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EQUITY RESEARCH IN BANKING SECTOR Research Project submitted In Part Completion of Masters of Management Studies U niversity of Mumbai By Amit

Kanowjia Under the guidance of Mr. Nikesh Ruparel Vidyalankar Institute of Technology Wadala (E), Mumbai 400 037 JULY 2010 1

DECLARATION I hereby declare that the project work entitled Equity Research in Banking Sector submitted to Vidyalankar Institute of Technology, wadala(E), Mumbai-400037 is a record of an original work done by me under the guidance of Mr. Nikesh Ruparel and this project work is submitted in partial fulfillment of the requirement for th e award of the degree of Masters of Management Studies (MMS). The results embodi ed in this report have not been submitted to any other University or Institute f or the award of any degree or diploma. Amit Kanowjia 2

ACKNOWLEDGEMENT I take this opportunity to sincerely thanks and express my gratitude to my proje ct guide Mr. Nikesh Ruparel for guiding me throughout my entire project. The exp erience and the knowledge acquired over the interactions with the guide have bee n invaluable to say the least and will help me a great deal in my future educati on and career. I would also like to thank my co-guide Mr. Jitendra Bapna for val uable input on coordination in my project. My project was completed in a very su pportive and interactive environment and has been great learning experience. Las t but not the least I would like to thanks my family and friends for all the sup port they have provided me. Amit Kanowjia 3

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- Industr y Qualitative Factor- Company Quantitative Factor-Ratios Technical Analysis Intr oduction to Technical Charts Introduction to Trendline Introduction to Support & Resistance Introduction to Indicators Moving Averages Analysis of Banking Secto r The Indian Banking Sector Recent development in Banking sector SWOT Analysis o f 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 o f Yes Bank Recommendations Conclusion Bibliography 4 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 8 1 82

EXECUTIVE SUMMARY Indian Economy being one of the fastest developing economies in the world, Compa nies in India are growing at farter rate as compared to their growth rate a deca de back. Many Indian companies are expanding their business globally with merger s and acquisitions. As companies grow their shareholders are benefitted with goo d dividend and capital appreciation on investment in equity shares of such compa nies. Number of companies listed in stock exchange (BSE & NSE) has been increasi ng every year with new IPOs coming in the market. In India people are realizing t hat 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 inves t 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 gambl ing with your money which many of us would not like to do with our hard earned m oney. 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 financi al 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 exp lained How to do fundamental analysis & technical analysis with analysis of bank ing sector and few banks in the sector. 5

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 valuatio ns placed on assets do not exceed liabilities, negative equity exists. In an acc ounting context, Shareholders' equity (or stockholders' equity, shareholders' fu nds, shareholders' capital or similar terms) represents the remaining interest i n assets of a company, spread among individual shareholders of common or preferr ed 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 capita l as the business is a separate entity from its owners. Businesses can be consid ered to be, for accounting purposes, sums of liabilities and assets; this is the accounting equation. After liabilities have been accounted for, the positive re mainder is deemed the owner's interest in the business. This definition is helpf ul to understand the liquidation process in case of bankruptcy. At first, all th e secured creditors are paid against proceeds from assets. Afterward, a series o f creditors, ranked in priority sequence, have the next claim/right on the resid ual proceeds. Ownership equity is the last or residual claim against assets, pai d only after all other creditors are paid. In such cases where even creditors co uld not get enough money to pay their bills, nothing is left over to reimburse o wners' 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 denominat ions, 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 equi ty shares of Rs 10 each. The holders of such shares are members of the company a nd 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 divid ends 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) c ompany or a startup (a company being created or newly created). When the investm ent is in infant companies, it is referred to as venture capital investing and i s generally understood to be higher risk than investment in listed going-concern situations. 6

How to invest in Equity Shares? Investors can buy equity shares of a company from Security market that is from P rimary market or Secondary market. The primary market provides the channel for s ale of new securities. Primary market provides opportunity to issuers of securit ies; Government as well as corporate, to raise resources to meet their requireme nts 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 m arket. Stock exchange only acts as facilitator for trading of equity shares. Any one who wishes to buy shares of a company can buy it from an existing shareholde r 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 .Equi ties have the potential to increase in value over time. It also provides your po rtfolio with the growth necessary to reach your long term investment goals. Rese arch 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 y ielded far superior returns than any other investment. However, this does not me an all equity investments would guarantee similar high returns. Equities are hig h risk investments. One needs to study them carefully before investing. It is im portant for investors to note that while equity shares give highest return as co mpared to other investment avenues it also carries highest risk therefore it is important to find real value or intrinsic value of the security before investing i n it. The intrinsic value of a security being higher than the securitys market va lue represents a time to buy. If the value of the security is lower than its mar ket price, investors should sell it. To be able to value equity, we need to firs t understand how equity is to be analyzed. Equity Share of any company can be an alyzed through 1. Fundamental Analysis 2. Technical Analysis 7

