15 275.95 0.00 528.17

293.93 0.64 293.29 0.00 354.18

141.37 0.30 141.07 216.76 286.36

118.23 84.89 0.17 0.42 118.06 84.47 0.00 -0.03 194.42 182.04

140.28 72.19 31.67 965.91 8.50 16.06 16.06 130.40

69.03 58.48 27.82 648.94 7.50 7.93 7.93 112.98

73.50 16.18 30.26 528.17 7.50 8.40 8.40 104.26

35.50 228.06 26.75 354.18 7.00 4.22 4.22 50.08

29.75 -25.65 22.19 286.36 6.00 3.73 3.73 27.57

21.25 33.65 17.58 194.42 12.50 6.71 2.68 60.89

70

Balance Sheet
(Rs. in Crores) Particulars SOURCES OF FUNDS Capital Reserves Total Deposits Borrowings Other Liabilities & Provisions TOTAL LIABILITIES APPLICATION OF FUNDS Cash & Balances with RBI Balances with Banks & money at Call Investments Advances Fixed Assets Other Assets Miscellaneous Expenditure not written off TOTAL ASSETS Contingent Liability Bills for collection Mar-10 Mar-09 Mar-08 Mar-07 Mar-06 Mar-05

348.14

345.67

344.67 3,249.03

326.16 1,307.34

309.29 543.45

123.32 627.55

4,191.77 3,559.86

23,886.47 15,644.00 16,423.65 11,000.09 6,565.92 4,299.54 6,140.51 6,734.01 2,869.42 2,428.34 5,119.25 3,178.71 5,099.75 1,609.23 2,183.24 1,149.88 901.81 567.79

37,436.31 28,711.88 28,315.31 19,916.58 10,177.77 6,520.01

2,085.67 214.59

995.35 145.32

1,683.49 439.18 9,141.99

751.22 544.75

418.79 173.71

238.73 181.66

12,512.66 9,110.18

6,861.96 2,855.53 1,826.97

20,775.05 16,625.34 15,552.22 10,924.07 6,348.31 4,017.14 427.65 213.36 210.25 1,288.18 0.00 141.09 693.49 0.00 105.22 276.21 0.00 97.10 158.41 0.00

1,420.69 1,622.33 0.00 0.00

37,436.31 28,711.88 28,315.31 19,916.58 10,177.77 6,520.01 36,966.02 57,954.21 121,627.58 100,654.70 39,504.80 12,193.72 649.32 317.58 290.88 219.44 92.76 21.01

71

Key Ratios
Mar ' 09 Mar ' 08 Mar ' 07 Mar ' 06 Mar ' 05

Per share ratios
Adjusted EPS (Rs) Adjusted cash EPS (Rs) Reported EPS (Rs) Reported cash EPS (Rs) Dividend per share Operating profit per share (Rs) Book value (excl rev res) per share (Rs) Book value (incl rev res) per share (Rs.) Net operating income per share (Rs) Free reserves per share (Rs) 7.98 9.99 7.99 10.00 0.75 13.08 0.96 0.96 94.39 89.63 8.50 9.97 8.53 10.00 0.75 16.32 104.26 104.26 81.83 85.15 4.32 5.38 4.33 5.40 0.70 7.10 50.95 50.95 48.81 34.53 3.81 4.77 3.82 4.78 0.60 6.51 27.95 27.95 29.42 13.00 6.84 8.74 6.88 8.79 1.25 10.53 61.38 61.38 43.91 39.50

Profitability ratios
Operating margin (%) Gross profit margin (%) Net profit margin (%) Adjusted cash margin (%) Adjusted return on net worth (%) Reported return on net worth (%) Return on long term funds (%) 13.85 11.72 8.35 10.45 7.06 7.06 50.50 19.93 18.13 10.37 12.12 8.14 8.17 47.47 14.54 12.35 8.84 10.98 8.47 8.50 54.27 22.12 18.87 12.97 16.18 13.64 13.67 59.26 23.97 19.64 15.35 19.48 11.13 11.21 41.30

