EQUITY RESEARCH ON BANKING SECTOR

INSTITUTE FOR TECHNOLOGY AND MANAGEMENT

PROJECT REPORT ON “EQUITY RESEARCH oN BANKING SECTOR” Submitted in Partial Fulfillment of the Award of the Degree of Post Graduate Diploma in Management

Submitted By

SAGAR MODI ROLL NO: 201311985 PGDM FINANCE 2013 - 15

Under the guidance of

PROF. VIJAYANTA PAWASE

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ACKNOWLEDGEMENT It is with immense gratitude that I acknowledge the support and help of my company guide MR. NIKESH RUPAREL, Senior Business Mentor, Birla Sun Life Insurance Company Ltd., for their cordial support, valuable information and guidance, which helped me in completing this task through various stages. The experience and the knowledge acquired over the interactions with the guide have been invaluable to say the least and will help me a great deal in my future education and career. I would also like to thank my Faculty guide PROF. VIJAYANTA PAWASE for his exemplary guidance, monitoring and constant encouragement throughout the course of the project. The blessings, help and guidance given by him time to time shall carry me long way in the journey of life on which I am about to embark. I am obliged to staff members of Birla Sun Life Pvt. Ltd., for the valuable information provided by them in their respective fields. I am grateful for their cooperation during the period of my assignment. Lastly, I thank almighty, family and friends for their constant encouragement without which this assignment would not be possible.

Regards, Sagar Modi PGDM 1985 ITM BUSINESS SCHOOL

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TABLE OF CONTENTS Sr.No. Contents 1

Chapter 1- Introduction 1.1 Introduction 1.2 Problem in hand 1.3 Importance and scope of the Problem 1.4 Objectives of the project 1.5 Entire Modus operandi and process

2

18 22 24 27 29

Chapter 3- Analysis and Interpretation 3.1 Choice and techniques of data/information collection 3.2 Interpretation and outcome of the analysis 3.3 General Observations

4

8 12 13 15 16

Chapter 2- Details of the Organization 2.1 Introduction 2.2 The Organisations 2.2.1 Products 2.2.2 Organizational Structure 2.3 Milestones Achieved

3

Page No

30 52 55

Chapter 4- Conclusion 4.1 Summary 4.2 Gains of the Study 4.3 Limitations of the Study 4.4 Scope for Further Work

67 69 70 70

5

Chapter 5- Recommendation

71

6

Bibliography / References

72

7

Annexure

-

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CERTIFICATE

This is to certify that the Project work titled ―Equity Research in Banking Sector‖is a bonafide work of Mr. Sagar Modi carried out in partial fulfilment for the award of degree of PGDM under my guidance. This project work is original and not submitted earlier for the award of any degree/diploma of this or any other university/institution.

Prof. Vijayanta Pawase Faculty Guide

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EXECUTIVE SUMMMARY Indian Economy being one of the fastest developing countries in the world, companies in India are growing at a faster rate as compared to their growth rate a decade back. Many Indian companies are expanding their business globally with mergers and acquisition. As companies grow their shareholders benefitted with good dividend and capital appreciation on investment in equity shares of such companies. Number of companies listed in stock exchange (BSE & NSE) has been increasing every year with new IPO’s coming in the market. In India people are realizing that equity has potential to give highest return as compared to other investment avenues however people are not aware how to do equity valuation, they just invest in shares based on tips given by brokers, friends or family members. Investing in equity shares based on tips is not the true investment but it is clear gambling with your money which many of us would not like to do with our hard earned money. Equity valuation begins with analysis of the sector in which you want to make investment; if the sector looks positive then analyze various companies in the sector. A company is analysed fundamentally to check its performance and financial strength. Technical analysis is used to decide the right price to buy a stock so that higher return on investment can be generated. In this report I have explained how to do Fundamental Analysis & Technical Analysis with respect to banking sector and few banks in this sector. A short introduction about the equity research and mutual fund has been given. The company profile of Aditya Birla Grouo and Birla Sunlife has been given. Few big companies have been analysed in this sector like SBI, AXIS bank, BOB, ICICI bank, PNB etc. The latest data has been taken to analyze the best performance amongst all the companies. In Fundamental Analysis, PEST (political, economical, social and technical) factors have been taken with respect to banking sector. Then we have discussed the various kinds of charts like the Line Chart, Bar Chart and Candlestick chart. The Indian Banking sector has been discussed in brief and along with the SWOT (Strength, Weakness, Opportunities and Threats) and Porter’s analysis is stated. Then the technical analysis of the top banks has been done. The market price and P/E ratios have been taken to calculate the EPS. After the target price was calculated with the help of sector P/E and EPS and finally the difference was taken between the target price and market price to arrive at the best performing company. Finally the conclusion and recommendations are given with respect to derived result.

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LIST OF TABLES, FIGURES AND CHARTS 1. Types of Mutual Fund 2. Organisation Structure 3. Types of Charts 4. Chart Patterns 5. Fundamental vs Technical Analysis 6. Banking Structure 7. Data of Fundamental Analysis on PSU Banks 8. Data of Fundamental Analysis on Private Banks 9. Investment Portfolio for PSU Banks 10. Investment Portfolio for Private Banks 11. State Bank of India (SBI) Financials 12. State Bank of India (SBI) Candlestick Chart 13. Bank of Baroda (BOB) Financial 14. Bank of Baroda (BOB) Line Chart 15. Punjab National Bank (PNB) Financial 16. Punjab National Bank (PNB) Line Chart 17. AXIS Bank Financial 18. AXIS Bank Line Chart 19. YES Bank Financial 20. YES Bank Line Chart 21. ICICI Bank Financial 22. ICICI Bank Candlestick Chart 23. Syndicate Bank Financial 24. Syndicate Bank Candlestick Chart 25. Karur Vyvsa Bank (KVB) Financial 26. Karur Vyvsa Bank (KVB) Line Chart 27. Banking stocks change over time 28. Sensex and NAV Comparisons 29. Growth Enhancer Fund

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CHAPTER – 1 INTRODUCTION Equity Research: Equity research is an important aspect of investment and portfolio management. If one wants to have growth in the investment, one needs to make smart investments in a constantly changing market environment. Stock prices can easily fluctuate throughout any given week. Some good news and a stock can shoot up dramatically. Hints of bad news and the stock falls. To offset risk and capitalize on opportunity, one needs expert equity research to make sound investment decisions. Investment brings back high returns and value. It is crucial for any organization or business to Invest for growth. You might be confident of your investment plans but there is always a doubt about the company in which you are investing. Equity research is the answer to avoid any kind of investment risk. A high quality research report of the equity research will be provided to us that also suggest Future beneficial investments. This report captures the returns and the risks involved making us more confident about our present investment decisions. Companies globally are adopting equity research before taking critical decisions of investment. The equity research combined with the awareness of the strengths and weaknesses of the company is highly beneficial. It provides us with a clear picture for investments. The team of analysts conducts through research. They collect comprehensive information and critical data. They conduct a rigorous research and analysis to provide us with details such as the company financial reputation, history, about their market shares and company news and other useful information. This also includes sector reports and market estimates. Due to vast geographical reach, they have good knowledge of the various industries and the market. They find out all the highs and lows and the future growth rate of a company which we are investing in.

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Mutual Funds: A mutual fund is a type of professionally managed collective investment schemes that pools money from many investors to purchase securities. While there is no legal definition of the term mutual fund, it is most commonly applied only to those collective investment vehicles that are regulated and sold to the general public. They are sometimes referred to as "investment companies" or "registered investment companies". Globally, mutual funds have long been a popular investment option. The Indian mutual fund industry, though still small in comparison to the size of the Indian economy, offers Indian, and in some cases global investors, both big and small, an avenue to invest safely and securely, at a reduced cost, in a diverse range of securities, spread across a wide range of industries and sectors. The economic progress of a company is, to a certain extent, inked with the growth of the capital market. Capital market growth depends on the savings of the nation. In India, notwithstanding a high rate of savings by the community, the capital market is not in a position to grow fast because the common man has not acquired the necessary know-how himself to select appropriate avenues of investment which will serve his needs. Therefore the savings are mainly directed towards bank deposits and real estates. Mutual fund units are investment vehicles provide a means of participation in the stock market for people who have neither the time, nor the money, nor perhaps the expertise to undertake direct investment in equities successfully. The basic idea of mutual fund is simple; a large number of investors pool their money in order to obtain a spread professionally managed stock exchange investments that they cannot obtain individually. The advantage is that the investor in a mutual fund is taking much less of a risk than a direct equity investor, because increase in the number of stocks held obviously reduces the effect that any one stock can have on overall performance of the equity portfolio. Professional management has 2 main benefits, it provides: 1 Specialized investment expertise which should ensure greater success than the inexperienced investor can achieve on his own 1

Reduction in the administration burden of investment.

Mutual fund is set up in the form of a trust, which has a sponsor, trustees, an asset management company (AMC), and a custodian.

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DIFFERENT TYPES OF MUTUAL FUNDS

Classification of Mutual Fund

On the Basis of Objective

On the Basis of Flexibility Hedge Funds

Debt/Income Funds

Tax Saving Funds

Index Funds

Equity,Growth /Funds

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Close-ended Funds

Open-ended Funds

I.

II.

III.