FUNDAMENTAL ANALYSIS 8

Introduction Fundamental analysis is a technique that attempts to determine a se curitys value by focusing on underlying factors that affect a Companys actual busi ness 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 fina ncial condition and management). Fundamental analysis of a business involves ana lyzing its financial statements and health, its management and competitive advan tages, and its competitors and markets. Fundamental analysis is performed on his torical and present data, but with the goal of making financial forecasts. A fun damental analyst believes that analyzing strategy, management, product, financia l stats and many other readily and not-so-readily quantifiable numbers will help choose stocks that will outperform the market. There are several possible objec tives: y y y y To conduct a company stock valuation and predict its probable price evolution, T o 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 companys reven ue growing? y Is it actually making a profit? y Is it in a strong-enough positio n 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 t he economic well-being of a company. Obvious items include things like revenue a nd profit, but fundamentals also include everything from a companys 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 ter ms. 9

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. Learni ng 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. On e change in government policy could potentially wipe out all of its sales. For t his reason, companies will always disclose in their annual report if any one cus tomer accounts for a majority of revenues. y Market Share Understanding a company's present market share can tell volumes abo ut 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 ear nings, along with its market share. Market share is important because of economi es of scale. When the firm is bigger than the rest of its rivals, it is in a bet ter position to absorb the high fixed costs of a capital-intensive industry. y Industry Growth One way of examining a company's growth potential is to first ex amine whether the amount of customers in the overall market will grow. This is c rucial because without new customers, a company has to steal market share in ord er to grow. In some markets, there is zero or negative growth, a factor demandin g careful consideration. For example, a manufacturing company dedicated solely t o 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. 10

y Competition Simply looking at the number of competitors goes a long way in under standing the competitive landscape for a company. Industries that have limited b arriers to entry and a large number of competing firms create a difficult operat ing 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 w ith few alternatives have the ability to pass on costs to their customers. A gre at 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, pr icing power. y Regulation Certain industries are heavily regulated due to the importance or sev erity 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 rep resent the entire industry for a region (such as utility companies), governments usually specify how much profit each company can make. In these instances, whil e 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 indus try 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 re ach the market. As a result, the Food and Drug Administration (FDA) requires tha t new drugs must pass a series of clinical trials before they can be sold and di stributed 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 ap proved. 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 s hould always be on the lookout for regulations that could potentially have a mat erial impact upon a business' bottom line. Investors should keep these regulator y costs in mind as they assess the potential risks and rewards of investing. 11

QUALITATIVE FACTOR THE COMPANY Before diving into a company's financial statements, lets take a look at some of the qualitative aspects of a company. Following are the qualitative factors of t he company that investor should be aware of y Business Model One of the most important questions that should be asked is what exactly does th e company do? This is referred to as a company's business model. Its how a compa ny makes money? You can get a good overview of a company's business model by che cking 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 Reliances brand n ame 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 growt h and profits. When a company can achieve competitive advantage, its shareholder s can be well rewarded for decades. y Management A company relies upon management to steer it towards financial success. Some bel ieve 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 comp any fail to properly execute the plan. Every public company has a corporate info rmation section on its website. Usually there will be a quick biography on each executive with their employment history, educational background and any applicab le 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 manage ment: 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 cont ent is worthwhile, other times it's boilerplate. One tip is to compare what mana gement 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. 12

2. Ownership and Insider Sales Just about any large company will compensate exec utives with a combination of cash, restricted stock and options. It is a positiv e 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 Amba ni & 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 file d with the Securities and Exchange Board of India (SEBI), so it's publicly avail able information. Talk is cheap - think twice if you see management unloading al l 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 ca n 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 the ir performance. 4. Conference Calls Some of the big market capitalisation companies have conference calls do that ma nagement can address critical issues such as performance review, critical develo pments etc. The excerpts of these are later displayed on the companys web sites s o as to enable investors to access these. 13

QUANTITATIVE FACTOR Now as we know the qualitative factor of fundamental analysis, lets proceed to th e quantitative factor of fundamental analysis. Quantitative factor include analy sis of financial statement of the company. RATIO ANALYSIS Financial ratios are t ools for interpreting financial statements to provide a basis for valuing securi ties and appraising financial and management performance. In general, there are 4 kinds of financial ratios that a financial analyst will use most frequently, t hese 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 efficient ly 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 leve l of interest payable out of profits? 14

Following are some ratios which are used to analyze companies performance 1. Curr ent Ratio: Current ratio is calculated in order to work out firms 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 liabili ties of a business. Where current assets are those assets which are either in th e form of cash or easily convertible into cash within a year. Similarly, liabili ties, which are to be paid within an accounting year, are called current liabili ties. Current Ratio = Current Assets/Current Liabilities Current Assets include Cash in hand, Cash at Bank, Sundry Debtors, Bills Receivable, Stock of Goods, Sh ort-term Investments, Prepaid Expenses, Accrued Incomes etc. Current Liabilities include Sundry Creditors, Bills Payable, Bank Overdraft, Outstanding Expenses e tc. Objective and Significance: Current ratio shows the short-term financial pos ition of the business. This ratio measures the ability of the business to pay it s current liabilities. The ideal current ratio is supposed to be 2:1 i.e. curren t 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 o rder 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 Ca sh in hand, Cash at Bank, Sundry Debtors, Bills Receivable, Short-term Investmen ts etc. In other words, all current assets are liquid assets except stock and pr epaid expenses. Current liabilities include Sundry Creditors, Bills Payable, Ban k Overdraft, Outstanding Expenses etc 15