Leverage ratios
Long term debt / Equity Total debt/equity Owners fund as % of total source Fixed assets turnover ratio 4.01 19.97 7.08 4.57 17.95 7.21 6.62 13.12 5.82 7.59 11.63 4.43 5.68 14.96 3.21

Liquidity ratios
Current ratio Current ratio (inc. st loans) Quick ratio Inventory turnover ratio 0.49 0.08 5.91 0.39 0.06 5.83 0.32 0.05 5.74 0.24 0.03 6.20 0.32 0.03 9.36 -

Payout ratios
Dividend payout ratio (net profit) Dividend payout ratio (cash profit) Earning retention ratio 10.07 8.04 89.92 10.29 8.77 89.67 18.91 15.18 81.01 18.76 15.00 81.20 20.74 16.25 79.11

72

From the above chart of Kotak Mahindra Bank we can see that the stock has moved in uptrend direction in past however it is moving in sideways direction since March 2010. Currently the stock has crossed its 50 day Exponential Moving average line which indicates that current price of the stock is the right price to Buy Kotak Mahindra Bank¶s Shares

73

YES BANK

74

Profile of Yes Bank

Yes Bank India, founded under the initiative of Rana Kapoor and Ashok Kapur, is known for comprehensive banking and providing financial solutions to its customers. The main mission of the Yes Bank in India is to establish a hi-tech driven private Indian bank catering to the needs of the emerging India. The founders got the financial assistance from the Rabobank Nederland, the world's only AAA rated private bank, and three respected global institutional private equity investors, CVC Citigroup, AIF Capital and ChrysCapital. At present, Yes Bank India has forty fully operational branches. Activities: The main feature that differentiates Yes Bank India in the banking industry is their use of knowledge bankers who are industry experts in various sectors of Indian economy thereby helping their valued customers with in-depth knowledge of these sectors. In general the products and services offered by the Yes Bank are:
y y y y y y

Corporate and Institutional Banking Financial Markets Investment Banking Business and Transactional Banking Retail Banking Private Banking

YES BANK has been recognized amongst the Top and the Fastest Growing Bank in various Indian Banking League Tables by prestigious media houses and Global Advisory Firms, and has received national and international honors for our Businesses including Corporate Finance, Investment Banking, Treasury, Transaction Banking, and Sustainable practices through Responsible Banking. The Bank has received several recognitions for world-class IT infrastructure, and payments solutions, as well as excellence in Human Capital.

75

SHAREHOLDING PATTERN (%)

0.51 2.51

0.57 8.86 31.27

Indian Promoters Banks,Financial Institutions & Insurance FII's Private Corporate Bodies

47.54 1.25

NRI's/Foreign Others Others General Public

76

Description

Details

Industry House BSE Code NSE Code Incorporation Year Registered Office

Bank - Private Private 532648 YESBANK

Nehru Centre 9th Floor, Dr Annie Besant Road Worli , Mumbai, Maharashtra-400018 91-22-66699000

Phone

Email

yestouch@yesbank.in www.yesbank.in INE528G01019 Bank - Private RANA KAPOOR

Web ISINNO Industry Chairman & MD

Part Time Chairman S.L.KAPUR

Director Listing

AJAY VOHRA & BHARAT PATEL BSE,NSE

77

Profit & Loss
(Rs. in Crores) Particulars INCOME : Interest Earned Other Income Total I II. Expenditure Interest expended Payments to/Provisions for Employees Operating Expenses & Administrative Expenses Depreciation Other Expenses, Provisions & Contingencies Provision for Tax Fringe Benefit tax Deferred Tax Total II III. Profit & Loss Reported Net Profit Extraordinary Items Adjusted Net Profit Prior Year Adjustments Profit brought forward IV. Appropriations Transfer to Statutory Reserve Transfer to Other Reserves Trans. to Government /Proposed Dividend Balance carried forward to Balance Sheet Equity Dividend % Earnings Per Share-Unit Curr Earnings Per Share(Adj)-Unit Curr Book Value-Unit Curr Mar-10 Mar-09 Mar-08 Mar-07 Mar-06 Mar-05