IV. V.

VI. VII.

VIII. IX. X. XI.

XII.

Open and Close-ended Funds – If the period or target amount of the fund is definite, the fund is called close-ended (stipulated maturity period 5-7 years) otherwise an open-ended fund. Income and Growth-oriented Funds – The income-oriented fund aims at distribution of income periodically amongst investors, consequently, its investment strategy conforms to the fund objective by deployment of investors’ monies into fixed income yielding securities. Growth oriented fund meet the investors’ need for appreciation and ability to defer liquidity. Area, Industry, Customer group Funds – The fund may have, at international level, investments in securities of specified areas. These funds provide access to foreign investors into domestic securities. Certain funds may invest into specific industries like rail, infrastructure or for specific customer target like widow and pensioners. Taxation Funds – Certain funds are designed to avail certain tax-exemptions. Income/Debt-oriented Scheme – The aim of the income funds is to provide regular and safety income to investors. Such schemes generally invest in fixed income securities like bonds, corporate debentures, money market instruments and government securities. Balanced Funds – The aim of this fund is to provide growth and regular income, in these type of funds both equities and fixed income securities investment is done. Gold Exchange-traded Fund – ETF buyers are pure investors who seek a return out of their investment without any other beautification or social status. No possession of gold is possible in these investments. Real Estate Mutual Fund – REMFs would invest in real estate directly or indirectly. Money Market or Liquid fund – These are the income funds which aims to provide easy liquidity. Gift Fund – No default risk in those funds, invest exclusively in the government securities. Index Funds – It replicate the portfolio of a particular index likes the BSE sensitive index, S&P NSE 50 index (Nifty) etc. These are also called exchange traded index funds. Commodity Funds – It invest in a single commodity or a group of commodities are called specialised commodity funds. Funds that invest in all commodities are called diversified commodity funds.

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1.2 Problem on hand: We have given a task to build a mutual fund and to track it with the performances of BSE sensex index. Before selling a mutual fund or saying a mutual fund is better option for investment, it is required to know the function and working of mutual funds. The whole point of investing in a fund is to leave the investment management function to the professionals. Therefore, the quality of the fund manager is one of the key factors to consider when analyzing the investment quality of any particular fund. Our task is to make a mutual fund or a fund, and to show its growth with comparison with sensex. Investment fund managers make the investment decisions to try to increase the value of a fund: where a group of people (shareholders) pool their savings to invest in financial assets, typically securities or shares. They work in the financial sector managing equity funds, currency or property on behalf of clients looking for the best return on their investment. Our main work is to be acquainted with the functionality of a fund manager and to show performance of our fund. We have formed group of 9 people and each one have selected one/two sectors and made our fund. We have given INR 100 crores for the total fund and 1 crore participants in the fund. So we have to give an output showing NAV performance of our fund with SENSEX. I have selected Banking sector.

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1.3 Importance and scope of the problem through adequate literature review: NAV: In the context of mutual funds, NAV per share is computed once a day based on the closing market prices of the securities in the fund's portfolio. All mutual funds' buy and sell orders are processed at the NAV of the trade date. However, investors must wait until the following day to get the trade price. Mutual funds pay out virtually all of their income and capital gains. As a result, changes in NAV are not the best gauge of mutual fund performance, which is best measured by annual total return. Equity Funds: Stock or equity funds invest in common stocks which represent an ownership share (or equity) in corporations. They may focus on a specific industry or sector. A stock fund may be sub classified along two dimensions: (1) market capitalization and (2) investment style (i.e., growth vs. value). Market capitalization ("cap") indicates the size of the companies in which a fund invests, based on the value of the company's stock. Each company's market capitalization equals the number of shares outstanding times the market price of the stock. Market capitalizations are typically divided into the following categories:    

Micro cap Small cap Mid cap Large cap

While the specific definitions of each category vary with market conditions, large cap stocks generally have market capitalizations of at least $10 billion, small cap stocks have market capitalizations below $2 billion, and micro cap stocks have market capitalizations below $300 million. Funds are also classified in these categories based on the market caps of the stocks that it holds. Stock funds are also sub classified according to their investment style: growth, value or blend (or core). Growth funds seek to invest in stocks of fast-growing companies. Value funds seek to invest in stocks that appear cheaply priced. Blend funds are not biased toward either growth or value.

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When you buy a share of a company you become a shareholder in that company. Shares are also known as Equities. Equities have the potential to increase in value over time. It also provides your portfolio with the growth necessary to reach your long term investment goals. Research studies have proved that the equities have outperformed most other forms of investments in the long term.  

Equities are considered the most challenging and the rewarding, when compared to other investment options. Research studies have proved that investments in some shares with a longer tenure of investment have yielded far superior returns than any other investment.

However, this does not mean all equity investments would guarantee similar high returns. Equities are high risk investments. One needs to study them carefully before investing. Equity Mutual Fund is one of the best options for investment. One of the main advantages of mutual funds is that they give small investors access to professionally managed, diversified portfolios of equities, bonds and other securities, which would be quite difficult (if not impossible) to create with a small amount of capital. Other advantages of Mutual Funds are – Professional management, diversification, convenient administration, potential return, low costs, transparency, liquidity, flexibility, well regulated and choices of schemes.

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1.4 Objectives of the project:  To select large cap stocks for the fund from the sectors and update daily last price of stocks and to compare total fund’s NAV with the SENSEX  To understand the basics of equity research  Fundamental Analysis of Banking sector.  Technical Analysis of the selected stocks  To show sector performance of banking with BSE sensitivity index  To provide an overview of banking sector.

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1.5 Entire modus operandi and process: We analyzed all the funds which are providing by Birla Asset Company and these funds are, Assure Fund, Income Advantage Fund, Protector Fund, Builder Fund, Balancer Fund, Enhancer Fund, Magnifier Fund etc. There are three types of mutual funds: value funds, growth funds and blend funds. The mutual fund can also be pure debt market oriented, equity market dominated or balanced. Through these funds I came to know that how a fund manager allocates funds in equity market and debt market as well. To understand the above fund allocation I did equity trading for two weeks so that I can understand the volatility involves in equity market, for that I have to choose a sector that is Banking sector. Our mutual fund is an equity fund with large cap companies only. Next step was allocating fund in these sector for that I took large cap banking companies (those stocks whose market capitalization are more than 5000cr and listed in A or B category in BSE stock Exchange) and did P/E valuation by taking EPS and MPS, after calculating it I got Industry P/E through which I came to know that some of my shares are overvalued and undervalued, for overvalued shares I further calculated the PEG ratio. If PEG ratio shows below or equal to 1 then it means that particular share is good to buy, or if it is greater than 1 then simply exclude that particular share from portfolio, so that my other shares will be safe. These all are part of fundamental analysis. The next step is Technical analysis of these stocks.

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Steps involved in selecting companies under Banking Sector:

Step - 1: Selection of large cap companies from PSU banks and private banks is done, with respect to the market cap. The stock, which market capitalization is more than INR 5000 crores, is selected as the large cap stocks. Step – 2: The selected stocks are formed the large cap sector of Banking sector. The average PE (Price Earnings ratio) of all the stocks is calculated. Step – 3: The PE of all the stocks individually compared with the sector PE, which stand more than sector, they are termed as overvalued stock and otherwise named as undervalued stock. Step – 4: The undervalued stocks are selected as the value picks and overvalued stocks are compared with PEG (Price/Earnings growth ratio). Step – 5: The overvalued stocks are selected on the basis of growth basis. Step – 6: The top line and bottom line for the stocks are analysed also. Step – 7: After selecting the stocks, an excel sheet is done with the number of stocks and price of the stocks. In virtually, 100 crore is being assigned for the overall fund. So we formed a group of 9, and divided the sectors accordingly. Step – 8: The NAV is calculated daily after the market ends and comparison between the NAV and SENSEX is done. Step – 9: Additionally Technical analysis is done for the selected stocks. To conclude the stocks are technically strong or not after being selected by fundamental analysis.

Primary data or secondary data used: I collected data from NSE, BSE sites and moneycontrol for the market capitalization of companies. For PE and PEG, market price of the stock is collected from the BSE and from annual report of company, the EPS is calculated. For the technical graph of the companies, secondary data are used.

Sample selection: The universal sample is the whole sector of Banking. Then the sample contains only the large market capitalization from these sectors.

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CHAPTER – 2 DETAILS OF THE ORGANIZATION 2.1 Introduction Aditya Birla Financial Services Group (ABFSG):

Aditya Birla Financial Services Group (ABFSG) ranks among the top 5 fund managers in India (excluding LIC) with an AUM of USD 20.4 billion. Having a strong presence across the life insurance, asset management, NBFC, private equity, retail broking, distribution & wealth management, and general insurance broking businesses, ABFSG is committed to serve the end-to-end financial services needs of its retail and corporate customers. The seven companies representing ABFSG are: Birla Sun Life Insurance Company Ltd., Birla Sun Life Asset Management Company Ltd., Aditya Birla Finance Ltd., Aditya Birla Capital Advisors Pvt. Ltd., Aditya Birla Money Ltd., Aditya Birla Money Mart Ltd. and Aditya Birla Insurance Brokers Ltd. In FY 2013-14, ABFSG reported consolidated revenue from these businesses at Rs. 6,640 Crore (USD 1.1 billion) and earnings before tax at Rs. 745 Crore. Anchored by about 13,000 employees and trusted by over 5.3 million customers, ABFSG has a nationwide reach through 1,500 points of presence and about 130,000 agents / channel partners.

