A PROJECT REPORT ON EQUITY ANALYSIS ON SPECIFIC BANKING SCRIPS

By SAIRAM PRASAD EETURI B4-41

Industry Supervisor
K.SUNEEL (BRANCH MANAGER) NETWORTH DIRECT HYDERABAD

Faculty Supervisor PARDHA SARADHI.M (Associate professor)

SIVASIVANI INSTITUTE OF MANAGEMENT

EQUITY ANALYSIS ON SPECIFIC BANKING SCRIPS Company profile:

Networth direct with excellence in customer relations began a decade ago. Today Networth is one of the most respected stock broking and wealth management companies in india. With its retail focused stock broking business model. Networth is committed to provide its real value for money to its clients. A Netwoth group member of the Bombay stock exchange, National stock exchange and two leading commodity exchange in the country: NCDEX & MCX NETWORTH is also depository participated with CDSL (central depository services in India) and NSDL. Introduction: An analysis of securities and the organization and operation of their markets. The determination of the risk reward structure of equity and debt securities and their valuation. Special emphasis on common stocks. Other topics include options, mutual fluids and technical analysis. Technical analysis is a method of predicting price movements and future market trends by studying charts of past market action which take into account price of instruments, volume of trading and, where applicable, open interest in the instruments. Fundamental analysis is a method of forecasting the future price movements of a financial instrument based on economic, political, environmental and other relevant factors and statistics that will affect the basic supply and demand of whatever underlies the financial instrument.

Objective:
To do equity analysis of banking securities how they are performing in technically and fundamentally. Sub-Objectives: To justify the current investment in the chosen securities. To understand the movement and performance of stocks. To recommend increase/decrease of investment in a particular security.

Based on the financial performance I have taken some specific banking scrips in terms of NII (net interest income) CASA (currents accounts and savings account ratio) GROWTH: Growth on Assets: o Cash balances with RBI. o Growth in advances o investments Growth on Liabilities: o Reserves o Deposits o Borrowings The list of banks are 1. State bank of India (SBI) 2. Punjab national bank 3. ICICI bank 4. HDFC bank

ON THE JOB TRAINING : I was assigned the equity market department. I have learned the working of the stock market and trading in equities. Interacted with customers regarding opening of DEMAT accounts and explaining its pros and cons to them. Adopted the Real time experience on trading platform. Achievements

: while working in this project I have interacted with customers and brought

business to my company in the form of 8demat accounts from the customers. Received an amount of RS.2000 as stipend after completion of my internship. RESEARCH METHODOLOGY Type of Study: The research has been based on secondary data analysis. The study has been exploratory as it aims at examining the secondary data for analyzing the previous researches that have been done in the area of technical and fundamental analysis of stocks. The knowledge thus gained from this preliminary study forms the basis for the further detailed Descriptive research. In the exploratory study, the various technical indicators that are important for analyzing stock were actually identified and important ones short listed.

For financial performance and fundamental analysis o Companies previous annual reports Technical analysis: closing prices of specific scrips data from NSE (National Stock Exchange) website Bank nifty and S&P CNX (standard and poor)

Literature review:
The following literature were reviewed for the project 1. Study of stock price responses to earnings announcements of selected companies listed on BSE which is done by IQBAL from finance India September 2010.the stock performance and reaction with the market conditions.

2. Operational efficiency of selected private banks of India. (P.S.Vohra) from Finance India march 2011. Which is shown in terms of the growth of the private banks in India and their performance.

Fundamental Analysis:
A method of evaluating a security that entails attempting to measure its intrinsic value by examining related economic, financial and other qualitative and quantitative factors. Fundamental analysts attempt to study everything that can affect the security's value, including macroeconomic factors (like the overall economy and industry conditions) and company-specific factors (like financial condition and management). Fundamental analysis is about using real data to evaluate a security's value. Although most analysts use fundamental analysis to value stocks, this method of valuation can be used for just about any type of security. The end goal of performing fundamental analysis is to produce a value that an investor can compare with the security's current price, with the aim of figuring out what sort of position to take with that security (underpriced = buy, overpriced = sell or short). For doing fundamental analysis I have chosen some ratios and applied to some specific banks. Earnings Per Share(EPS) Dividend payout ratio Net profit margin P/E ratio. and Return on equity.

Earnings per share (EPS): The portion of a company's profit allocated to each outstanding share of common stock. Earnings per share serves as an indicator of a company's profitability.

Table:
Pnb Sbi Hdfc Icici 2007 48.84 86.29 43.29 28.55 2008 64.98 106.56 44.87 34.59 2009 98.03 143.67 52.77 37.37 2010 123.86 144.37 64.42 33.76 2011 139.94 116.07 84.4 36.1

Display chart:
160 140 120 100 80 60 40 20 0 2007 2008 2009 2010 2011 48.84 43.29 28.55 86.29 64.98 44.87 34.59 52.77 37.37 33.76 36.1 64.42 106.56 143.67 144.37 123.86 98.03 84.4 pnb sbi hdfc icici 139.94 116.07

Interpretation : Dividend payout ratio: The payout ratio provides an idea of how well earnings
support the dividend payments. More mature companies tend to have a higher payout ratio.