2,369.71 581.15 2,950.86

2,001.43 458.93 2,460.36

1,304.68 360.68 1,665.36

587.61 200.71 788.32

192.80 99.81 292.61

29.98 18.20 48.18

1,581.76 256.89 102.71 30.26 252.75 267.74 0.00 -18.99 2,473.12

1,492.13 218.02 77.85 30.10 176.35 183.02 1.68 -22.63 2,156.52

974.11 202.41 52.12 19.23 111.01 117.26 1.65 -12.45 1,465.34

416.26 117.47 29.67 11.07 70.22 54.94 0.92 -6.60 693.95

104.72 50.12 13.23 5.66 34.49 25.71 NA 2.81 NA

11.85 21.27 7.98 1.25 11.41 0.10 NA -1.92 NA

477.74 -0.37 478.11 0.00 405.78

303.84 -0.10 303.94 0.00 245.08

200.02 -0.01 200.03 0.00 105.30

94.37 0.00 94.37 0.00 37.73

55.32 -0.02 55.34 0.00 -3.76

-3.76 -0.02 -3.74 0.00 0.00

119.44 31.52 59.61 672.95 15.00 13.81 13.81 90.96

75.96 67.18 0.00 405.78 0.00 10.23 10.23 54.69

50.01 10.23 0.00 245.08 0.00 6.76 6.76 44.59

23.59 3.21 0.00 105.30 0.00 3.37 3.37 28.11

13.83 0.00 0.00 37.73 0.00 2.05 2.05 21.21

0.00 0.00 0.00 -3.76 0.00 0.00 NA 10.66

78

Balance Sheet
(Rs. in Crores) Particulars SOURCES OF FUNDS : Capital Reserves Total Deposits Borrowings Other Liabilities & Provisions TOTAL LIABILITIES APPLICATION OF FUNDS : Cash & Balances with RBI Balances with Banks & money at Call Investments Advances Fixed Assets Other Assets Miscellaneous Expenditure not written off TOTAL ASSETS Contingent Liability Bills for collection 1,995.31 1,277.72 677.94 644.99 959.24 668.33 389.76 903.08 88.17 127.41 41.34 11.69 394.86 760.98 19.64 46.66 0.00 339.67 296.98 295.79 280.00 507.06 270.00 302.69 200.00 13.24 663.03 369.74 29.16 Mar-10 Mar-09 Mar-08 Mar-07 Mar-06 Mar-055

2,749.88 1,327.24 1,023.13

26,798.56 16,169.42 13,273.16 8,220.39 2,910.38 4,749.08 3,701.68 986.21 867.32 464.76 216.26

1,745.32 1,405.47 1,404.93 1,230.16

36,382.51 22,900.79 16,983.22 11,104.93 4,164.09 1,275.17

10,209.94 7,117.02 5,093.71 3,073.12 1,350.19 22,193.12 12,403.09 9,430.27 6,289.74 2,407.09 115.47 131.11 101.17 730.50 0.00 70.87 378.36 0.00 34.72 156.51 0.00

1,190.73 1,326.86 0.00 0.00

36,382.51 22,900.79 16,983.22 11,104.93 4,164.09 1,275.17 105,778.93 65,765.55 68,883.40 52,150.40 17,508.24 6,689.23 153.43 192.93 788.57 100.71 1.30 0.00

79

Key Ratios
Mar ' 10 Mar ' 09 Mar ' 08 Mar ' 07 Mar ' 06

Per share ratios
Adjusted EPS (Rs) Adjusted cash EPS (Rs) Reported EPS (Rs) Reported cash EPS (Rs) Dividend per share Operating profit per share (Rs) 14.08 14.97 14.06 14.96 1.50 21.69 10.24 11.25 10.23 11.24 16.37 54.69 54.69 81.62 36.47 6.76 7.41 6.76 7.41 9.43 1.18 1.18 53.78 31.18 3.37 3.77 3.37 3.77 4.82 28.11 28.11 26.31 16.66 2.05 2.26 2.05 2.26 3.38 21.21 21.21 10.51 10.70