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Birla Sun Life Asset Management Company Ltd. (BSLAMC):

Birla Sun Life Asset Management Company Ltd. (BSLAMC), the investment manager of Birla Sun Life Mutual Fund, is a joint venture between the Aditya Birla Group and the Sun Life Financial Inc. of Canada. The joint venture brings together the Aditya Birla Group's experience in the Indian market and Sun Life's global experience. Birla Sun Life Asset Management Company has one of the largest team of research analysts in the industry, dedicated to tracking down the best companies to invest in. BSLAMC strives to provide transparent, ethical and research-based investments and wealth management services.

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Birla Sun Life Mutual Fund:

Established in 1994, Birla Sun Life Mutual fund has emerged as one of India's leading flagships of Mutual Funds business managing assets of a large investor base. Our solutions offer a range of investment options, including diversified and sector specific equity schemes, fund of fund schemes, hybrid and monthly income funds, a wide range of debt and treasury products and offshore funds.

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Birla Sun Life Insurance Company Limited (BSLI):

Established in 2000, Birla Sun Life Insurance Company Limited (BSLI) is a joint venture between the Aditya Birla Group, a well-known and trusted name globally amongst Indian conglomerates and Sun Life Financial Inc, leading international financial services organization from Canada. The local knowledge of the Aditya Birla Group combined with the domain expertise of Sun Life Financial Inc., offers a formidable protection for its customers' future. With an experience of over 10 years, BSLI has contributed significantly to the growth and development of the life insurance industry in India and currently ranks amongst the top 6 private life insurance companies in the country Birla Sun Life Insurance Company Limited (BSLI) is a joint venture between the Aditya Birla Group, a well-known Indian conglomerate and Sun Life Financial Inc., one of the leading international financial services organisations from Canada. With an experience of over a decade, BSLI has contributed to the growth and development of the Indian life insurance industry, and currently is one of the life insurance companies in the country. BSLI offers a complete range of offerings, comprising of protection solutions, children's future solutions, wealth with protection solutions, health and wellness solutions, as well as retirement solutions; it has an extensive distribution reach of over 500 cities through its network of over 550 branches, over 1,05,000 empanelled advisors, and over 100 partnerships with corporate agents, brokers and banks. The AUM of Birla Sun Life Insurance is close to Rs. 22,300 Crores and it has a robust capital base of over Rs. 2,200 Crores, as on 30th September, 2013.

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2.2 The organization: The Aditya Birla Group The Aditya Birla Group is one of India's largest business houses. Global in vision, rooted in Indian values, the Group is driven by a performance ethic pegged on value creation for its multiple stakeholders. The Group operates in 26 countries – India, UK, Germany, Hungary, Brazil, Italy, France, Luxembourg, Switzerland, Australia, USA, Canada, Egypt, China, Thailand, Laos, Indonesia, Philippines, UAE, Singapore, Myanmar, Bangladesh, Vietnam, Malaysia, Bahrain and Korea. A US $29 billion corporation in the League of Fortune 500, the Aditya Birla Group is anchored by an extraordinary work force of 130,000 employees, belonging to 40 different nationalities. Over 60 per cent of its revenues flow from its operations across the world. The Aditya Birla Group is a dominant player in all its areas of operations viz; Aluminium, Copper, Cement, Viscose Staple Fibre, Carbon Black, Viscose Filament Yarn, Fertilisers, Insulators, Sponge Iron, Chemicals, Branded Apparels, Insurance, Mutual Funds, Software and Telecom. The Group has strategic joint ventures with global majors such as Sun Life (Canada), AT&T (USA), the Tata Group and NGK Insulators (Japan), and has ventured into the BPO sector with the acquisition of TransWorks, a leading ITES/BPO company.

Group Companies of Aditya Birla:                 

Aditya Birla Capital Advisors Private Limited Aditya Birla Chemicals (India)Limited Aditya Birla Chemicals (Thailand) Limited Aditya Birla Finance Limited Aditya Birla Insurance Brokers Aditya Birla Minacs Worldwide Limited Aditya Birla Minerals Aditya Birla Money Mart Limited Aditya Birla Money Limited Aditya Birla Nuvo Limited Aditya Birla Retail Aditya Birla Science and Technology Company Limited Alexandria Carbon Black Company SAE Alexandria Fiber Company SAE Birla Jingwei Fibres Company Limited Birla Laos Pulp and Plantations Company Limited Birla Sun Life Asset Management Company Limited

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                        

Birla Sun Life Insurance Dahej Harbour & Infrastructure Limited Hindalco industries Domsjö Fabriker Essel Mining and Industries Grasim Industries Limited Idea Cellular Limited Indo Phil Cotton Mills Indo Phil Textile Mills Indo Thai Synthetics Liaoning Birla Carbon Company Limited Novelis Inc. Pan Century Surfactants Inc. PT Elegant Textile Industry PT Indo Bharat Rayon PT Indo Liberty Textiles PT Indo Raya Kimia PT Sunrise Bumi Textiles Swiss Singapore Overseas Enterprises Pte Limited Thai Acrylic Fibre Thai Carbon Black Thai Rayon UltraTech Cement Limited Utkal Alumina International Limited Pantaloons Fashion & Retail

Sun Life Financial Sun Life Financial is a leading international financial services organization providing a diverse range of protection and wealth products and services to individuals and corporate customers. Sun Life Financial and its partners have operations in key markets worldwide, including Canada, the United States, the United Kingdom, Ireland, Hong Kong, the Philippines, Japan, Indonesia, India, China, Australia, Singapore, Vietnam, Malaysia and Bermuda. As of March 31, 2014, the Sun Life Financial group of companies had total assets under management of $671 billion. For more information please visit www.sunlife.com. Vision: To be a leader and role model in a broad based and integrated financial services business. Mission: To help people mitigate risks of life, accidents, health and money at all stages and under all circumstances.

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Values: • • • • •

Integrity Commitment Passion Seamlessness Speed

2.2.1 Products: Birla Sun life mutual fund and insurance services are a part of Aditya Birla Financial Services (ABFS). They offer a range of financial solutions across our nine lines of businesses.         

Asset Management Broking General Insurance Broking Life Insurance NBFC Online Money Management Private Equity Project & Structured Finance Wealth Management & Distribution

Mutual Funds Mutual Funds give you access to Indian equity and debt securities. We offer you advice on the entire universe of mutual funds: • •

equity funds – growth or capital appreciation debt funds – capital preservation

PMS - Portfolio Management System is a unique way to build a customized portfolio of Indian equities. At Aditya Birla Money, we act as authorized distributors for various PMS providers to meet the growing needs of investors and expand a portfolio beyond equities and bonds.

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Direct Equity - Aditya Birla Money offers you convenient, simple and efficient trading in Indian equities. We provide you with a seamless platform to invest in the Indian secondary markets. Your Wealth Management advisor will provide you valuable advice based on our inhouse research. Structured Products – ABM brings you customized investment solutions, giving you access to various asset classes. Unlike most other structures, returns can be linked to a variety of asset types such as equity indices, basket of stocks, and commodities. Alternate Asset Products - Even if your interests lie beyond the stock market, Aditya Birla Money has a solution for you. Through our distribution tie-ups, we offer a wide range of Private Equity Fund (which invest in unlisted securities) to give you the opportunity of investing in the growing Indian economy. With these products and investment strategy, you can preserve your capital, ensure risk protection, leverage and diversify. Real Estate - If your interests lie in real estate, we offer niche property investment services. We bring in a combination of in-depth market knowledge and real estate industry expertise to offer a range of specialized real estate investment services. We provide expert advice and innovative real estate solutions tailor made to your needs and objectives Loan against Securities and Mutual Funds - Our tie-up with Aditya Birla Finance lets you use your share investments as security against borrowing. This way, you are able to investment more, and increase the size of your overall portfolio. Gold - A healthy portfolio is about diversification and risk management. To this end, we offer multiple avenues of investing in gold. Holding gold in a portfolio can provide distinct benefits, as it is not correlated with most other assets. Life Insurance - While offering solutions for building and preserving capital, your Relationship Manager will offer you comprehensive advice on how best to provide for financial protection to loved ones and cover risks and uncertainties. Our affiliation with Birla Sun Life Insurance provides the opportunity to obtain even more favourable offers, which can result in lower costs and greater benefits. Our Policy Analyst ensures that the planning you’ve previously done remains current and competitive.

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Services offered:      

Research Online Portfolio Access Financial Planning Regular Portfolio Review Wealth Creation Tax Savings

Research - Our quality research provides clients with the information they need to make informed investment decisions. The Aditya Birla Money research team is dedicated to keeping you updated with access to the latest publications and a wide range of industry happenings including: market depth, breaking commentary, long-term forecasts, detailed daily updates and the latest financial news. Highly proactive services - Our service includes Daily Market Update, Weekly update on mutual Funds and Event Based SMS to keep you completely informed on the markets. Online Portfolio Access - Wherever you are, our network works for you. The online portfolio ensures every detail of your investments is at your fingertips. You can constantly monitor the composition of your portfolio, so you always know if your long term objectives are being met. Financial planning - We offer a comprehensive financial planning session to help devise your investment strategy. This is followed by complimentary personalized report outlining specific recommendations on the step-by-step actions you need to take to achieve your financial goals. Regular Portfolio Reviews - Your portfolio undergoes regular reviews to ensure your money is constantly working in your best interest, keeping your personal financial goals in sight.and towards your personal financial goal.

