assignment.docx

SECURITY ANALYSIS AND

INVESTMENT MANAGEMENT

ASSIGNMENTON

Analysis of Industries:

Banking and Software Industry

Submitted To:Dr. Ajai Prakash

Submitted By: Sringarika Sahu

M.B.A. sem IV (Finance)

DEPARTMENT OF BUSINESS ADMINISTRATIONUNIVERSITY OF LUCKNOW

LUCKNOW2013-2014

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Contents

TOPICS Page no.

1. Overview of the industries

a. Banking industry

b. State Bank of India

c.ICICI Bank

d. Software Industry

e. Infosys

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5-6

7-8

9

10-11

2. Analysisa.SBIb. ICICIc.Infosys

12-15 16-19 20-23

3. Comparative Analysisa.SBI & Infosysb. SBI & ICICI

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4. References 26

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ACKNOWLEDGEMENT

Gratitude can’t be expressed in words. But I would certainly like to name a

few, without whose commendable support, successful completion of this

project and the learning would not be possible.

As a dedicated and determined student with a purpose and a futuristic

vision in my mind I started the project, facing ups and downs. But at every

step of this journey I found the valuable inspiration, guidance, moral

support and most of all encouragement to do something spectacular by my

subject teacher Dr. Ajai Prakash.

I would like to acknowledge my deep sense of gratitude and thanks to him

for awarding me this great opportunity to work on this project and to clarify

all the concepts in order to make my project even better.

Sringarika Sahu

MBA 4th sem(Finance)

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OVERVIEW OF THE INDUSTRIES

I. BANKING INDUSTRY Banking is the backbone of the modern industry. Health of the banking industry is one of the most important pre-condition for sustained economic growth of any country. The world of banking has assumed the new dimension at the dawn of 20thcentury with the advent of tech banking, thereby lending the industry a stamp of fun avarsality. In general, banking may be classified as retail banking and wholesale banking. Retail banking, which is designed to meet the requirement of individual customers and increase their savings, includes payment of futility bills, consumer loans, credit cards, checking bank account balance , alternate channels, transferring funds between accounts and the like. Wholesale (Corporate) banking caters the needs of corporate customers like bill discounting, opening letter of credit and cash management. Many individuals find investments to be fascinating because they can participate in the decision making process and see the results of their choices.

BANKING INDUSTRY IN INDIA

Banking in India originated in the last decades of the 18th century. The oldest bank in existence in India is the State Bank of India, a government-owned bank that traces its origins back toJune1806 and that is the largest commercial bank in the country. Central banking is the responsibility of the Reserve Bank of India, which in 1935 formally took over these responsibilities from the then Imperial Bank of India, relegating it to commercial banking functions. After India’s independence in 1947, the Reserve Bank was nationalized and given broader powers. In 1969 the government nationalized the 14 largest commercial banks; the government nationalized the six next largest in 1980.Currently, India has 88 scheduled commercial banks (SCBs) - 27 public sector banks (that is with the Government of India holding a stake), 29 private banks (these do not have government stake; they may be publicly listed and traded on stock exchanges) and 31 foreign banks. They have a combined network of over 53,000 branches and 17,000 ATMs. According to a report by ICRA Limited, a rating agency, the public sector banks hold over 75 percent of total assets of the banking industry, with the private and foreign banks holding 18.2% and 6.5% respectively.

The banking industry is slated for growth in future with a more qualitative rather than quantitative approach. People will rely more on borrowed funds, pace of deposit growth slowing downside by side. However, advances and investments would not see a healthy growth rate.