3. Debt-Equity Ratio: Debt equity ratio shows the relationship between long-term debts and shareholders funds. It is also known as External-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 o f owners stock in the business. Proprietors are always keen to have more funds fr om borrowings because: (i) Their stake in the business is reduced and subsequent ly their risk too (ii) Interest on loans or borrowings is a deductible expenditu re while computing taxable profits. Dividend on shares is not so allowed by Inco me 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 + L ong- term Loans Fictitious Assets Net Fixed Assets means Fixed Assets at cost le ss depreciation. It will also include trade investments. Objective and Significa nce: This ratio indicates as to what extent fixed assets are financed out of lon g-term funds. It is well established that fixed assets should be financed only o ut 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 eq ual to 1. If the ratio is less than 1, it means the firm has adopted the impuden t 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. 16

5. Working Capital Turnover Ratio: Working capital turnover ratio establishes a relationship between net sales and working capital. This ratio measures the effi ciency of utilization of working capital. Working Capital Turnover Ratio = Net S ales or Cost of Goods Sold/Net Working Capital Where Net Working Capital = Curre nt Assets Current Liabilities Objective and Significance: This ratio indicates t he number of times the utilisation of working capital in the process of doing bu siness. 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 capit al turnover ratio indicates that the working capital has not been used efficient ly. 6. Stock Turnover Ratio: Stock turnover ratio is a ratio between cost of goods s old 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 Sto ck = [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 mov ing 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. 17

7. Debtors Turnover Ratio: Debtors turnover ratio indicates the relation between net credit sales and average accounts receivables of the year. This ratio is als o known as Debtors Velocity. Debtors Turnover Ratio = Net Credit Sales/Average Accounts Receivables Where Ave rage Accounts Receivables = [Opening Debtors and B/R + Closing Debtors and B/R]/ 2 Credit Sales = Total Sales Cash Sales Objective and Significance: This ratio i ndicates the efficiency of the concern to collect the amount due from debtors. I t 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 quickl y. 8. Capital Turnover Ratio: Capital turnover ratio establishes a relationship bet ween net sales and capital employed. The ratio indicates the times by which the capital e mployed 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-te rm Loans Fictitious Assets. Objective and Significance: The objective of capital turnover ratio is to calculate how efficiently the capital invested in the busi ness is being used and how many times the capital is turned into sales. Higher t he ratio, better the efficiency of utilisation of capital and it would lead to h igher 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 m anner: Net Profit Ratio = Net Profit/Net Sales x 100 Where Net Profit = Gross Pr ofit Selling and Distribution Expenses Office and Administration Expenses Financ ial Expenses Non Operating Expenses + Non Operating Incomes. And Net Sales = Tot al Sales Sales Return 18

Objective and Significance: In order to work out overall efficiency of the conce rn Net Profit ratio is calculated. This ratio is helpful to determine the operat ional 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 rel ationship between the profit earned before interest and tax and the capital empl oyed to earn such profit. Return on Capital Employed = Net Profit before Interes t, Tax and Dividend/Capital Employed x 100 Where Capital Employed = Share Capita l (Equity + Preference) + Reserves and Surplus + Long-term Loans Fictitious Asse ts Or Capital Employed = Fixed Assets + Current Assets Current Liabilities Objec tive and Significance: Return on capital employed measures the profit, which a f irm 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 invest ors 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 bett er 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 equit y shareholders with equity shareholders funds. Return on Equity = Net Profit afte r Interest, Tax and Preference Dividend/Equity Shareholders Funds x 100 Where Equ ity Shareholders Funds = Equity Share Capital + Reserves and Surplus Fictitious A ssets Objective and Significance: Return on Equity judges the profitability from the point of view of equity shareholders. This ratio has great interest to equi ty shareholders. The 19

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 profi t (after interest, tax and preference dividend) by the number of equity shares. Earning Per Share = Net Profit after Interest, Tax and Preference Dividend/No. O f Equity Shares Objective and Significance: Earning per share helps in determini ng the market price of the equity share of the company. It also helps to know wh ether the company is able to use its equity share capital effectively with compa re to other companies. It also tells about the capacity of the company to pay di vidends 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 pro fit 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 divide d by Rs.200 per share earnings = 10 P/E.) This ratio is calculated to find out t he possibility of capital appreciation in future. Price Earning Ratio = Market P rice per Equity Share/ Earning per Share. 20

TECHNICAL ANALYSIS 21

INTRODUCTION Should I buy today? What will prices be tomorrow, next week, or nex t year? Wouldn't investing be easy if we knew the answers to these seemingly sim ple 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 ac tion (i.e., current expectations) with comparable historical price action to pre dict 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 analysi s. Technical analysis is applicable to stocks, indices, commodities, futures or any tradable instrument where the price is influenced by the forces of supply an d 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 intrada y (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 betwee n the forces of supply and demand for the company's stock. The objective of anal ysis 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 o f any asset is only what someone is willing to pay for it. 22

What is Chart? A price chart is a sequence of prices plotted over a specific timeframe. In stat istical 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-ax is (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. 23

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 plot ting one price point, usually the close, of a security over a period of time. Co nnecting 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 ca n 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, th inly traded stocks and intraday prices 24

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 cha rt. The high and low are represented by the top and bottom of the vertical bar a nd 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 l ow for that week. 25