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2.2.2 Organization structure: The leadership team provides strategic direction to Group companies. The team comprises Leadership team

Group companies

Mr. Kumar Mangalam Mr. Pranab Barua

Birla Chairman Aditya Birla Group Retail and Apparels

Mrs. Rajashree Birla Chairperson

The Aditya Birla Centre for Community Initiatives and Rural Development Group Corporate Services

Mr. Rajiv Dube Mr. Ajay Srinivasan Dr. Rakesh Jain Mr. Askaran Agrawal Mr. Ravi Kastia

Financial Services Aditya Birla Nuvo Birla Group Trusts & Special Community Projects Trading, Port and Power Projects

Dr. Bharat Singh

Business Review Council (Services business)

Mr. Himanshu Kapania Mr. D.D. Rathi

Telecom Business Review Council (Services business)

Dr. Santrupt B. Misra

Carbon Black Business and Group HR

Mr. Debu Bhattacharya Mr. Shailendra Jain Chairman Mr. K. K. Maheshwari Mr. Thomas Varghese

Metals Business Review Council (Manufacturing business) Pulp & Fibre Textiles

Mr. Lalit Naik Mr. O. P. Puranmalka

Chemicals Cement

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Aditya Birla Financial Services

Insurance Services

Wealth Management

Chief Executive Officer (CEO) Head of Sales (HOS) Zone Manager (ZM)

Power Business Mentor

Regional Manager (RM)

Senior Business Mentor

Managing Partner / Branch Manager (BM)

Business Mentor

Business Partner (BP) Associate Partner (AP) Business Development Manager (BDM) Senior Agent Manager (SAM) Agent Manager (AM)

(Organisation Structure)

SWOT analysis Strength:1.) Backed By Aditya Birla and Sun life financial services 2.) Emphasis on Customer Satisfaction through Transparent Functioning 3.) Strong Capital Base

Weakness:1.) Low Presence in Rural Market 2.) Lesser advertising as compared to competitors

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Opportunity:1.) Growing potential in the Rural Market 2.) Alignment with Government Schemes 3.) Better awareness amongst people for getting insurance

Threats:1.) Economic crisis and economic instability 2.) Entry of new NBFCs in the sector

2.3 Milestones achieved:  Aditya Birla Financial Services (ABFS) is given the 'Excellence Award' by the Institute of Internal Auditors India – Bombay Chapter, for use of most innovative processes in conducting branch internal audit.  Birla Sun Life Asset Management Company recognised as the 'Most Admired AMC of the Year' in the BFSI Category by Star of India Awards.  Aditya Birla Financial Services won the 'Best Marketing Campaign Birla Sun Life Insurance' at the Effies, the Indian chapter of Effies International, which recognises marketing campaigns for their effectiveness in the market.  At the Midas Awards, New York, the only international platform that recognises excellence in financial advertising and marketing, ABFS won four Gold Midas Awards between Birla Sun Life Insurance, Birla Sun Life Mutual Fund and Aditya Birla Money. The company's insurance business bagged the Grand Midas at the event.  Aditya Birla Financial Services won the Silver Award at the Emvies 2012. The Emvies honour measurable and significant contributions in the field of Indian media.

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CHAPTER – 3 ANALYSES OF DATA 3.1 Choice and techniques of data/ information collection: The project is on equity research analysis of the sectors. Hence study has to be done on the basis of information and news available about the sectors i.e. secondary data by various modes. This research had to be completed by doing Fundamental analysis and Technical analysis of the companies. Secondary data was collected from the internet, company websites, magazines and various articles. However the main source of information is Annual Report issued by the companies and also quarterly reports of the current year showing their performances in current market scenario. Firstly data was analyzed on the basis of the industry. The industry i.e. Banking focused on and its performance and relation with the Indian economy was monitored and then specific stocks were chosen to be invested in depending upon the fundamentals of the company stocks. These stocks were individually analyzed and then measured whether it would give maximum returns if invested in. The research on the sectors and companies in those sectors is explained in the later part of the report.

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FUNDAMENTAL ANALYSIS:

Fundamental analysis of a business involves analyzing its financial statements and health, its management and competitive advantages, and its competitors and markets. When analyzing a stock, futures contract, or currency using fundamental analysis there are two basic approaches one can use; bottom up analysis and top down analysis. The term is used to distinguish such analysis from other types of investment analysis, such as quantitative analysis and technical analysis. Fundamental analysis is performed on historical and present data, but with the goal of making financial forecasts. There are several possible objectives:   

To conduct a company stock valuation and predict its probable price evolution, To make a projection on its business performance, To evaluate its management and make projected decisions,

Fundamental analysis includes: 1. Economic analysis 2. Industry analysis 3. Company analysis

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On the basis of these three analyses the intrinsic value of the shares are determined. This is considered as the true value of the share. If the intrinsic value is higher than the market price it is recommended to buy the share. If it is equal to market price then hold the share and if it is less than the market price then sell the shares.

Stock valuation: In financial markets, stock valuation is the method of calculating theoretical values of companies and their stocks. The main use of these methods is to predict future market prices, or more generally, potential market prices, and thus to profit from price movement – stocks that are judged undervalued (with respect to their theoretical value) are bought, while stocks that are judged overvalued are sold, in the expectation that undervalued stocks will, on the whole, rise in value, while overvalued stocks will, on the whole, fall. In the view of fundamental analysis, stock valuation based on fundamentals aims to give an estimate of their intrinsic value of the stock, based on predictions of the future cash flows and profitability of the business. Fundamental analysis may be replaced or augmented by market criteria – what the market will pay for the stock, without any necessary notion of intrinsic value. These can be combined as "predictions of future cash flows/profits (fundamental)", together with "what will the market pay for these profits?" These can be seen as "supply and demand" sides – what underlies the supply (of stock), and what drives the (market) demand for stock?

Stock valuation methods: Stocks have two types of valuations. One is a value created using some type of cash flow, sales or fundamental earnings analysis. The other value is dictated by how much an investor is willing to pay for a particular share of stock and by how much other investors are willing to sell a stock for (in other words, by supply and demand). Both of these values change over time as investors change the way they analyze stocks and as they become more or less confident in the future of stocks. The fundamental valuation is the valuation that people use to justify stock prices. The most common example of this type of valuation methodology is P/E ratio, which stands for Price to Earnings Ratio. This form of valuation is based on historic ratios and statistics and aims to assign value to a stock based on measurable attributes. This form of valuation is typically what drives long-term stock prices. The other way stocks are valued is based on supply and demand. The more people that want to buy the stock, the higher its price will be. And conversely, the more people that want to sell the stock, the lower the price will be. This form of valuation is very hard to understand or predict, and it often drives the short-term stock market trends. There are many different ways to value stocks. The key is to take each approach into account while formulating an overall 32 | P a g e

opinion of the stock. If the valuation of a company is lower or higher than other similar stocks, then the next step would be to determine the reasons.

Earnings per share (EPS)

EPS is the net income available to common shareholders of the company divided by the number of shares outstanding. Usually there will be two types of EPS listed: a GAAP (Generally Accepted Accounting Principles) EPS and a Pro Forma EPS, which means that the income has been adjusted to exclude any one time items as well as some non-cash items like amortization of goodwill or stock option expenses. The most important thing to look for in the EPS figure is the overall quality of earnings. Make sure the company is not trying to manipulate their EPS numbers to make it look like they are more profitable. Also, look at the growth in EPS over the past several quarters / years to understand how volatile their EPS is, and to see if they are an underachiever or an overachiever. In other words, have they consistently beaten expectations or are they constantly restating and lowering their forecasts? The EPS number that most analysts use is the pro forma EPS. To compute this number, use the net income that excludes any one-time gains or losses and excludes any non-cash expenses like stock options or amortization of goodwill. Then divide this number by the number of fully diluted shares outstanding. Historical EPS figures and forecasts for the next 1–2 years can be found by visiting free financial sites such as Yahoo Finance (enter the ticker and then click on "estimates").

EPS =

Net Profit Available for Equity Shareholders - PreferenceDividend No. Of Equity Shares

Price to Earnings (P/E)

PE ratio is one of the most widely used tools for stock selection. It is calculated by dividing the current market price of the stock by its earning per share (EPS). It shows the sum of money you are ready to pay for each rupee worth of the earnings of the company.

PE Ratio =

Market price of Share Earning Per Share

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Assume there are two companies 'A' and 'B', operating in the same sector. If PE of 'A' is 30 and PE of 'B' is 22, then 'B' is considered to be a better buy, as the market price has not gone up to reveal the earnings prospects of the company. But 'A' is considered to show higher growth prospects as compared to 'B'.