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STATE BANK OF INDIA

Type Public

Traded as

NSE: SBIN

BSE: 500112

LSE: SBID

BSE SENSEX Constituent

Industry Banking, financial services

Founded 1 July 1955

Headquarters Mumbai, Maharashtra, India

Area served Worldwide

Key peoplePratip Chaudhuri

(Chairman)

ProductsCredit cards, consumer banking, corporate banking, finance and insurance,

investment banking, mortgage loans, private banking, wealth management

Revenue US$ 36.950 billion (2012)[1]

Profit US$ 3.202 billion (2012)[1]

Total assets US$ 359.237 billion (2012)[1]

Total equity US$ 20.854 billion (2012)[1]

Owner(s) Government of India

Employees 292,215 (2012)[1]

Website www.sbi.co.in

COMPANY PROFILE

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‘State Bank of India (SBI), with a 200 year history, is the largest commercial bank in India in terms of assets, deposits, profits, branches, customers and employees. The Government of India is the single largest shareholder of this Fortune 500 entity with 61.58% ownership. SBI is ranked 60th in the list of Top 1000 Banks in the world by "The Banker" in July 2012.

The origins of State Bank of India date back to 1806 when the Bank of Calcutta (later called the Bank of Bengal) was established. In 1921, the Bank of Bengal and two other banks (Bank of Madras and Bank of Bombay) were amalgamated to form the Imperial Bank of India. In 1955, the Reserve Bank of India acquired the controlling interests of the Imperial Bank of India and SBI was created by an act of Parliament to succeed the Imperial Bank of India.

The SBI group consists of SBI and five associate banks. The group has an extensive network, with over 20000 plus branches in India and another 173 offices in 34 countries across the world. As of 31st March 2012, the group had assets worth USD 359 billion, deposits of USD 278 billion and capital & reserves in excess of USD 20.88 billion. The group commands over 22% share of the domestic Indian banking market.

SBI’s non- banking subsidiaries/joint ventures are market leaders in their respective areas and provide wide ranging services, which include life insurance, merchant banking, mutual funds, credit cards, factoring services, security trading and primary dealership, making the SBI Group a truly large financial supermarket and India’s financial icon. SBI has arrangements with over 1500 various international / local banks to exchange financial messages through SWIFT in all business centres of the world to facilitate trade related banking business, reinforced by dedicated and highly skilled teams of professionals.’

The Bank is actively involved since 1973 in non-profit activity called Community Services Banking. All our branches and administrative offices throughout the country sponsor and participate in large number of welfare activities and social causes. Our business is more than banking because we touch the lives of people anywhere in many ways.

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Type Private

Traded as

BSE: 532174

NSE: ICICIBANK

NYSE: IBN


CNX Nifty Constituent

Industry Banking, financial services

Founded 1954

Headquarters Mumbai, India


Key peopleK.V. Kamath (Chairman)

Ms.Chanda Kochhar (MD & CEO)

ProductsCredit cards, Consumer banking, corporate banking, finance and insurance,

investment banking, mortgage loans, private banking, wealth management

Revenue US$ 13.52 billion (2012)

Profit US$ 1.60 billion (2012)

Total assets US$ 98.99 billion (2012)

Total equity US$ 12.62 billion (2012)

Employees 81,254 (2012)

Website www.icicibank.com

COMPANY PROFILE

ICICI Bank was established by the Industrial Credit and Investment Corporation of India, an Indian financial institution, as a wholly owned subsidiary in 1955. The parent company was formed in 1955 as a joint-venture of the World Bank, India's public-sector banks and public-sector insurance companies to provide project financing to Indian industry.The bank was initially known as the Industrial Credit and Investment Corporation of India Bank, before it

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http://en.wikipedia.org/wiki/United_States_dollar

changed its name to the abbreviated ICICI Bank. The parent company was later merged with the bank.

ICICI Bank launched internet banking operations in 1998.

ICICI's shareholding in ICICI Bank was reduced to 46 percent, through a public offering of shares in India in 1998, followed by an equity offering in the form of American Depositary Receipts on the NYSE in 2000. ICICI Bank acquired the Bank of Madura Limited in an all-stock deal in 2001 and sold additional stakes to institutional investors during 2001-02.

ICICI Bank is India's largest private sector bank with total assets of Rs. 5,367.95 billion (US$ 99 billion) at March 31, 2013 and profit after tax Rs. 83.25 billion (US$ 1,533 million) for the year ended March 31, 2013. The Bank has a network of 3,620 branches and 11,292 ATMs in India, and has a presence in 19 countries, including India.

