fyp-equity research for india infoline

7/27/2019 Fyp-equity Research for India Infoline

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A

PROJECT REPORT

ON

EQUITY RESEARCH (FUNDAMENTAL ANALYSIS)

FOR

INDIA INFOLINE LTD.

SUBMITTED TO UNIVERSITY OF PUNEIN PARTIAL FULFILLMENT OF 2 YEARS FULL TIME COURSE

MASTERS IN BUSINESS ADMINISTRATION (M.B.A.)

SUBMITTED BYCHOTHANI HITESH HASMUKH

( BATCH - 2006-08 )

BRACTsVISHWAKARMA INSTITUTE OF MANAGEMENT,

KODHAWA PUNE- 411014.

www.final-yearproject.com | www.troubleshoot4free.com/fyp/


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ACKNOWLEDGEMENT

This project bears imprint of all those who have directly or

indirectly helped and extended their kind support in completing this

project.

At the time of making this report I express my sincere gratitude to

all of them.

I must first express my gratitude to Ms. Reena Singh, Branch

Manager (Sohrab Hall Branch) and the staff members for havingaccorded me the permission to undertake a project in India Infoline Ltd.

I also must show my deepest gratitude to Director Dr. Sharad

Joshi and Prof. Smita Sovani for their valuable suggestions, guidance

and advice in bringing out this project.

- Chothani Hitesh H.



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INDEX

Sr. No. Title Page No.

1. EXECUTIVE SUMMARY 1

2. COMPANY PROFILE 4

3. OBJECTIVE OF THE STUDY 9

4. THEREOTICAL BACKGROUND 10

5. RESEARCH METHODOLOGY 18

6. DATA ANAYLSIS/FINDINGS 20

7. LIMITATIONS 55

8. CONCLUSION 57

9. RECOMMANDATION 60

10. BIBLIOGRAPHY62



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INTRODUCTION

The stock markets are the most volatile markets and are difficult to understand

as the weather. Though this does not mean that the markets cannot be predicted but

it only means that trends may change without warning, as with weather.

The stock markets are characterized by almost all factors, again starting right

from weather and ending at the political environment. Effects of one market also

causes a spillover into the other and an external cause in one market can lead to the

reaction in another market. For instance, its been proved that a delayed monsoon in

India will create the problems of flooding in the European countries, effecting

adversely economies of both the regions.

The pulse of the market also depends upon timely exit and entry. For arriving

at a correct conclusion reasonable data is required to understand the mechanics of

the stock and the industry vis--vis global and local in which the company

operates. While a practical long-term view will help reduce risks, marrying the stock

on the other hand may totally increase risks.

By going through the Industry Reports, Financials the investor can arm

himself with reasonable information about the stocks, which are being tracked by the

investor. However, for consistent monitoring of stocks, it is imperative that the

investor has limited exposure to the stocks, which are being capable of being tracked

by him a too big a portfolio will divert attention and ultimately harm investor

interests.

In the present project an attempt is made to study the importance of fundamental

analysis for investors.

Shares: -



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The companies Act 1956 defines Shares as a share in the capital of a company and

includes stock except where distinction between stock and share is expressed or

implied. A share is regarded as property, which can be bought and sold like any other

property. It also consists other rights given by Articles of Association of company.

Equity or ordinary shares: -

These are those shares, which do not enjoy any special rights in respect of payment of

dividend or repayment of capital. The return of capital to equity shareholders is not

guaranteed. Also when the company is wound up, capital of equity shareholders is

lastly paid, only after all other claims have been paid in full. That is why equity is also

called as The Risk Bearing or Venture Capital.

There are two sources ofreturn on equity shares: -

1. Dividend: -When companies earn sufficient profit, then Board of Directorsdeclares for all shares.

2. CapitalGain: -Which arises from an increase in the market price of shares,which is generally associated with growth in per share earning.

Benefits of Investments in Equity shares: -

1. You can earn good rate of dividend or can make better profit on marketfluctuation.

2. Bonus issue: -These are given as free gift to existing shareholders either fullyor partly paid up out of accumulated profits.

3. Existing shareholders can get Right issue in case of further issue of capitalby company.

4. Equity shareholders have Right to vote in annual general meeting and otherrights like call meeting, winding up of the company.