How does PE help? Understanding PE gives the investors an idea if the stock has sufficient growth potential. Stocks with low PE can be considered good bargains as their growth potential is still unknown to the market. If the PE is high, it warns of an over-priced stock. It means the stock's price is much higher than its actual growth potential. So these stocks are more liable to crash drastically. This will allow savvy investors to sell their holdings before the stock price crashes. Now that the analyst has several EPS figures (historical and forecasts), the analyst will be able to look at the most common valuation technique used, the price to earnings ratio, or P/E. To compute this figure, one divides the stock price by the annual EPS figure. For example, if the stock is trading at $10 and the EPS is $0.50, the P/E is 20 times. A complete analysis of the P/E multiple includes a look at the historical and forward ratios. Historical P/Es are computed by taking the current price divided by the sum of the EPS for the last four quarters, or for the previous year. Historical trends of the P/E should also be considered by viewing a chart of its historical P/E over the last several years (one can find this on most finance sites like Yahoo Finance). Specifically consider what range the P/E has traded in so as to determine whether the current P/E is high or low versus its historical average. Forward P/Es reflect the future growth of the company into the future. Forward P/Es are computed by taking the current stock price divided by the sum of the EPS estimates for the next four quarters, or for the EPS estimate for next calendar or fiscal year or two. P/Es change constantly. If there is a large price change in a stock, or if the earnings (EPS) estimates change, the ratio is recomputed.

Growth rate Valuations rely very heavily on the expected growth rate of a company. One must look at the historical growth rate of both sales and income to get a feeling for the type of future growth expected. However, companies are constantly changing, as well as the economy, so solely using historical growth rates to predict the future is not an acceptable form of valuation. Instead, they are used as guidelines for what future growth could look like if similar circumstances are encountered by the company. Calculating the future growth rate requires 34 | P a g e

personal investment research. This may take form in listening to the company's quarterly conference call or reading a press release or other company article that discusses the company's growth guidance. However, although companies are in the best position to forecast their own growth, they are often far from accurate, and unforeseen events could cause rapid changes in the economy and in the company's industry. For any valuation technique, it is important to look at a range of forecast values. For example, if the company being valued has been growing earnings between 5 and 10% each year for the last 5 years, but believes that it will grow 15 –20% this year, a more conservative growth rate of 10–15% would be appropriate in valuations. Another example would be for a company that has been going through restructuring. It may have been growing earnings at 10–15% over the past several quarters or years because of cost cutting, but their sales growth could be only 0–5%. This would signal that their earnings growth will probably slow when the cost cutting has fully taken effect. Therefore, forecasting an earnings growth closer to the 0–5% rate would be more appropriate rather than the 15–20%. Nonetheless, the growth rate method of valuations relies heavily on gut feel to make a forecast. This is why analysts often make inaccurate forecasts, and also why familiarity with a company is essential before making a forecast.

Price earnings to growth (PEG) ratio

This valuation technique has really become popular over the past decade or so. It is better than just looking at a P/E because it takes three factors into account; the price, earnings, and earnings growth rates. To compute the PEG ratio, the Forward P/E is divided by the expected earnings growth rate (one can also use historical P/E and historical growth rate to see where it has traded in the past). This will yield a ratio that is usually expressed as a percentage. The theory goes that as the percentage rises over 100% the stock becomes more and more overvalued, and as the PEG ratio falls below 100% the stock becomes more and more undervalued. The theory is based on a belief that P/E ratios should approximate the long-term growth rate of a company's earnings. Whether or not this is true will never be proven and the theory is therefore just a rule of thumb to use in the overall valuation process. Here is an example of how to use the PEG ratio to compare stocks. Stock A is trading at a forward P/E of 15 and expected to grow at 20%. Stock B is trading at a forward P/E of 30 and expected to grow at 25%. The PEG ratio for Stock A is 75% (15/20) and for Stock B is 120% (30/25). According to the PEG ratio, Stock A is a better purchase because it has a lower PEG ratio, or in other words, you can purchase its future earnings growth for a lower relative price than that of Stock B. PEG =

PE Ratio EPS Growth (%)

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TECHNICAL ANALYSIS:

Technical analysis is a financial term used to denote a security analysis discipline for forecasting the direction of prices through the study of past market data, primarily price and volume. Behavioural economics and quantitative analysis incorporate technical analysis, which being an aspect of active management stands in contradiction to much of modern portfolio theory. Technical analysis employs models and trading rules based on price and volume transformations, such as the relative strength index, moving averages, regressions, intermarket and intra-market price correlations, business cycles, stock market cycles or, classically, through recognition of chart patterns. Technical analysis stands in contrast to the fundamental analysis approach to security and stock analysis. Technical analysis analyzes price, volume and other market information, whereas fundamental analysis looks at the actual facts of the company, market, currency or commodity. Most large brokerage, trading group, or financial institutions will typically have both a technical analysis and fundamental analysis team.

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Concepts  Resistance — a price level that may prompt a net increase of selling activity  Support — a price level that may prompt a net increase of buying activity  Breakout — the concept whereby prices forcefully penetrate an area of prior support or resistance, usually, but not always, accompanied by an increase in volume.  Trending — the phenomenon by which price movement tends to persist in one direction for an extended period of time  Average true range — averaged daily trading range, adjusted for price gaps  Chart patterns— distinctive pattern created by the movement of security prices on a chart  Momentum — the rate of price change

CHART TYPES: There are three main types of charts that are used by investors and traders depending on the information that they are seeking and their individual skill levels. The chart types are: the line chart, the bar chart, the candlestick chart 1. Line Chart - The most basic of the three charts is the line charts because it represents only the closing prices over a set period of time. The line is formed by connecting the closing prices over the time frame. Line charts do not provide visual information of the trading range for the individual points such as the high, low and opening prices. However, the closing price is often considered to be the most important price in stock data compared to the high and low for the day and this is why it is the only value used in line charts.

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2. Bar Charts - The bar chart expands on the line chart by adding several more key pieces of information to each data point. The chart is made up of a series of vertical lines that represent each data point. This vertical line represents the high and low for the trading period, along with the closing price. The close and open are represented on the vertical line by a horizontal dash. The opening price on a bar chart is illustrated by the dash that is located on the left side of the vertical bar. Conversely, the close is represented by the dash on the right.

3. Candlestick charts - The candlestick chart is similar to a bar chart, but it differs in the way that it is visually constructed. Similar to the bar chart, the candlestick also has a thin vertical line showing the period’s trading range. The difference comes in the formation of a wide bar on the vertical line, which illustrates the difference between the open and close. And, like bar charts, candlesticks also rely heavily on the use of colors to explain what has happened during the trading period. There are two color constructs for days up and one for days that the price falls. When the price of the stock is up and closes above the opening trade, the candlestick will usually be white or clear. If the stock has traded down for the period, then the candlestick will usually be red or black, depending on the site. If the stock's price has closed above the previous day’s close but below the day's open, the candlestick will be black or filled with the color that is used to indicate an up day.

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Chart patterns: Head & Shoulder This is one of the most popular and reliable chart patterns in technical analysis. Head and shoulders is a reversal chart pattern that when formed, signals that the security is likely to move against the previous trend Head and shoulders top is a chart pattern that is formed at the high of an upward movement and signals that the upward trend is about to end. Head and shoulders bottom, also known as inverse head and shoulders is the lesser known of the two, but is used to signal a reversal in a downtrend.

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Cup with handle A cup with handle chart is a bullish continuation pattern in which the upward trend has paused but will continue in an upward direction once the pattern is confirmed. This price pattern forms what looks like a cup, which is preceded by an upward trend. The handle follows the cup formation and is formed by a generally downward/sideways movement in the security's price. Once the price movement pushes above the resistance lines formed in the handle, the upward trend can continue. There is a wide ranging time frame for this type of pattern, with the span ranging from several months to more than a year.

Double tops and bottoms This chart pattern is another well-known pattern that signals a trend reversal - it is considered to be one of the most reliable and is commonly used. These patterns are formed after a sustained trend and signal to chartists that the trend is about to reverse. The pattern is created when a price movement tests support or resistance levels twice and is unable to break through. This pattern is often used to signal intermediate and long-term trend reversals.

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Triangles Triangles are some of the most well-known chart patterns used in technical analysis. The three types of triangles, which vary in construct and implication, are the symmetrical triangle, ascending and descending triangle. These chart patterns are considered to last anywhere from a couple of weeks to several months.

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Flag and pennant These two short-term chart patterns are continuation patterns that are formed when there is a sharp price movement followed by a generally sideways price movement. This pattern is then completed upon another sharp price movement in the samedirection as the move that startedthe trend. The patterns are generally thought to last from one to three weeks.

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Wedge The wedge chart pattern can be either a continuation or reversal pattern. It is similar to a symmetrical triangle except that the wedge pattern slants in an upward or downward direction, while the symmetrical triangle generally shows a sideways movement. The other difference is that wedges tend to form over longer periods, usually between three and six months.

Triple Tops and Bottoms Triple tops and triple bottoms are another type of reversal chart pattern in chart analysis. These are not as prevalent in charts as head and shoulders and double tops and bottoms, but they act in a similar fashion. These two chart patterns are formed when the price movement tests a level of support or resistance three times and is unable to break through; this signals a reversal of the prior trend.

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Rounding bottom A rounding bottom, also referred to as a saucer bottom, is a long-term reversal pattern that signals a shift from a downward trend to an upward trend. This pattern is traditionally thought to last anywhere from several months to several years.