ICICI Bank offers a wide range of banking products and financial services to corporate and retail customers through a variety of delivery channels and through its specialised subsidiaries in the areas of investment banking, life and non-life insurance, venture capital and asset management.

The Bank currently has subsidiaries in the United Kingdom, Russia and Canada, branches in United States, Singapore, Bahrain, Hong Kong, Sri Lanka, Qatar and Dubai International Finance Centre and representative offices in United Arab Emirates, China, South Africa, Bangladesh, Thailand, Malaysia and Indonesia. Our UK subsidiary has established branches in Belgium and Germany.

ICICI Bank's equity shares are listed in India on Bombay Stock Exchange and the National Stock Exchange of India Limited and its American Depositary Receipts (ADRs) are listed on the New York Stock Exchange (NYSE).

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II. Software Industry

Just as coal and steel were the essential ingredients in the Industrial revolution, Information Technology drives the modern economy. It is necessary for every sector: for agriculture, manufacturing, for services. It pervades our lives: microprocessor controlled domestic appliances, telecommunications, air traffic control, computer controlled traffic lights and train reservation, banking and financial services, business administration, education, health care, entertainment etc.

The information Services industry cannot therefore be considered as a separate sector, in isolation from the rest of the economy. It forms a strategically important part of the national infrastructure which is disproportionate to that suggested by the absolute numbers employed. Our Information Services or Information Technology capability is both a measure and also a determinant of our economic health and future prospects.

The software industry has become the driving force in the IT Industry. It is ideally suited to India as it is people intensive, it demands highly skilled young people, it has no undesirable environmental side effects, it is growing rapidly and unlike capital intensive - low skilled industries, investment in this industry is not easily displaced.

Software Industry in India

The software industry has become the driving force in the IT industry. It is ideally suited to India as it demands highly skilled manpower, it has no undesirable environmental side effects, it has grown rapidly and unlike "capital intensive and low skilled industries", investment in this industry is not easily displaceable.

It was in the 70's that the computer as a productivity tool started proliferating in the Indian industries scene. But it was only by mid 80's that the forecasters, analysts and Indian government policy planners began to understand the potential of the Indian talent in computer software. The realization led to the formulation of the computer software policy in 1986. The economists began to analyze the potential of the Indian software industry. It would they said, be one of the fastest growing sectors of the economy and provide high quality employment for young people. It would earn significant revenue from exports and would be a highly desirable industry, as it required skilled manpower, few raw materials and was not any way damaging to the environment.

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InfosysType Public

Traded as

BSE: 500209

NSE: INFY

NYSE: INFY


CNX Nifty Constituent

Industry IT services, IT consulting

Founded 1981

Headquarters Electronics City, Bangalore, Karnataka, India


Key people

N. R. Narayana Murthy

(Executive Chairman)

S.D. Shibulal

(CEO & MD)

S. Gopalakrishnan

(Executive Vice Chairman, former Co-Chairman)

Services IT, business consulting and outsourcing services

Revenue US$ 6.69 billion (2013)

Profit US$ 1.72 billion (2013)

Total assets US$ 8.53 billion (2013)

Total equity US$ 7.33 billion (2013)

Owner(s) Government of India

Employees 158,404 (December 2013)

COMPANY PROFILE

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Infosys is a global leader in consulting, technology, and outsourcing solutions. As a proven partner focused on building tomorrow's enterprise, Infosys enables clients in more than 30 countries to outperform the competition and stay ahead of the innovation curve. With US$7.9 billion (in LTM Q2 FY14 revenues) and 160,000+ employees, we provide enterprises with strategic insights on what lies ahead. We help enterprises transform and thrive in a changing world through strategic consulting, operational leadership, and the co-creation of breakthrough solutions, including those in mobility, sustainability, big data, and cloud computing.

The Infosys Story

In 1981, seven engineers started Infosys Limited with just US$250. From the beginning, the company was founded on the principle of building and implementing great ideas that drive progress for clients and enhance lives through enterprise solutions. For over three decades, we have been a company focused on bringing to life great ideas and enterprise solutions that drive progress for our clients.