Table:
Mar '07 icici hdfc pnb sbi 27.36 16.32 27.26 16.75 Mar '08 28.84 18.93 21.61 20.56 Mar '09 29.08 19.1 22.47 21.13 Mar '10 31 19.15 19.62 21.2 Mar '11 32.33 20.16 17.27 23.24

Display chart:
35 31 30 25 20 15 10 5 0 Mar '07 Mar '08 Mar '09 Mar '10 Mar '11 27.36 27.26 28.84 29.08 23.24 21.2 19.62 19.15 20.16 17.27 icici hdfc pnb sbi 32.33

21.61 20.56 18.93 16.32 16.75

22.47 21.13 19.1

Interpretation: Net profit margin: A ratio of profitability calculated as net income divided by revenues, or net
profits divided by sales. It measures how much out of every dollar of sales a company actually keeps in earnings. Looking at the earnings of a company often doesn't tell the entire story. Increased earnings are good, but an increase does not mean that the profit margin of a company is improving. For instance, if a company has costs that have increased at a greater rate than sales, it leads to a lower profit margin. This is an indication that costs need to be under better control.

Table:
Mar '07 Hdfc icici sbi pnb 13.57 14.12 10.12 12.53 Mar '08 12.82 10.81 11.65 12.68 Mar '09 11.35 10.51 12.03 13.76 Mar '10 Mar '11 14.76 16.09 9.74 12.17 10.54 8.55 15.64 14.56

Display chart:
18 16 14 12 10.12 10 8 6 4 2 0 Mar '07 Mar '08 Mar '09 Mar '10 Mar '11 14.12 13.57 12.53 13.76 12.82 12.68 11.65 10.81 12.03 11.35 10.51 12.17 10.54 9.74 8.55 Hdfc icici sbi pnb 15.64 14.76 16.09 14.56

Interpretation: P/E ratio: A valuation ratio of a company's current share price compared to its per-share
earnings.

In general, a high P/E suggests that investors are expecting higher earnings growth in the future compared to companies with a lower P/E. However, the P/E ratio doesn't tell us the whole story by itself. It's usually more useful to compare the P/E ratios of one company to other companies in the same industry, to the market in general or against the company's own historical P/E. It would not be useful for investors using the P/E ratio as a basis for their investment to compare the P/E of a technology company (high P/E) to a utility company (low P/E) as each industry has

much different growth prospects.

Table:
Hdfc icici sbi pnb 2007 20.83 28.18 10.78 8.75 2008 29.42 22.26 15.00 7.82 2009 18.34 8.90 7.42 4.19 2010 30.00 28.22 14.40 8.18 2011 27.76 30.82 23.85 8.72

Display chart:
35.00 30.00 25.00 20.00 15.00 15.00 10.00 5.00 0.00 2007 2008 2009 2010 2011 10.78 8.75 7.82 8.90 7.42 4.19 28.18 20.83 29.42 22.26 18.34 14.40 8.18 8.72 30.00 28.22 30.82 27.76 23.85 Hdfc icici sbi pnb

P/E GROWTH:

Hdfc icici sbi pnb

2008 41% -21% 39% -11%

2009 -38% -60% -51% -46%

2010 64% 217% 94% 95%

2011 -7% 9% 66% 7%

250% 217% 200%

150% 95% 94% 64% 50% 41% 39% 9% 0% 2008 -11% -21% -38% 2009 -46% -51% -60% 2010 -7% 2011 7% 66% Hdfc icici sbi pnb

100%

-50%

-100%

Interpretation:
here there is negative growth in the year of 2009 for all banking sector due to the crisis that too ICICI bank has faced many problem and allegations on the bank is going to closed. The companies are bounced back again in the year of 2010 to 2011.comparitively SBI performance is stable growth.

Return on equity:
The amount of net income returned as a percentage of shareholders equity. Return on equity measures a corporation's profitability by revealing how much profit a company generates with the money shareholders have invested.

Table:
HDFC bank ICICI bank SBI PNB 2008 13.83 13.17 13.72 19 2009 15.32 8.94 15.74 23.52 2010 13.7 7.58 13.89 24.06 2011 15.47 7.79 12.71 22.12

Display chart:
30 25 20 15 10 5 0 2008 2009 2010 2011 19 15.32 15.74 13.83 13.72 13.17 8.94 13.7 15.47 13.89 12.71 7.79 HDFC bank icici bank SBI 7.58 PNB 23.52 24.06 22.12

Technical analysis:
Technical analysis really just studies supply and demand in a market in an attempt to determine what direction, or trend, will continue in the future. In other words, technical analysis attempts to understand the emotions in the market by studying the market itself, as opposed to its components. If you understand the benefits and limitations of technical analysis, it can give you a new set of tools or skills that will enable you to be a better trader or investor. The trend lines are justified by the DOW Theory. For long term perspective and the short term perspective of the price movement of a particular scrips. Technical analysis tools which are using. Moving average method and Relative strength index

Moving average: An indicator frequently used in technical analysis showing the average
value of a security's price over a set period. Moving averages are generally used to measure momentum and define areas of possible support and resistance.

Relative strength index (RSI):

A technical momentum indicator that compares the magnitude of recent gains to recent losses in an attempt to determine overbought and oversold conditions of an asset. It is calculated using the following formula: RSI = 100 - 100/(1 + RS*)