A rounding bottom chart pattern looks similar to a cup and handle pattern but without the handle. The long-term nature of this pattern and the lack of a confirmation trigger, such as the handle in the cup and handle, makes it a difficult pattern to trade. We have finished our look at some of the more popular chart patterns. You should now be able to recognize each chart pattern as well the signal it can form for chartists. We will now move on to other technical techniques and examine how they are used by technical traders to gauge price movements.

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Fundamental vs Technical analysis:

Fundamental analysis using

Technical analysis

Definition

Value calculated economic factors.

various Uses price movements and patterns on charts to predict future price movements.

Data from

Economic reports, news events, Chart analysis industry statistics

Bought When price falls below ( above ) When trader sees a price intrinsic value formation that has a high probability of moving into profit in the near future. Type of trader Usually longer term position traders Generally swing traders and short term day traders Asset (Sold)

Time Horizon

Concept Utilized

Offer holding for days,weeks or Can be long term, but most take even months. positions for days, minutes ,or even seconds. Report expectations vs actual Trendlines , support and outcomes, current news events resistance (supply & demand), compared to historical events. dow theory, price patterns.

BANKING SECTOR: 45 | P a g e

The Indian banking sector has emerged as one of the strongest drivers of India’s economic growth. The present Rs 64 trillion (US$ 1.17 trillion) Indian banking industry is governed by the Banking Regulation Act of India, (1949) and is closely monitored by the Reserve Bank of India (RBI). RBI manages the country's money supply and foreign exchange and also serves as a bank for the Government of India and for the country's commercial banks. As of now, public sector banks account for 70 per cent of the Indian banking assets. The Indian banking industry has made outstanding advancement in last few years, even during the times when the rest of the world was struggling with financial meltdown. India's economic development and financial sector liberalization have led to a transformation of the Indian banking sector over the past two decades. The Indian banking sector has been relatively well shielded by the central bank and has managed to sail through most of the crisis. But, currently in light of slowing domestic GDP growth, persistent inflation, asset quality concerns and elevated interest rates, the investment cycle has been wavering in the country. Today Indian Banking is at the crossroads of an invisible revolution. The sector has undergone significant developments and investments in the recent past. Most of banks provide various services such as Mobile banking, SMS Banking, Net banking and ATMs to their clients. Apart from streamlining their processes through technology initiatives such as ATMs, telephone banking, online banking and web based products, banks also resorted to cross selling of financial products such as credit cards, mutual funds and insurance policies to augment their fee based income. They are also looking at various financial inclusion initiatives in order to spread the use of financial services among India’s large unbanked population.

Liberal policies, Government support and huge development in other economic segments have made the Indian banking industry more progressive and inclusive with regard to global banking standards. 46 | P a g e

According to an IBA-FICCI-BCG report, India’s gross domestic product (GDP) growth will make the Indian banking industry the third largest in the world by 2025. According to the report, the domestic banking industry is set for an exponential growth in coming years with its assets size poised to touch USD 28,500 billion by the turn of the 2025.

Structure: The Reserve Bank of India, the nation’s central bank, began operations on April 01, 1935. It was established with the objective of ensuring monetary stability and operating the currency and credit system of the country to its advantage. In India, the banks are being segregated in different groups. Each group has their own benefits, own dedicated target markets, limitations in operating in India. The commercial banking structure in India consists of Scheduled Commercial Banks and Unscheduled Banks. Scheduled commercial Banks constitute those banks which have been included in the Second Schedule of Reserve Bank of India (RBI) Act, 1934. For the purpose of assessment of performance of banks, the Reserve Bank of India categorize them as public sector banks, old private sector banks, new private sector banks and foreign banks.

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Business division Retail banking - Loans to Individuals (Auto loan, Housing Loan, Education Loan and other personal loan) or small businesses. Wholesale banking - Loans to Mid and Large corporate (Working Capital loans, Project finance, Term loans, Lease Finance) Treasury Operations - Investment in Equity, Derivates, Commodities, Mutual Funds, Bonds, Trading and Forex operations Other Banking Businesses - Merchant Banking, Leasing business, Hire purchase, Syndication services etc.

Porter’s 5 forces analysis on banking sector Supply

Liquidity is controlled by the Liquidity is controlled by the Reserve Bank of India (RBI).

Demand

India is a growing economy and demand for credit is high though it could be cyclical.

Barriers to entry Licensing requirement, investment in technology and branch network, capital and regulatory requirements. Bargaining power High during periods of tight liquidity. Trade unions in public sector banks can be anti reforms and orchestrate strikes. Depositors may invest of suppliers elsewhere if interest rates fall. Bargaining power For good creditworthy borrowers bargaining power is high due to the availability of large number of banks. of customers Competition

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High- There are public sector banks, private sector and foreign banks along with non banking finance companies competing in similar business segments. Plus the RBI is all set to issue new banking licenses soon.

PEST analysis on banking sector Political factors

- Monitary policy - Regulatory framework - Budget and budget measures - Changes in interest rates

Economic factors

- More saving - More capital formation - Increase in production of goods and services - Banking channels

Social factores

- Increase in population - Changes in lifestyle - Easy way of lending money - Exploring banking facilities in rural areas

Technological factors

- Internet banking - IT services and mobile banking - Credit cards - Improvement in efficiency

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SWOT analysis on banking sector Strenths

- Valuable contributor to GDP - Regulatory environment - Government support

Weaknesses

- Increasing NPA - Low penetration - Lack of product differentiation

Opportunities

- Modern technology - Untapped rural market - Globalization

Threats

- Unorganized money lending market - Customer dissatisfaction - Rise of monopolistic structure

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3.2 Interpretation and outcome of the analysis: Leading banks in terms of market capitalization:

PSU banks Company name SBI Bank of Baroda Bank of India Canara Bank PNB IDBI Bank Allahabad Bank Andhra Bank Syndicate Bank Union Bank OBC Central Bank Indian Bank UCO Bank IOB Corporation Bank Industry PE

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Price

PE

2643.3 869.8 317.75 439.2 972.05 97.1 131.55 100.25 160.5 216.55 349.75 82.65 173.25 107.55 83.35 357.8 -

EPS

LTPT

PEG

13.93 206.2 1796.002 0.76 8.27 105.75 921.08 9.24 34.38 299.45 -8.17 8.31 52.86 460.41 9.8 134.31 1169.84 13.89 6.99 60.88 -1.25 6.11 21.52 187.44 13.57 7.39 64.37 -3.28 5.86 27.4 238.65 8.05 26.91 234.39 9.2 38 330.98 0.56 -8.84 -9.35 6.95 24.93 217.14 7.22 14.89 129.69 17.11 4.87 42.42 -0.32 10.67 33.53 292.05 -1.38 8.71

-

CASA 44.82 25.75 32.79 25.12 39.16 22.63 31.2 25.7 29.9 29.5 24.13 29.03 34.96 24.25 20.33

NIM 2.93 1.86 2.46 2.4 3.19 2.17 2.81 3.21 2.79 2.56 2.68 3.09 2.34 2.34 2.1

NPA 2.1 1.52 2.06 2.18 2.35 2.48 3.19 2.45 1.56 2.3 2.27 2.26 3.17 3.2 2.32

Private banks Company name AXIS Bank HDFC Bank ICICI Bank Indusind Bank Kotak Mahindra YES Bank ING Vyvsa Bank Federal Bank JK Bank Karur Vyvsa Bank Industry PE

Price

PE

1899.5 824.55 1458.25 541.8 872.7 578.75 643.9 115.7 1536.25 462.05 -

EPS

LTPT

14.2 132.33 22.55 35.34 15.31 72.17 20.6 20.3 27.68 19.51 12.91 44.82 18.44 34.77 11.79 9.81 6.3 243.92 11.59 40.06 16.14

PEG

CASA

2135.81 - 45.01% 570.39 0.902 44.81 1164.82 0.53 41.89 327.64 1.128 29.32 314.89 1.134 31.87 723.39 22 561.19 -1.52 32.5 158.33 26.94 3936.87 39.23 646.57 19.25

NIM

NPA

3.21% 3.99 2.76 3.15 4.4 2.9 3.3 3.37 4.15 3.03

0.44% 0.27 0.77 0.31 1.08 0.05 0.03 0.98 1.91 0.37

-

The companies whose market capitalization is more than INR 5000 crores are selected for investment purposes. Then their market price per share and earnings per share is calculated. Price Earnings ratio for each company is calculated individually and an average is calculated which is treated as a standard. The companies that posses more PE than the standard are called overvalue stocks and they are further analyse for growth pick. The stock which has less PE value than the standard, are termed as undervalued stocks and are select in the portfolio. The LTPT (Long term price target) is calculated by multiplying the sector PE to the last market price of the stock. It is not possible to forecast the particular time period when the LTPT will be achieved. In the growth picks, the PEG ratio is calculated by market price of stock to the growth of EPS over last year. The stocks which have negative EPS growth are left out. The stocks which are having PEG less than 1 and more than 0, are considered to be good growth pick. Little above 1 can also be considered as a good pick. Here from the data, SBI, OBC and ICICI Bank are selected on the basis of growth. Central Bank has negative EPS, so it is not selected in the calculation.