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, h igh, low and close are all required. A daily candlestick is based on the open pr ice, 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, esp ecially the relationship between the open and the close. White (clear) candlesti cks form when the close is higher than the open and black (solid) candlesticks f orm when the close is lower than the open. The white and black portion formed fr om the open and close is called the body (white body or black body). The lines a bove and below are called shadows and represent the high and low. 26

INTRODUCTION TO TRENDLINE Trendlines are an important tool in technical analysis for both trend identifica tion 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 res istance. Trends in charts are found to take decision regarding buying, selling o r 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. 27

The above chart of MERK&CO shows downtrend movement in stock. The trendline is f ormed by joining previous highest closing prices of the stock. Note: Trendline a s 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 bull ish signal and it is the time to buy that particular stock whereas breakout in u ptrend 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. 28

INTRODUCTION TO SUPPORT AND RESISTANCE Support and resistance represent key junctures where the forces of supply and de mand meet. In the financial markets, prices are driven by excessive supply (down ) and demand (up). Supply is synonymous with bearish, bears and selling. As dema nd increases, prices advance and as supply increases, prices decline. When suppl y 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 dicta tes that as the price declines towards support and gets cheaper, buyers become m ore inclined to buy and sellers become less inclined to sell. By the time the pr ice reaches the support level, it is believed that demand will overcome supply a nd 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 th e price from rising further. The logic dictates that as the price advances towar ds resistance, sellers become more inclined to sell and buyers become less incli ned to buy. By the time the price reaches the resistance level, it is believed t hat supply will overcome demand and prevent the price from rising above resistan ce. 29

The above chart of PHILLIP MORRIS shows that the stock has Resistance at 51.5 wi th double top confirmation and it has Support at 45.5 with double bottom confirm ation. Breakout in the resistance level gives bullish signal, it is the right ti me 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 se ll the stock when its price goes below support level as it is expected that the s tock may further fall in price. Note: When a resistance level is successfully pe netrated, that level becomes a support level. Similarly when a support level is successfully penetrated, that level becomes a resistance level. 30

INTRODUCTION TO INDICATORS An indicator is a series of data points that are derived by applying a formula t o 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 clos ing prices, while others incorporate volume and open interest into their formula s. The price data is entered into the formula and a data point is produced. An i ndicator offers a different perspective from which to analyze the price action. Regardless of the complexity of the formula, indicators can provide unique persp ective on the strength and direction of the underlying price action. Why use ind icators? Indicators serve three broad functions: to alert, to confirm and to pre dict. y An indicator can act as an alert to study price action a little more clo sely. 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 te chnical analysis tools. If there is a breakout on the price chart, a correspondi ng 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 t o confirm the weakness. y Some investors and traders use indicators to predict t he direction of future prices. Following are various indicators used in Technica l Analysis y y y y y y y y Average Directional Index (ADX) Average True Range (A TR) 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 t he technical analyst. By using an average of prices, moving averages smooth a da ta series and make it easier to spot trends. This can be especially helpful in v olatile markets. Moving Averages like other indicators are mainly used to confir m 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 Averag e) and 200 day SMA line. The chart shows breakout in 200 day SMA line at 50 whic h gives bearish signal. Investors are advised to sell the stock at 50 as it is e ntering 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 e conomy. 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 a nd internal factors. For the past three decades India's banking system has sever al outstanding achievements to its credit. It is no longer confined to only metr opolitans 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 In dia'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 I ndia. 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. G one are days when the most efficient bank transferred money from one branch to o ther in two days. Now it is simple as instant messaging or dial a pizza. Money h as become the order of the day. Post Independence In 1948, the Reserve Bank of India, India's central banking au thority, was nationalized, and it became an institution owned by the Government of India. In 1949, the Banking Regulation Act was enacted which empowered the Re serve 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 exis ting bank may be opened without a license from the RBI, and no two banks could h ave common directors. 34