5. Shareholders get free copy of Annual Report in which details of all businessconducted in last year is mentioned.



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6. A share is Transferable Property. It can be transferred or transmitted byshareholder to any other person.

7. Tax Exemption: -As per Income Tax Act, Dividend is not taxable in thehands of shareholders similarly Long Term Capital Gain on shares is

exempted up to March 2007.

8. Liquidity: -Because of large market for share investor can convert hisinvestments into liquid money easily.

What is Fundamental analysis?

Fundamental analysis is the examination of the underlying forces that affect

the well being of the economy, industry groups, and companies. As with mostanalysis, the goal is to derive a forecast and profit from future price movements. At

the company level, fundamental analysis may involve examination of financial data,

management, business concept and competition. At the industry level, there might be

an examination of supply and demand forces for the products offered. For the national

economy, fundamental analysis might focus on economic data to assess the present

and future growth of the economy. To forecast future stock prices, fundamental

analysis combines economic, industry, and company analysis to derive a stock's

current fair value and forecast future value. If fair value is not equal to the currentstock price, fundamental analysts believe that the stock is either over or under valued

and the market price will ultimately gravitate towards fair value. Fundamentalists do

not heed the advice of the random walkers and believe that markets are weak-form

efficient. By believing that prices do not accurately reflect all available information,

fundamental analysts look to capitalize on perceived price discrepancies.

Fundamental analysis is a method used to determine the value of a stock by

analyzing the financial data that is 'fundamental' to the company. That means that

fundamental analysis takes into consideration only those variables that are directly

related to the company itself, such as its earnings, its dividends, and its sales.

Fundamental analysis does not look at the overall state of the market nor does it

include behavioral variables in its methodology. It focuses exclusively on the



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company's business in order to determine whether or not the stock should be bought

or sold.



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EXECUTIVE SUMMARY



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In India many traditional people are very risk averse. They are not aware of

the investment opportunities in the stock market. They consider stock market as a

game of gambling. But the original scenario is quite different. There is no doubt that

there are speculators who try to hike the price of a stock artificially. Investing in

equities involves high risk and the return on it totally depends on the companies

performance. But investing in the right stock at the right price and holding for a

longer time horizon would surely be a better investment.

The strategy of selecting stocks that trade for less than their intrinsic value is

called value investing. Value investors actively seek stocks of companies that they

believe the market has undervalued. They believe the market overreacts to good and

bad news, causing stock price movements that do not correspond with the company's

long-term fundamentals. The result is an opportunity for value investors to profit by

buying when the price is deflated. The very definition of value investing is subjective.

Some value investors only look at present assets/earnings and don't place any value on

future growth. Other value investors base strategies completely around the estimation

of future growth and cash flows. Despite the different methodologies, it all comes

back to trying to buy something for less than its worth. The purpose behind this

project was to learn the mannerisms of the stock market trading and analyzing a stock

for a good investment opportunity.

The reason behind choosing this project is that it provides hands on experience

with what goes on in the stock market on a day to day basis. The field of equity

research is very vast and one has to look into various aspects of the functioning of the

company to get to any conclusion about the possible performance of the company in

the market. Investors like warren buffet made a fortune out of investments in the stock

market, which is quiet impossible without proper research about the companies. The

field of equity research is full of challenges.



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The project is done with India Infoline Securities Limited a very well known

company in the field of stock broking and capital market services sector. This project

gave me a chance to get valuable insights from a hoard of vastly experienced people

in this field and to get various approaches each one adopts to evaluate various

companies. The duration of the project was two months. These two months were not

only limited to learning and devoting time towards equity research but it also

provided an insight on what various services such broking houses provide and what

efforts are required to manage such organizations.



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COMPANY PROFILE



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INDIA INFOLINE LTD

India Infoline limited is listed on both the leading stock exchanges in India,

i.e. The Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). It is

engaged in the business of Equities broking, Wealth Advisory Services and Portfolio

Management Services. It offers broking services in the Cash and Derivatives

segments of the NSE as well as the Cash segment of the BSE. It is registered with the

National Securities Depository Ltd. (NSDL) as well as Central Depository Services

Ltd. (CDSL) as a depository participant, providing a one-stop solution for client

trading in the equities market. A SEBI authorized Portfolio Manager; it offers

Portfolio Management Services to clients.