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INVESTMENT PORTFOLIO After the selection of the stocks, the proportion of stocks in the portfolio is calculated.

PSU banks Company name

Selection method

State Bank of India

Growth Pick

2685.1

2000

5370200

Bank of Baroda

Value Pick

888.35

11500

10216025

Canara Bank

Value Pick

445.85

11500

5127275

Punjab National Bank Value Pick

995.2

11000

10947200

Allahabad Bank

Value Pick

132.3

30000

3969000

Syndicate Bank

Value Pick

165

40000

6600000

Union Bank

Value Pick

220.65

15000

3309750

OBC

Growth Pick

354.3

10000

3543000

Indian Bank

Value Pick

174.7

25000

4367500

UCO Bank

Value Pick

108.45

25000

2711250

Total

Buy price

Volume

Amount

56161200

Private banks Company name AXIS Bank ICICI Bank YES Bank Federal Bank JK Bank Karur Vyvsa Total

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Selection method Value Pick Growth Pick Value Pick Value Pick Value Pick Value Pick

Buy price Volume Amount 397.17 30000 11476800 1477 4000 5908000 580.55 16000 9288800 118.2 71065 8399883 157.9 60000 9321900 470.1 20000 9402000 53797383

3.3 General observations:

State Bank of India (SBI) : Founded in 1806, Bank of Calcutta was the first bank established in India and over a period of time evolved into SBI. SBI represents a sterling legacy of over 200 years. It is the oldest commercial bank in the Indian subcontinent, strengthening the nation’s trillion - dollar economy and serving the aspirations of its vast population. The State Bank of India is India’s largest commercial bank in terms of assets, deposits, profits, branches. Number of customers and employees, enjoying the continuing faith of millions of customers across the social spectrum. The company operates through 21,977 branches, including 6,108 branches of its 5 associate banks; and 51,491 ATMs.

State Bank of India FY Mar (INR Crore)

FY 10

FY 11

FY 12

FY 13

FY 14

Income

85962.1

96324.8

120873

135692

154904

EBITDA

15629.7

26326.1

32580.7

32221.3

33443.2

Net Profit

9166.39

7370.69

11713.3

14105.3

10891.5

EPS (INR)

144.37 9.4

116.07 16.4

174.46 9.9

206.2 8.3

145.88 13.93

P/E

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SBI candlestick chart:

It made a pattern of double bottom, so it is recommended as it will go up. It follows a longterm uptrend.

Bank of Baroda: Bank of Baroda (BOB) was founded by Maharaja Sayajirao Gaekwad in July 1908. It started with a paid up capital of Rs10 lakh. Bank of Baroda is a pioneer in various customer centric initiatives in the Indian banking sector. It headquartered in Vadodara in Gujarat, India. It is the second-largest bank in India. Bank of Baroda Limited is a provider of deposit loans, retail loans, credit cards and debit cards. The company operates in four segments: treasury, corporate / wholesale banking, retail banking and other banking operations. Its wholesale banking division offers a range of loan products and services, such as term loans, short - term loans, demand loans, working capital facilities, trade finance products, treasury products, bridge loans, syndicated loans, infrastructure loans, cross currency/interest rate swaps, foreign currency loans and loan against future rent receivables.

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Its retail loan book consisted of five products, such as home loan, auto loan, education loan, traders loan and mortgage loan. It provides third products in life insurance, non life

Insurance, including health insurance, mutual funds and equity trading under tie - up arrangements with different partners.

The company operates through 4,276 branches in India; 102 branches/offices in 24 countries internationally; and 6,254 ATMs.

Bank of Baroda FY Mar (INR Crore)

FY 10

FY 11

FY 12

FY 13

FY 14

Income

19885.4

24695.1

33097

38827.3

43402.5

EBITDA

4646.16

7224.65

8857.19

9299.79

9636.05

Net Profit

3058.33

4241.68

5006.96

4480.72

4541.08

EPS (INR)

83.96

108.33

121.79

106.37

105.75

5

7.4

6.4

6.6

8.27

P/E

Bank of Baroda line chart:

57 | P a g e

A cup with handle chart is a bullish continuation pattern in which the upward trend has paused but will continue in an upward direction once the pattern is confirmed. Thus it is recommended that the stock will continue an upward trend.

Punjab National Bank: Established in 1895 in Lahore, Punjab National Bank is one of the oldest banks in India having a virtual presence in every important center of the country. The company offers personal banking products and services, including savings fund accounts, current accounts, and fixed deposit schemes; credit, debit, and travel cards; various credit schemes, such as housing loans, car and two wheeler finance, personal loans, professional loans, education loans, mortgage loans, reverse mortgages, and advances against gold and jewelry; capital gain account schemes; doorstep banking services; and nomination facilities. It also provides loans for micro and small enterprises, and finance for traders, as well as finance for professionally qualified medical practitioners and the service sector; agricultural banking products and services; social banking products and services. As of March 31, 2014, the company operated a network of 6,201 branches, which included 5,636 general banking branches; 241 specialized branches; 1 extension counter; and 323 service back offices, as well as 6,940 ATMs.

Punjab National Bank FY Mar (INR Crore)

FY 10

FY 11

FY 12

FY 13

FY 14

Income

24961.4

30599.1

4060.63

46109.3

47800

EBITDA

6478.82

9311.54

10906.6

11225.9

11736.9

Net Profit

3902.94

4433.5

4884.2

4747.67

3342.58

EPS (INR)

123.86

139.94

144

134.31

92.32

6.5

5.8

6.7

7.6

9.8

P/E

58 | P a g e

Punjab National Bank line chart:

The Technical graph shows the uptrend. Thus it is recommended that the stock will go up.

AXIS Bank: Axis Bank Limited (formerly UTI Bank) is the third largest private sector bank in India. Axis Bank established in 1993 was the first of the new private banks to have begun operations in 1994 after the Government of India allowed new private banks to be established. It offers financial services to customer segments covering large and mid - corporates, MSME, agriculture and retail businesses. The company operates in four segments: treasury, retail banking, corporate / wholesale banking, and other banking business.

59 | P a g e

As of March 31, 2014, the company had a network of 2,402 domestic branches and extension counters, and 12,922 ATMs situated in 1,636 centres.

Axis Bank FY Mar (INR Crore)

FY 10

FY 11

FY 12

FY 13

FY 14

Income

15583.8

19786.9

2414.87

33733.7

38046.4

EBITDA

10543.1

6415.69

7430.86

9303.13

11456.1

Net Profit

2514.53

3388.49

4242.21

5179.43

6217.67

EPS (INR)

62.06

82.54

102.67

110.68

132.22

8.6

10.9

11.7

16.8

14.2

P/E

Axis Bank line chart:

A cup with handle chart is a bullish continuation pattern in which the upward trend has paused but will continue in an upward direction once the pattern is confirmed. Thus it is recommended that the stock will continue an upward trend.

60 | P a g e

YES Bank: Yes Bank, incorporated in 2003. It is a new age private sector bank.It is the only bank that has been awarded a greenfield license by the Reserve Bank of India (RBI). The company specializes in retail, private banking and wealth management business, along with corporate and institutional banking, financial markets, investment banking, corporate finance, branch banking, business and transaction banking, business lines across the country. As of March 31, 2014, it operated 560 branches covering 375 cities in India. The company also operates 1,139 ATMs; and 2 national operating centers in Mumbai and New Delhi.

YES Bank FY Mar (INR Crore)

FY 10

FY 11

FY 12

FY 13

FY 14

Income

2945.24

4665.02

7164.48

9551.43

11702.9

EBITDA

791.17

1193.6

1554.89

2193.39

2751.13

Net Profit

477.74

727.14

977

1300.68

1617.78

EPS (INR)

14.06

20.95

27.68

36.27

44.86

8.5

11.5

11.2

14.7

12.91

P/E

Yes Bank line chart:

61 | P a g e

From the above chart, it is clearly cocluded that the stock will follow an uptrend move. It followed the symmetrical triangle chart pattern from mid 2013 to beginning of 2014 and after the breakout point the stock has shown uptrend.

ICICI Bank: ICICI Bank was originally promoted in 1994 by ICICI Limited, an Indian financial institution, and was its wholly - owned subsidiary. ICICI's shareholding in ICICI Bank was reduced to 46% through a public offering of shares in India in fiscal 1998. As of 2014 it is the second largest bank in India in terms of assets and market capitalization. It offers commercial banking, retail banking, project and corporate finance, working capital finance, insurance, venture capital and private equity, investment banking, broking, and treasury products and services. As of March 31, 2014, it operated through a network of 3,753 branches and 11,315 ATMs in India.

ICICI Bank FY Mar (INR Crore) Income 62 | P a g e

FY 10 32996.4

FY 11 32621.9

FY 12 41045.4

FY 13 48421.3

FY 14 54606

EBITDA

5857.66

9531.07

10428.7

13689.4

17170.5

Net Profit

4024.98

5151.38

6465.26

8325.47

9810.48

EPS (INR)

36.1

44.73

56.09

72.22

84.95

P/E

10.7

12

13.4

19.6

15.31

ICICI Bank candlestick chart:

From the above chart, it is clearly cocluded that the stock will follow an uptrend move. It followed the symmetrical triangle chart pattern from beginning 2013 to beginning of 2014 and after the breakout point the stock has shown uptrend.