Liberalization The new policy shook the Banking sector in India completely. Bank ers, 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 pr ivate banks, which came to be known as New Generation tech-savvy banks, which in cluded banks such as Global Trust Bank (the first of such new generation banks t o be set up) which later amalgamated with Oriental Bank of Commerce, UTI Bank (n ow 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 th e foundation for the reformation of the Indian banking sector. Constituted in 19 91, the Committee submitted two reports, in 1992 and 1998, which laid significan t thrust on enhancing the efficiency and viability of the banking sector. As the international standards became prevalent, banks had to unlearn their traditiona l operational methods of directed credit, directed investments and fixed interes t rates, all of which led to deterioration in the quality of loan portfolios, in adequacy of capital and the erosion of profitability. The recent international c onsensus on preserving the soundness of the banking system has veered around cer tain core themes. These are: effective risk management systems, adequate capital provision, sound practices of supervision and regulation, transparency of opera tion, conducive public policy intervention and maintenance of macroeconomic stab ility in the economy. Until recently, the lack of competitiveness vis--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. H owever, the banking sector reforms have provided the necessary platform for the Indian banks to operate on the basis of operational flexibility and functional a utonomy, thereby enhancing efficiency, productivity and profitability. The refor ms also brought about structural changes in the financial sector and succeeded i n easing external constraints on its operation, i.e. reduction in CRR and SLR re serves, capital adequacy norms, restructuring and recapitulating banks and enhan cing the competitive element in the market through the entry of new banks. The r eforms also include increase in the number of banks due to the entry of new priv ate and foreign banks, increase in the transparency of the banks balance sheets t hrough the introduction of prudential norms and increase in the role of the mark et forces due to the deregulated interest rates. These have significantly affect ed 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 Reconstruc tion Fund. For revival of weak banks, the Verma Committee recommendations have l aid the foundation. Lastly, to maintain macroeconomic stability, RBI has introdu ced the Asset Liability Management System. The competitive environment created b y financial sector reforms has nonetheless compelled the banks to gradually adop t modern technology to maintain their market share. Thus, the declaration of the Voluntary Retirement Scheme accounts for a positive development reducing the ad ministrative 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 a nd private sector banks. Branch size has been reduced considerably by using tech nology thus saving manpower. The deregulation process has resulted in delivery o f innovative financial products at competitive rates; this has been proved by th e increasing divergence of banks in retail banking for their development and sur vival. In order to survive and maintain strong presence, mergers and acquisition s 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 secto r reforms have lead to the development of a diversifying portfolio in retail ban king, 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 profi tability with other regional banks over the last few years. The banking index ha s grown at a compounded annual rate of over 51 per cent since April 2001 as comp ared to a 27 per cent growth in the market index for the same period. Policy mak ers have made some notable changes in policy and regulation to help strengthen t he sector. These changes include strengthening prudential norms, enhancing the p ayments system and integrating regulations between commercial and co-operative b anks. Bank lending has been a significant driver of GDP growth and employment. E xtensive reach: the vast networking & growing number of branches & ATMs. Indian banking system has reached even to the remote corners of the country. In terms o f quality of assets and capital adequacy, Indian banks are considered to have cl ean, strong and transparent balance sheets relative to other banks in comparable economies in its region. WEAKNESS Public Sector Banks need to fundamentally str engthen institutional skill levels especially in sales and marketing, service op erations, risk management and the overall organisational performance ethic & str engthen human capital. Old private sector banks also have the need to fundamentally strengthen skill le vels. 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 c apital 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 s take in PSU banks below 51% thus choking the headroom available to these banks f or raining equity capital. Impediments in sectoral reforms: Opposition from Left and resultant cautious approach from the North Block in terms of approving merg er of PSU banks may hamper their growth prospects in the medium term. OPPORTUNIT Y The market is seeing discontinuous growth driven by new products and services that include opportunities in credit cards, consumer finance and wealth manageme nt on the retail side, and in fee-based income and investment banking on the who lesale banking side. These require new skills in sales & marketing, credit and o perations. With increased interest in India, competition from foreign banks will only inten sify. Given the demographic shifts resulting from changes in age profile and hou sehold income, consumers will increasingly demand enhanced institutional capabil ities and service levels from banks. New private banks could reach the next level of their growth in the Indian banki ng sector by continuing to innovate and develop differentiated business models t o 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 o f performance in their service platforms. Attracting, developing and retaining m ore leadership capacity Foreign banks committed to making a play in India will need to adopt alternative approaches to win the race for the customer and build a value-creating customer f ranchise 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 se ctor entities engaged in infrastructure funding to raise ECBs. This enabled bank s and financial institutions, which were earlier not permitted to raise such fun ds, 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 b anks, 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. Increa se in the number of foreign players would pose a threat to the Public Sector Ban k 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 (SC Bs) was 171 of which, 86 were Regional Rural Banks and the number of NonSchedule d Commercial Banks including Local Area Banks stood at 5. Taking into account al l banks in India, there are overall 56,640 branches or offices, 893,356 employee s and 27,088 ATMs. Public sector banks made up a large chunk of the infrastructu re, 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 und er an act called The Reserve Bank of India Act, 1934. All the banks and other fi nancial 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 b anks has gone up substantially, RBI has to change the schedule every now and the n, hence irrespective of whether a bank finds its name in the schedule to the RB I Act or not, its schedule status can be found out from its banking license. A B ank 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 activitie s that a bank can carry out in India. In the case of a scheduled bank, it is lic ensed by the RBI to carry on extensive banking operations including foreign exch ange operations, whereas, a non-scheduled bank can carry out only limited operat ions. There are a number of factors considered by RBI to declare a bank as a sch eduled bank, like the amount of share capital, type of banking activities that t he bank is permitted to carry out etc. An example of difference between a schedu led and non-scheduled bank is dealing in Foreign Exchange. Commercial and Co-operative Banks Commercial banks are by far the most widesprea d banking institutions in India. They provide major products and services in Ind ia. A commercial bank is run on commercial lines, for profits of the organizatio n. A co-operative bank on the other hand is run for the benefit of a group of me mbers of the co-operative body. A co-operative bank distributes only a very smal l 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 ar e commercial scheduled banks. There are a large number of private sector co-oper ative 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 B anks and District Central Co-operative Banks at the District level. Under the Di strict Central Co-operative Bank, there are Co-operative Societies. 42