COMPANY VISION:

The companies Vision is to be the most respected company in the financial

services space.

The box below elaborates how the company proposes to attain the vision of being the

most respected company in the space.

SHAREHOLDERS

Growth at above industry rate

with derisking

High ROCE, ROE

GENERAL PUBLIC

Corporate Governance

Transparency

CUSTOMERS

Cutting edge technology

High service standards

EMPLOYEES

Skill development by investments

in training

Empowerment and conducive

work environment



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SLOGAN:

ITS ALL ABOUT MONEY, HONEY!

PRODUCT AND SERVICES:

We are a one-stop financial services shop, most respected for quality of its advice,

personalised service and cutting-edge technology.

Equities Broking:

India Infoline provided the prospect of researched investing to its clients, which

was hitherto restricted only to the institutions. Research for the retail investor did not

exist prior to India Infoline. India Infoline leveraged technology to bring the

convenience of trading to the investors location of preference (residence or office)

through computerized access. India Infoline made it possible for clients to view

transaction costs and ledger updates in real time.

Portfolio Management Services:Our Portfolio Management Service is a product wherein an equity investment

portfolio is created to suit the investment objectives of a client. We at Indiainfoline

invest your resources into stocks from different sectors, depending on your risk-return

profile. This service is particularly advisable for investors who cannot afford to give

time or don't have that expertise for day-to-day management of their equity portfolio.

Research:

Sound investment decisions depend upon reliable fundamental data and stock

selection techniques. India Infoline Equity Research is proud of its reputation for, and

we want you to find the facts that you need. Equity investment professionals routinely

use our research and models as integral tools in their work. They choose Ford Equity

Research when they can clear your doubts.



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Commodities:

India Infolines extension into commodities trading reconciles its strategic intent

to emerge as a one-stop solutions financial intermediary. Its experience in securities

broking has empowered it with requisite skills and technologies. The Companys

commodities business provides a contra-cyclical alternative to equities broking. The

Company was among the first to offer the facility of commodities trading in Indias

young commodities market (the MCX commenced operations only in 2003). Average

monthly turnover on the commodity exchanges increased from Rs 0.34 bn to Rs 20.02

bn. The commodities market has several products with different and non-correlated

cycles. On the whole, the business is fairly insulated against cyclical gyrations in the

business.

Insurance:

An entry into this segment helped complete the clients product basket;

concurrently, it graduated the Company into a one-stop retail financial solutions

provider. To ensure maximum reach to customers across India, we have employed a

multi pronged approach and reach out to customers via our Network, Direct and

Affiliate channels. Following the opening of the sector in 1999-2000, a number of

private sector insurance service providers commenced operations aggressively and

helped grow the market.

The Companys entry into the insurance sector derisked the Company from a

predominant dependence on broking and equity-linked revenues. The annuity based

income generated from insurance intermediation result in solid core revenues across

the tenure of the policy.

Invest In Mutual Fund

India Infoline offers you a host of mutual fund choices under one roof, backed by

in-depth research and advice from research house and tools configured as investor

friendly.



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Wealth Management Services:

Imagine a financial firm with the heart and soul of a two-person organization. A

world-leading wealth management company that sits down with you to understand

your needs and goals. We offer you a dedicated group for giving you the most

personal attention at every level.

Mortgages:

During the year under review, Indiainfoline acquired a 75% stake in Moneytree

Consultancy Services to mark its foray into the business of mortgages and other loan

products distribution. The business is still in the investing phase and at the time of the

acquisition was present only in the cities of Mumbai and Pune. The Company brings

on board expertise in the loans business coupled with existing relationships across a

number of principals in the mortgage and personal loans businesses. Indiainfoline

now has plans to roll the business out across its pan-Indian network to provide it with

a truly national scale in operations.

HEAD OFFICE:

India Infoline Ltd.,

75, Nirlon Complex,

Off. Western Express Highway,

Goregaon (East),

Mumbai 400063.

WEB ADDRESS:

www.indiainfoline.com

www.5paise.com



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OBJECTIVE OF THE PROJECT

TO UNDERSTAND THE CONCEPT AND TECHNIQUES

OF FUNDAMENTAL ANALYSIS.