Book value (excl rev res) per share (Rs) 90.96 Book value (incl rev res) per share (Rs.) 90.96 Net operating income per share (Rs) Free reserves per share (Rs) 84.68 69.33

Profitability ratios
Operating margin (%) Gross profit margin (%) Net profit margin (%) Adjusted cash margin (%) Adjusted return on net worth (%) Reported return on net worth (%) Return on long term funds (%) 25.62 24.56 16.30 17.35 15.48 15.46 74.73 20.06 18.81 12.35 13.59 18.71 18.70 120.56 17.54 16.33 12.01 13.16 15.16 15.16 97.09 18.31 16.81 12.06 13.48 11.99 11.98 71.98 32.16 30.17 19.08 21.04 9.66 9.66 33.03

Leverage ratios
Long term debt / Equity Total debt/equity Owners fund as % of total source Fixed assets turnover ratio 8.67 10.33 13.93 9.96 9.12 12.44 10.06 9.03 11.96 10.44 8.73 8.50 5.08 16.44 7.83

Liquidity ratios
Current ratio Current ratio (inc. st loans) Quick ratio Inventory turnover ratio 0.68 0.04 14.54 0.45 0.06 5.14 0.51 0.04 7.92 0.30 0.03 5.74 0.72 0.04 12.34 -

Payout ratios
Dividend payout ratio (net profit) Dividend payout ratio (cash profit) Earning retention ratio 12.47 11.73 87.54 100.00 100.00 100.00 100.00

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The above chart of Yes bank shows that the stock has support at Rs.248 & Resistance at Rs.284. Though the stock has shown uptrend movement in past, it is currently moving in downward direction and reaching close to trendline also it is currently trading below its 50 day Exponential moving Average, so its not the right time to buy Yes Bank stock. Investors who are already holding this stock should be watchful about the stock as it may break the trendline in near future. If it breaks the trendline then sell the Yes Bank Shares.
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RECOMMENDATIONS
From the study of banking sector I found that most of the banking sector stocks are bullish. Most of the banks have good valuation & their percentage growth is also good. Let¶s do a comparative study of banks taken in these studies

BANKS

PUNJAB NATL. BANK

UNION BANK OF INDIA

KOTAK MAH. BANK

YES BANK 19.71

P/E(TTM) (x)

8.7

7.84

47.34

P/BV(TTM) (x)

2.04

1.81

5.85

2.99

EV/EBIDTA (x)

11.92

14.73

23.4

16.05

ROE (%)

25.8

26.2

13.3

20.3

RECOMMENDATION

BUY

BUY

BUY

HOLD 

As per P/E ratio Punjab natl. Bank and Union Bank of India are undervalued stocks, Yes bank is fairly valued and Kotak Mahindra Bank is overvalued.  ROE is highest for Union bank of India and it is lowest for Kotak Mahindra Bank.

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CONCLUSION 

We all have personal biases, and every analyst has some sort of bias. There is nothing wrong with this, and the research can still be of great value. 

Check the track record of an analyst before taking any decision based on his recommendation. 

Corporate statements and press releases offer good information, but they should be read with a healthy degree of skepticism to separate the facts from the spin. 

Investors should become skilled readers to weed out the important information
and ignore the hype.  Keep long term horizon for investment but book profits at the right times.  Always keep diversified investment, do not invest all your money in the same sector or in the same company.

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BIBLIOGRAPHY

www.answers.com www.wikipedia.com NCFM basic module 1 www.investopedia.com www.stockcharts.com www.docstoc.com http://rbidocs.rbi.org.in/rdocs/Speeches/PDFs/81026.pdf http://hubpages.com/hub/Banking-system-in-India-Why-banks-in-India-are-facingdifficulty-in-getting-deposits www.caclubindia.com www.zignals.com www.indiainfoline.com www.pnbindia.com www.unionbankofindia.co.in www.money.rediff.com www.kotak.com www.yesbank.in

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