We recognize the importance of nurturing relationships that reflect our culture of unwavering ethics and mutual respect. It will come as no surprise, then, that 98 percent of our revenue comes from existing clients (as of September 30, 2013).

Infosys has a growing global presence of more than 160,000+ employees worldwide, 73 offices and 94 development centers in the United States, India, China, Australia, Japan, Middle East, and Europe.

At Infosys, we believe our responsibilities extend beyond business. That is why we established the Infosys Foundation – to provide assistance to some of the more socially and economically depressed sectors of the communities in which we work. And that is why we behave ethically and honestly in all our interactions – with our clients, our partners and our employees.

ANALYSIS

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I. SBI

Technical Analysis

Technical Strength: 6.7 / 10

Indicator Analysis Signal (0 - 10)

Chart

RSI RSI is 77.2. According to RSI analysis, sbin is overbought.

3.0 SBIN RSI Chart

MACD MACD: 79.0 and Signal Line: 56.8. According to MACD analysis, sbin is technically strong.

8.0 SBIN MACD Chart

Simple Moving Average

According to simple moving average analysis, sbin is in a uptrend. Support level is at 1.72e+03.

9.0 SBIN Simple Moving Average Chart

Exponential Moving Average

According to exponential moving average analysis, sbin is in a uptrend. Support level is at 1.75e+03.

9.0 SBIN Exponential Moving Average Chart

Bollinger Bands %b is 0.957. According to bollinger bands, sbin is technically strong.

7.0 SBIN Bollinger Bands Chart

Fibonacci Retracement

According to fibonacci retracement, price is above all levels. Major support is at 1754.0266 and 1696.95. Resistance level is 1938.8.

6.5 SBIN Fibonacci Retracement Chart

Average True Range ATR: 44.9 NA SBIN Average True Range Chart

Average Directional Index

ADX is 45.2 which means SBIN is in a trend.

NA SBIN Average Directional Index Chart

Relative strength Index

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Moving average convergence divergence


13

Exponential moving average

Bollinger bands


14

Average True Range


Fundamental Analysis

Beta 1.23

Confidence in Beta 6.55%

II. ICICI 15

Technical Analysis



Chart

RSI RSI is 63.4. According to RSI analysis, icicibank is technically strong.

9.0 ICICIBANK RSI Chart

MACD MACD: 45.4 and Signal Line: 48.4. According to MACD analysis, a bearish crossover just happend and it's a negative signal.

0.0 ICICIBANK MACD Chart


According to simple moving average analysis, icicibank is in a strong uptrend. Major support levels are 1211.247, 1091.915, 1025.597.

10.0 ICICIBANK Simple Moving Average Chart


According to exponential moving average analysis, icicibank is in a strong uptrend. Major support levels are 1198.956, 1132.928, 1063.23.

10.0 ICICIBANK Exponential Moving Average Chart

Bollinger Bands %b is 0.587. 5.0 ICICIBANK Bollinger Bands Chart



6.5 ICICIBANK Fibonacci Retracement Chart

Average True Range

ATR: 30.3 NA ICICIBANK Average True Range Chart


ADX is 45.3 which means ICICIBANK is in a trend.

NA ICICIBANK Average Directional Index Chart


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Bollinger bands


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Average True Range



Beta 1.53


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III. Infosys

Technical Analysis



Chart

RSI RSI is 63.4. According to RSI analysis, ICICI bank is technically strong.

9.0 ICICIBANK RSI Chart

MACD MACD: 45.4 and Signal Line: 48.4. According to MACD analysis, a bearish crossover just happened and it's a negative signal.

0.0 ICICIBANK MACD Chart


According to simple moving average analysis, ICICI bank is in a strong uptrend. Major support levels are 1211.247, 1091.915, 1025.597.

10.0 ICICIBANK Simple Moving Average Chart


According to exponential moving average analysis, ICICI bank is in a strong uptrend. Major support levels are 1198.956, 1132.928, 1063.23.