TO STUDY THE PUBLIC SECTOR BANKS AND KEY

PLAYERS IN THE INDIAN STOCK MARKET.

TO RECOMMEND THE BEST AS A VALUE INVESTMENT



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THEREOTICAL BACKGROUND



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ABOUT PUBLIC SECTOR BANKS.

The shares undertaken here for the analysis belongs to the banking industry.

All the firms herein mention are from the public sector. This means that all the banks

are Public Sector Undertaking (PSUs).

A Public sector undertaking is a wherein the majority of the stake is with

either the state or the central government. A better word instead of stake can be

control, i.e. either the control is in the hands of the state government or the central

government. We can see in each of the bank that the majority of the shares are held by

the promoters that is the government.

Nationalization of the banks took place on 19th July, 1969. Initially fourteen

banks were nationalized. Later on six more banks were added to the list. At present

nineteen banks are under the public sector.

The government had contributed an aggregate of Rs. 20,446.12 crore towards

recapitalization of the nationalized banks by the end of March 1999. The government

of India decided to allow some of the public sector banks to tap directly the domestic

capital markets. In order to enable the nationalized banks to access the capital markets

to strengthen their capital base and meet the capital adequacy norms. The authorized

capital of each of the public sector banks was been set at Rs. 1500, crore divided into

150 crore fully paid up share of Rs. 10 each.

Oriental Bank of Commerce was the first nationalized bank to have access to

the capital markets. It raised a sum of Rs. 387.24 crore in October 1994, reducing the

government shareholding to 66.5%. In these way all the the public sector banks came

down to the capital market as and when required. The government share holding is

still the highest in all the public sector banks though all the banks have bought their

IPOs to the market.



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Why Public Sector Banks?

A Public sector undertaking is a wherein the majority of the stake is with

either the state or the central government. A better word instead of stake can be

control, i.e. either the control is in the hands of the state government or the central

government. We can see in each of the bank that the majority of the shares are held by

the promoters that is the government.

The public sector banks are one of the major sources of finance for small,

medium as well as large firms. These banks are very important from the point of

deposit mobilization. The public sector banks are those which have a strong network

of branches and they have reached the remote areas of the country. For e.g. the state

bank of India has a great network of branches and ATMs. SBI is the largest bank of

the country and is an agent of the Reserve bank Of India.

The public sector is a great source for fund mobilization and asset allocation.

The banks considered herein are the banks that have highest market capitalization

among the Public Sector Banks of the banking industry.

The banks if ranked according to their market capitalization:

State Bank of India.

Punjab National Bank.

Bank of Baroda.

Bank of India.



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BANKING STRUCTURE OF INDIAN BANK



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KEY POINTS ABOUT THE BANKS

Demand

Indian economy is growing at an impressive rate. The Industrial production

remained robust during April-May 2007, recording a year-on-year expansion of 11.7

per cent. The manufacturing sector remained the key driver of industrial activity, with

growth of 12.7 per cent. While growth of the mining sector remained subdued, that of

the electricity sector was higher than that during April-May 2006. The manufacturing

sectors robust performance was largely contributed by machinery and equipment,

food products, basic metal and alloy industries and chemicals and chemical

products. The higher growth in food products and wood and wood products could

be partly attributed to the base effect.

Robust growth in bank deposits and nonfood credit off take and exports of

business process outsourcing and information technology-enabled services helped in

sustaining the growth of the sub-sector financing, insurance, real estate and business

services. All these sectors are directly or indirectly connected to the bank or are

dependent on the banks for the growth.

Barriers to entry

Getting license for opening a bank is a rigorous process. The Reserve Bank of

India has laid down many criteria for getting a license for any organization to run a

banking business. It requires a specific amount of capital as prescribed by the RBI.

There is a huge investment in technology. Now days the business houses are in

requirement of speed banking so investment in technology is very important. For

growth of the bank it is very important for a bank to build a strong branch network.

Again there are rules laid out by the RBI for opening of the branches. Banks have to

open branches in the rural area to get a license to open a branch in the urban area.



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Bargaining power of suppliers:

The bargaining power of the supplier is high during periods of tight liquidity.

Trade unions in public sector banks can be anti reforms. Depositors may invest

elsewhere if interest rates fall.