At present, In India, the banks can be bifurcated into following categories. Public Sector Banks or Nationalized Banks, which are commercial and scheduled. E xamples: 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 Ch artered Bank etc. Indian Banks- Bank of Rajasthan Limited, VYSYA Bank Limited et c. Private Sector Banks, which are co-operative and scheduled- These are large c o-operative sector banks but which are scheduled banks. Examples: Saraswat Co-op erative Bank Limited, Cosmos Co-operative Bank Limited etc. Private Sector Banks , which are co-operative and non-scheduled-These are small co-operative banks bu t which are non-scheduled. Examples: Local cooperative banks which operate withi n 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 develop ing the rural economy by providing, for the purpose of development of agricultur e, trade, commerce, industry and other productive activities in the rural areas, credit and other facilities, particularly to the small and marginal farmers, ag ricultural labourers and artisans and small entrepreneurs Gramin Banks, that are also state owned. They operate at still smaller level than RRBs and serve at vi llage level. Foreign banks, These banks have Head Office outside India and branc h 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 con junction with the central Government, the monetary and credit policies. They are also controlled by RBI. 43

Retail Banking Vs Wholesale Banking Whole sale banking typically involves a smal l number of very large customers such as big corporations and governments, where as retail banking consists of a large number of small customers who consume pers onal banking and small business services. Wholesale banking is largely inter-ban k; 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 lend ing. Retail banking is largely intra-bank; the bank itself makes many small loan s. Most of the Indian public sector banks practice retail banking; they are slow ly practicing the concept of wholesale banking. On the other hand, most of the w ell established foreign banks in India and the recent private sector banks pract ice 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 p ortion of the income for large public sector banks is from lending operations, i n the case of any private sector bank in India, the amount of nonoperating incom e (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 c harges 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 branch es and subsidiaries in foreign countries. Special kinds of Bank branches Most Ba nks in India have special kind of branches. This is done to reap benefits of spe cialisation as activities done by these braches are quite complex and require sp ecialised knowledge and attention. Types of some special branches are 1. Foreign exchange branches 2. NPA recovery branches 3. Service branches dealing in Clear ing house operations/Corporate banking and Industrial finance branches 4. Person al banking branches 5. Housing finance branch 6. SSI branches 7. Agricultural fi nance 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 Sou rces: 1. Tier one and Tier two Capital in the form of equity/subordinate debts/d ebentures/preference shares. 2. Internal accrual generated out of profits. 3. Lo ng-term fixed deposits generated from public and corporate clients, financial in stitutions, and mutual funds, etc. 4. Long-term borrowings from financial instit utions like NABARD/SIDBI. Short-Term Sources: 1. Call money market, i.e., funds generated among inter banking transactions where there is online trading of mone y 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 cer tificate deposits in the open market. 5. Borrowing from RBI under Repo (Repurcha se option). 6. Short and medium-term fixed deposits generated from public and co rporate clients, mutual funds, and financial institutions, etc. 7. Floating in c urrent and saving accounts. 8. Short-term borrowings from FIs by way of rated pa pers 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 s trong fundamentals, large franchise value and good brand image. Besides being ra nked as one of India's top service brands, PNB has remained fully committed to i ts guiding principles of sound and prudent banking. Apart from offering banking products, the bank has also entered the credit card & debit card business; bulli on 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 achieve d significant growth in business which at the end of March 2010 amounted to Rs 4 35931 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 ). Punja b National Bank continues to maintain its frontline position in the Indian banki ng 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 o perational and financial performance has been brought about by Banks focus on cus tomer based business with thrust on CASA deposits, Retail, SME & Agri Advances a nd with more inclusive approach to banking; better asset liability management; i mproved margin management, thrust on recovery and increased efficiency in core o perations of the Bank. SHAREHOLDING PATTERN (%) 0.88 0.02 0.01 4.12 Indian Promoters 19.11 Banks,Financial Institutions & Insura nce 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 Pho ne E-mail URL Industry Chairman Managing Director Executive Director Listing Bank - Public Government 532461 PNB 1895 7 Bhikaiji Cama Place, New Delhi, New D elhi-110066. INE160A01014 91-11-26102303/26108205/26196487 hosd@pnbindia.com www.pnbindia.com Bank - Public K.R.KAMATH K.R.KAMATH M.V.TANKS ALE & NAGESH PYDAH BSE,NSE 52

Profit & Loss (Rs. in Crores) Particulars Mar-09 Mar-08 Mar-07 Mar-06 Mar-05 Mar-04 INCOME : I nterest Earned 19,326.16 14,265.02 11,236.14 9,584.15 8,459.85 7,778.95 Other In come 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 fo r 2,924.38 2,461.54 2,352.45 2,114.98 2,121.23 1,654.06 Employees Operating Expe nses & 663.76 563.61 485.00 455.22 384.44 321.56 Administrative Expenses Depreci ation 191.06 170.23 194.80 186.64 183.28 181.45 Other Expenses, Provisions & 1,7 12.66 1,072.78 1,945.94 1,777.05 1,457.07 1,754.57 Contingencies Provision for T ax 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 Extrao rdinary Items 1.18 0.70 -254.38 1.89 0.46 0.15 Adjusted Net Profit 3,089.70 2,04 8.06 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. Appr opriations 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 Tran s. to Government 737.78 479.55 459.73 215.71 197.66 119.72 /Proposed Dividend Ba lance carried forward to 7.64 0.00 15.52 183.49 0.00 0.00 Balance Sheet Equity D ividend % 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 Bor rowings Other Liabilities & Provisions TOTAL LIABILITIES APPLICATION OF FUNDS Ca sh & 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-0 9 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 42,125.49 154,702.99 119,501.5 7 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 0.00 899.8 4 3,302.58 0.00 246,939.64199,048.77162,529.13145,349.79126,268.72102,373.14 103,650.26 96,951.5 0 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 54