10.0 ICICIBANK Exponential Moving Average Chart

Bollinger Bands %b is 0.587. 5.0 ICICIBANK Bollinger Bands Chart



6.5 ICICIBANK Fibonacci Retracement Chart

Average True Range

ATR: 30.3 NA ICICIBANK Average True Range Chart


ADX is 45.3 which means ICICIBANK is in a trend.

NA ICICIBANK Average Directional Index Chart

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Bollinger bands


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Average True Range



Beta 1.53


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Comparative analysis of SBI AND Infosys

Key Financial Ratios

Ratios SBI Infosys

ROE 13.56 9.43

EPS 206.2 51.20

DPS 41.5 29.52

Beta 1.23 1.53

BETA : A measure of the volatility, or systematic risk, of a security or a portfolio in comparison to the market as a whole. Beta of greater than 1 indicates that the security ’s price will be more volatile than the market.

Here beta of SBI i.e., 1.23 is more near to 1. It is 23% more volatile than the market.

DPS : The sum of declared dividends for every ordinary share issued. Dividend per share (DPS) is the total dividends paid out over an entire year (including interim dividends but not including special dividends) divided by the number of outstanding ordinary shares issued. Dividends are a form of profit distribution to the shareholder. Having a growing dividend per share can be a sign that the company’s management believes that the growth can be sustained.

Here DPS is more in case of SBI; it indicates that company is growing YOY.

ROE: ROE examines profitably from the perspective of equity investors by relating profits available for the equity share holders with the book value of equity investments. The return from the point of view of equity shareholders may be calculated by comparing the net profit less preference dividend with their total contribution to the firm.

ROE of SBI is more as compared to Infosys.

EPS : EPS indicates the profitability of a company. Earnings per Share is the single most popular variable in dictating a share’s price. Earnings per Share is the Net Income (profit) of a company divided by the number of outstanding shares.

Here EPS of the SBI is far more as compared to Infosys.

Overall, it can be said that investing in SBI will give higher returns.

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Comparative analysis of SBI AND ICICI

Key Financial Ratios

Ratios SBI ICICI

ROE 13.56 7.96

EPS 206.2 40.95

DPS 41.5 12.0

Beta 1.23 1.53

In the analysis we can see that SBI has higher ROE, EPS, and DPS as compared to ICICI. Beta for ICICI is more near to 1 as compared to SBI.

Thus, it can be said returns will be higher in case of SBI.

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References

Books:

Security Analysis & Portfolio Management - Fishers & Jordon.

Investment analysis and portfolio Management, Chandra, McGraw

Hill2009.

Security Analysis & Portfolio Management- V.A.Avadhani.

Financial Markets and Services- Gordon and Natarajan, Himalaya

Publications.

Websites:

http://www.equitymaster.com/charts/CompGraph.asp?choose=0&chkComp=on&txtGrSymb=ICBK&ddlValnSymb=BSNX&period=6&Symbol=SBI%2CICBK%2C&MAverage=&PrnFriend=0&Type=&CmpSymbol=SBI%2CICBK%2C&chkSymbol=0&filename=chartm.asp&utm_source=stockquote-page&utm_medium=website&utm_campaign=chart-link&utm_content=1year#chart

http://www.google.com/finance http://www.moneycontrol.com/stock-charts/infosys/charts/IT#IT http://www.nseindia.com/ http://www.topstockresearch.com/HISTORY/INDIAN_STOCKS/

COMPUTERS_SOFTWARE/Infosys_Technologies_LtdOneYearChart.html http://techpaisa.com/stock/infy/ http://techpaisa.com/stock/sbi/ http://techpaisa.com/stock/ICICI/ http://www.technicalanalysissimplified.com/2013/03/which-stocks-to-trade07-feb-icici-

sbi.html http://www.studymode.com/essays/a-Study-On-Performance-Evaluation-Of-

1862543.html http://www.icicibank.com/aboutus/about-us.html http://www.infosys.com/about/Pages/index.aspx http://www.telitnetwork.itgo.com/about.html http://www.stockta.com/cgi-bin/analysis.pl http://www.chartscorner.com/tag/technical-analysis/ https://www.sbi.co.in/user.htm

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