Syndicate Bank:

63 | P a g e

Syndicate Bank was founded in 1925 under the name 'Canara Industrial and Banking Syndicate' in Udupi, Karnataka with seed capital of Rs.8000. It was started with an intention to provide financial support to the local weavers. The bank, along with 13 major commercial banks of India, was nationalised on 19 July 1969, by the Government of India. Syndicate Bank Limited provides a range of banking products and services to corporate, small to medium-sized enterprises, and retail customers in India. The company offers deposit services, including savings bank accounts, current accounts, and term deposits. It also provides housing loans, retail trade loans, vehicle loans, consumer loans, education loans, mortgage loans, investment loans, and short - term loans to the agricultural sector and for associated activities.

As of June 30, 2014, it operated approximately 3,272 branches, including 1044 rural, 856 semi urban, 708 urban, and 663 metro branches.

Syndicate Bank FY Mar (INR Crore)

FY 10

FY 11

FY 12

FY 13

FY 14

Income

11214.6

12366

16344.2

18295.1

19945.2

EBITDA

1470.52

1801

1928.01

3550.24

3681.09

Net Profit

813.32

1047.95

1313.39

2004.42

1711.46

EPS (INR)

15.58

18.28

21.82

33.3

27.4

3.6

3.4

4.6

6.6

5.86

P/E

Syndicate Bank candlestick chart:

64 | P a g e

From the above chart, We can coclude that the stock will follow a downtrend. There are two chart patterns upper Head & Shoulder and double top, they both are trend reversal pattern. In 2013 after the Head & shoulder pattern, it followed downtrend but after that the stock again moved up and followed uptrend. Mid 2014 showing the double top pattern, thus it is recommended that the stock will come down.

Karur Vyvsa Bank: Karur Vysya Bank, incorporated 1916, is popularly known as KVB. The bank was founded with an intention to develop the saving habit and to provide financial assistance to traders and agriculturists in and around Karur, a textile town in Tamil Nadu. The Karur Vysya Bank Limited provides various banking and financial services in India. The company offers savings and current accounts, non – resident external savings and current accounts, non – resident ordinary accounts, and fixed deposits; personal loans, home loans, loans for working professionals, vehicle loans, business loans, and educational loans to individuals; and demat accounts. It also offers working capital finance, term loans, and trade finance for traders/corporates. In addition, the company offers debit, gift, travel, and credit cards, as well as ID cards for credit for agriculturists; foreign exchange services; mutual fund investments; various life and 65 | P a g e

general insurance products; locker facilities; gold and silver coins/bars; remittance services; and Internet and mobile banking, utility bill payment, rail/air ticket booking, and online and offline share trading services. As of March 31, 2014, it operated a network of 572 branches and 1617 ATMs.

Karur Vyvsa Bank FY Mar (INR Crore)

FY 10

FY 11

FY 12

FY 13

FY 14

Income

1996.83

2462.13

3578.93

4694.99

5680.41

EBITDA

460.27

605.85

703.52

905.21

912.48

Net Profit

335.59

414.97

501.46

550.32

429.6

EPS (INR)

61.73

38.96

46.81

51.35

40.08

9.9

9.2

8

16.4

5.4

P/E

Karur Vyvsa Bank line chart:

The above chart showing rounding bottom pattern. So after this it recommended that the stock will folloe an uptrend. 66 | P a g e

CHAPTER – 4 CONCLUSIONS 4.1 Summary: Mutual funds are one of humanity's greatest inventions. For individual investors, they are by far the best way to invest. • There's usually a fund that specializes in most everything investors want. • They are efficient. •They are inexpensive. 67 | P a g e

• Easy to invest in. • They are as liquid as you can get (other than being priced at the end of the day). • They are easy to sell, and you can withdraw small odd dollar amounts anytime. • There's only a minimum initial investment once, then you can add INR 1000-10000. • Data about them are readily available and sufficient to make decisions. • They disclose everything and give you all of the information you need. • They are highly regulated. • They lower risk by providing diversification by owning many securities.

PSU banks Company name UCO Bank

LTP (12th Sept)

Buy price

Change

%Change

108.45

88.30

-20.15

-18.58 %

Indian Bank

174.7

156

-18.70

-10.70 %

OBC

354.3

286.25

-68.05

-19.21 %

220.65

214.85

-5.80

-2.63 %

Syndicate Bank

165

127.75

-37.25

-22.58 %

Allahabad Bank

132.3

121.95

-10.25

-7.75 %

Canara Bank

445.85

412.50

-33.35

-7.48 %

State Bank of India

2685.1

2625.60

-59.50

-2.21 %

995.2

984.30

-10.9

-1.09 %

888.35

944.15

+55.8

+6.28 %

Union Bank

PNB Bank of Baroda

68 | P a g e

Private banks Company name

LTP (12th Sept)

Buy price

Change

% Change

Karur Vyvsa Bank

470.1

531.25

+61.15

+13.08 %

JK Bank

157.9

151.40

-6.5

-4.12 %

Federal Bank

118.2

127.55

+9.35

+7.91 %

ICICI Bank

1477

1564.95

+87.95

+5.95 %

YES Bank

580.55

632.85

+52.30

+9.09 %

AXIS Bank

397.17

416.95

+19.78

+4.98 %

(BANKING STOCKS CHANGE OVER TIME)

28000

11.5

27500

11.3

27000

11.1 10.9

26500

10.7

26000

10.5

25500

10.3

BSE SENSEX

10.1

NAV

25000

9.9

24500

9.7

24000

9.5

69 | P a g e

(Sensex and NAV Comparisons)

From the above graph also, our fund performance with the BSE Sensitive index (SENSEX) can be measured. The NAV of our fund is beating the benchmark (BSE SENSEX) with a good marging. So we can conclude that investing in a mutual fund is better option.

4.2 Gains of the study From this study, I got to know about selection of stock in portfolio using PE and PEG ratio. I tracked these stocks for these 3 months, and saw the fluctuation and changes in these stocks. Investment is for long term, anyone should not rely on intraday trading for regular income or wealth appreciation. Mutual fund is one of the best available investment options for equity market, with less knowledge about equities.

4.3 Limitations of the study We made a virtual mutual fund with the help of large cap companies and only using value and growth picks. So for investment purpose, only this fund is not available. Anyone can choose a mutual fund as per their risk taking ability. In our study, we just made the fund using large cap companies, and PE, PEG ratio basis. More financial analysis and modelling can be done for forecasting purpose.

4.4 Scope for further work 70 | P a g e

The fund can be analysed and further revised. The new sector PE and long term price target need to be updated. We can use this method to select our portfolio also. By selecting the sector, which will go to excel in future and considering sector PE, we can select stocks for our portfolio. To make this fund more valuable, more research for these companies can be done. Financial modeling for every company should be done to derive the forecasted value. The related news about companies, top line, and bottom line should be updated with time.

CHAPTER – 5 RECOMMENDATIONS As per the growth picks and value picks, I have selected 16 stocks (10 PSU & 6 private banks) in my sector. From these 16 stocks, 10 stocks have not performed and remaining 6 stocks have performed well.

71 | P a g e

In PSU banks, all the stocks have not performed except Bank of Baroda while in private banks, all the stocks have performed well except JK bank. Karur Vyvsa bank has given the highest return. So I recommend private banks stocks for investment. But it is advisable to invest in a mutual fund as it is diversified, the risk of loss is less. The above analysed stocks are fundamentally strong to invest in.

Bibliogaraphy / References 1. http://www.ibef.org/industry/banking-india.aspx 2. http://www.equitymaster.com/research-it/sector-info/bank/Banking-Sector-AnalysisReport.asp 3. http://www.moneycontrol.com/indian-indices/s&p-bse-bankex-18.html 4. http://mutualfund.birlasunlife.com/ 72 | P a g e

5. http://www.adityabirla.com/About-Us/milestones 6. http://www.bseindia.com/markets/Equity/EQReports/industrywatch.aspx?expandable =2&page=40101001&scripname=Banks 7. http://www.wikipedia.org/ 8. http://info.shine.com/industry/banking-financial-services/8.html 9. http://economictimes.indiatimes.com/industry/banking/finance/articlelist/13358259.c ms 10. https://in.finance.yahoo.com/news/budget/sectorwatch/ 11. http://www.reuters.com/finance/stocks 12. http://www.equitymaster.com/stockquotes/sector.asp?sector=0%2CBANKPVT 13. http://www.equitymaster.com/stockquotes/sector.asp?sector=0%2CBANKPSU

GROWTH ENHANCER FUND PORTFOLIO as on 4th June 2014

ABOUT THE FUND

To provide long-term capital appreciation by actively managing a well-diversified equity portfolio of fundamentally strong and liquid large cap companies.

EQUITY

Holding (%)

Pharmaceuticals and Cement

11

Power and Engineering

11

Banking

11

STRATEGY 73 | P a g e

Tele-com and Media

11

RISK RETURN PROFILE

Oil and Gas and Paint

11

Auto and Ancillaries

11

Maintaining high quality diversified portfolio with growth and value stocks. Investment is

ASSET ALLOCATION

ASSET ALLOCATION

BENCHMARK

DATE OF INCEPTION

FUND PERFORMANCE

74 | P a g e