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) p er share (Rs) Book value (incl rev res) per share (Rs.) Net operating income per share (Rs) Free reserves per share (Rs) 123.78 130.85 123.86 130.93 22.00 191.6 3 514.77 562.09 777.82 63.79 97.97 104.03 98.03 104.09 20.00 151.48 41.28 10.23 694.81 64.04 64.94 70.34 64.98 70.38 10.00 109.81 341.98 390.68 505.09 63.79 48. 82 55.00 48.84 55.02 10.00 74.53 321.65 330.97 383.89 64.29 45.56 51.48 45.65 51 .57 6.00 57.00 287.79 297.38 310.53 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 (%) Re turn 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 6.7 6 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 r etention 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 55

he above chart of Punjab National Bank shows uptrend in stock. The stock is curr ent (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 ad vised to wait for some correction in the stock as stock is trading near the resi stance level or Buy the Stock above Rs. 1046. 56

UBI (Union Bank of India) 57

Profile of UBI The dawn of twentieth century witnesses the birth of a banking enterprise par ex cellence- UNION BANK OF INDIA- that was flagged off by none other than the Fathe r of the Nation, Mahatma Gandhi. Since that the golden moment, Union Bank of Ind ia 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 B ank, with a proactive approach to the changing needs of the society. This has re sulted 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 developmen t of new technologies, Union Bank has ensured complete customer delight, living up to its image of, GOOD 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 employee s is and ever will be dedicated and delighted to serve the discerning customer w ith professionalism and wholeheartedness. Union Bank is a Public Sector Unit wit h 55.43% Share Capital held by the Government of India. The Bank came out with i ts Initial Public Offer (IPO) in August 20, 2002 and Follow on Public Offer in F ebruary 2006. Presently 44.57 % of Share Capital is presently held by institutio ns, individuals and others. Over the years, the Bank has earned the reputation o f 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 launche d Core Banking Solution in 2002. Under this solution umbrella, All Branches of t he Bank have been 1135 networked ATMs, with online Telebanking facility made ava ilable to all its Core Banking Customers - individual as well as corporate. In a ddition to this, the versatile Internet Banking provides extensive information p ertaining 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 Ma nagement Service, Insurance, Mutual Funds and Demat. 58

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 59

Description Details Industry House BSE Code NSE Code Incorporation Year Registered Office ISINNO Pho ne 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-4000 21 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 60

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 15,395.4 0 13,410.93 10,564.20 8,603.36 6,683.38 5,736.50 II. Expenditure Interest expend ed 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 1,1 13.12 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 forw ard 0.83 0.65 0.48 0.55 40.99 77.44 IV. Appropriations Transfer to Statutory Res erve 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 0.6 5 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 Cur r 174.37 139.66 111.33 93.71 81.02 68.23 61

Balance Sheet (Rs. in Crores) Particulars SOURCES OF FUNDS Capital Reserves Total Deposits Bor rowings Other Liabilities & Provisions TOTAL LIABILITIES APPLICATION FUNDS Mar-1 0 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 8,7 74.89 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 7 4,266.91 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 6 2,517.40 41,703.7640,508.4439,379.41 4,565.80 3,231.72 3,177.02 1,728.81 4,116.4 8 9,519.12 62

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) p er 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 8 1.02 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 (%) Re turn 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 5.2 6 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 r etention 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 63

The above chart of Union Bank of India shows support at Rs.284, It has broken re sistance at Rs.276. The stock is currently trading at Rs.315 (on 23/6/2010).It i s a good stock to buy at current price. 64

KOTAK MAHINDRA BANK 65

Profile of Kotak Mahindra Bank The Kotak Mahindra group is a financial organization established in 1985 in Indi a. 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 fla gship 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 Ind ian banking history to convert to a bank. The Kotak Mahindra Group was born in 1 985 as Kotak Capital Management Finance Limited. This company was promoted by Ud ay 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 it s name to Kotak Mahindra Finance Limited. Kotak Mahindra Bank Limited. The Group 's principal activity is to provide banking and related services. The Group oper ates 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 inc luding 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 Institution s & Insurance FII's Private Corporate Bodies NRI's/Foreign Others Others 66

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 I NE237A01010 Bank - Private SHANKAR ACHARYA (Part Time) Email Web ISINNO Industry Chairman Executive vice UDAY KOTAK Chairman & MD Director Listing ANAND MAHINDRA & ASIM G HOSH BSE,NSE 67

Profit & Loss (Rs. in Crores) Particulars INCOME : Interest Earned Other Income Total I II. Ex penditure Interest expended Payments to/Provisions for Employees Operating Expen ses & Administrative Expenses Depreciation Other Expenses, Provisions & Continge ncies Provision for Tax Fringe Benefit tax Deferred Tax Total II III. Profit & L oss Reported Net Profit Extraordinary Items Adjusted Net Profit Prior Year Adjus tments Profit brought forward IV. Appropriations Transfer to Statutory Reserve T ransfer to Other Reserves Trans. to Government /Proposed Dividend Balance carrie d forward to Balance Sheet Equity Dividend % Earnings Per Share-Unit Curr Earnin gs 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 29 3.77 143.70 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 68

Balance Sheet (Rs. in Crores) Particulars SOURCES OF FUNDS Capital Reserves Total Deposits Bor rowings Other Liabilities & Provisions TOTAL LIABILITIES APPLICATION OF FUNDS Ca sh & 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 Ma r-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 2,86 9.42 2,428.34 5,119.25 3,178.71 5,099.75 1,609.23 2,183.24 1,149.88 901.81 567.7 9 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 1 21,627.58 100,654.70 39,504.80 12,193.72 649.32 317.58 290.88 219.44 92.76 21.01 69

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) p er 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 (%) Re turn on long term funds (%) 13.85 11.72 8.35 10.45 7.06 7.06 50.50 19.93 18.13 1 0.37 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 11.6 3 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 r etention ratio 10.07 8.04 89.92 10.29 8.77 89.67 18.91 15.18 81.01 18.76 15.00 8 1.20 20.74 16.25 79.11 70

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 Ma rch 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 K otak Mahindra Banks Shares 71

YES BANK 72

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 custome rs. The main mission of the Yes Bank in India is to establish a hi-tech driven p rivate 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 rate d private bank, and three respected global institutional private equity investor s, CVC Citigroup, AIF Capital and ChrysCapital. At present, Yes Bank India has f orty fully operational branches. Activities: The main feature that differentiate s Yes Bank India in the banking industry is their use of knowledge bankers who a re industry experts in various sectors of Indian economy thereby helping their v alued customers with in-depth knowledge of these sectors. In general the product s and services offered by the Yes Bank are: y y y y y y Corporate and Institutional Banking Financial Markets Investment Banking Busines s and Transactional Banking Retail Banking Private Banking YES BANK has been recognized amongst the Top and the Fastest Growing Bank in var ious Indian Banking League Tables by prestigious media houses and Global Advisor y Firms, and has received national and international honors for our Businesses i ncluding Corporate Finance, Investment Banking, Treasury, Transaction Banking, a nd Sustainable practices through Responsible Banking. The Bank has received seve ral recognitions for world-class IT infrastructure, and payments solutions, as w ell as excellence in Human Capital. 73

SHAREHOLDING PATTERN (%) 0.51 2.51 0.57 8.86 31.27 Indian Promoters Banks,Financial Institutions & Insurance FII's Private Corporat e Bodies 47.54 1.25 NRI's/Foreign Others Others General Public 74

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 75

Profit & Loss (Rs. in Crores) Particulars INCOME : Interest Earned Other Income Total I II. Ex penditure Interest expended Payments to/Provisions for Employees Operating Expen ses & Administrative Expenses Depreciation Other Expenses, Provisions & Continge ncies Provision for Tax Fringe Benefit tax Deferred Tax Total II III. Profit & L oss Reported Net Profit Extraordinary Items Adjusted Net Profit Prior Year Adjus tments Profit brought forward IV. Appropriations Transfer to Statutory Reserve T ransfer to Other Reserves Trans. to Government /Proposed Dividend Balance carrie d forward to Balance Sheet Equity Dividend % Earnings Per Share-Unit Curr Earnin gs 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

76

Balance Sheet (Rs. in Crores) Particulars SOURCES OF FUNDS : Capital Reserves Total Deposits B orrowings Other Liabilities & Provisions TOTAL LIABILITIES APPLICATION OF FUNDS : Cash & Balances with RBI Balances with Banks & money at Call Investments Advan ces Fixed Assets Other Assets Miscellaneous Expenditure not written off TOTAL AS SETS Contingent Liability Bills for collection 1,995.31 1,277.72 677.94 644.99 9 59.24 668.33 389.76 903.08 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 2 9.16 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 0.0 0 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 6 8,883.40 52,150.40 17,508.24 6,689.23 153.43 192.93 788.57 100.71 1.30 0.00 77

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 1.5 0 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 7.4 1 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 sha re (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 (%) Re turn on long term funds (%) 25.62 24.56 16.30 17.35 15.48 15.46 74.73 20.06 18.8 1 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 r etention ratio 12.47 11.73 87.54 100.00 100.00 100.00 100.00 78

The above chart of Yes bank shows that the stock has support at Rs.248 & Resista nce at Rs.284. Though the stock has shown uptrend movement in past, it is curren tly moving in downward direction and reaching close to trendline also it is curr ently 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. 79

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. Lets 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 stock s, Yes bank is fairly valued and Kotak Mahindra Bank is overvalued. ROE is highe st for Union bank of India and it is lowest for Kotak Mahindra Bank. 80

CONCLUSION We all have personal biases, and every analyst has some sort of bias. There is n othing 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 rec ommendation. 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 t he right times. Always keep diversified investment, do not invest all your money in the same sector or in the same company. 81

BIBLIOGRAPHY www.answers.com www.wikipedia.com NCFM basic module 1 www.investopedia.com www.s tockcharts.com www.docstoc.com http://rbidocs.rbi.org.in/rdocs/Speeches/PDFs/810 26.pdf http://hubpages.com/hub/Banking-system-in-India-Why-banks-in-India-are-fa cingdifficulty-in-getting-deposits www.caclubindia.com www.zignals.com www.india infoline.com www.pnbindia.com www.unionbankofindia.co.in www.money.rediff.com ww w.kotak.com www.yesbank.in 82