Competition:

There is high competition in the banking sector because of various kinds of

banks working in India. There are public sector banks, private sector and foreign

banks. The private sector banks are the banks which attracts the business house and

the high income class people. They normally are providing better service than the

public sector bank. The foreign banks operating in India are doing their business quite

efficiently. They have shown higher return on asset than the domestic banks, higher

non interest income, attained higher capital adequacy ratio and lower NPAs. The

public sector banks are facing a good competition from the scheduled co-operative

bank like The Cosmos Co operative bank. The non banking financial companies

(NBFC) are also giving a good competition being in similar business lines.

Supply:

Liquidity is controlled by the Reserve Bank of India (RBI). This may be done

by the RBI by the means of CRR or SLR.

CRR, BANKS AND SHARE PRICE

One of the major factors affecting profitability of the bank and thus the share

price of the banks is the CRR. Lets understand how.CRR stands for the cash reserve ratio. This is the specified proportion of

deposits that a bank has to maintain with the RBI. At present the cash reserve ratio is

7.00%. When there is a change in the CRR, the first impact is seen on the banks. For

banks, the rise in CRR would mean that a larger proportion of funds will be with RBI,

while a fall in rate will mean a lower proportion will be with the apex bank.



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There are specific angles that one has to consider while evaluating the impact

of CRR on banks. In time of boom, like is the currently, lending will give a higher

rate of return to banks. Hence, if they have to keep a large proportion of their funds

away from lending and in the form of deposits, it is a loss of opportunity for them.

This will bring down their earnings.

An increase in CRR would also mean that money is sucked out of the system.

This would mean that funds are hard to come by and hence banks will have to pay

more to depositors in order to induce them to keep their funds banks. This will push

up the cost of funds for banks. Due to this banks will also have to raise lending rates

in order to meet the increased cost while maintaining their margins.

The market will analyze banks on the basis of their margins, and whether they

will be able to maintain this going forward. A CRR rise in it self means tougher

condition for banks but what is important is that they should also be able to keep pace

with this entire situation. That is the key to the way in which the bank stocks will

perform in the market.

RBIs moves on the CRR.

Effective Since Cash Reserve Ratio

March 31, 2004 4.50

September 18, 2004 4.75 (+0.25)

October 2, 2004 5.00 (+0.25)

January 24, 2006 5.00

October 31, 2006 5.00

December 23, 2006 5.25 (+0.25)

January 6, 2007 5.50 (+0.25)

January 31, 2007 5.50

February 17, 2007 5.75 (+0.25)March 3, 2007 6.00 (+0.25)

April 14, 2007 6.25 (+0.25)

April 28, 2007 6.50 (+0.25)



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There may also be an over all impact on companies in terms of scarcity of

funds along with an increase in costs due to which the overall interest charges for

capital intensive companies will increase. There is also the worry that a lower lending

could lead to a contraction in activities, which might slow down demand in various

sector. This in turn could act as a dampener for several companies. It also affects

share prices of companies that operate in the affected sector over the medium term.



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RESEARCH METHODOLOGY



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The present study is the outcome of systematic procedures adopted by the

researcher, which includes primary data collection as well as secondary data

collection. They are explained below:

1.

PRIMARY DATA COLLECTION:

Primary data is originally gathered specifically on project hand. One can

obtain information from dealers, salesmen, etc. It offers much greater accuracy

and reliability.

In this study, the facts and figures are raw material with which researcher works.

Thus, in primary data collection researcher come across many methods as follows:

Observation method

2. SECONDARY DATA COLLECTION:

Secondary data is the data already collected by someone else. This data is not

especially collected to solve present or specific problem. The information is relevant

and can be used for our purpose.

After doing the data collection in primary method, the researcher did the collection

through the secondary data. In this there are several types such as:

General library

Trade-Books

Internet etc.



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DATA ANALYSIS AND FINDINGS



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THE CURRENT ECONOMIC SCENARIO

The status of the economy has a major impact on the overall stock prices.

Economic analysis is the study of the economic trends in the economy. The major

factors contributing to the economy analysis are as follows.

THE GROWTH OF THE GDP.

The Indian economy continued to record robust growth in 2006-07 for the

fourth successive year, buoyed by the sustained momentum in the services and

manufacturing sectors. The latest estimates released by the Central Statistical

Organisation (CSO) in May 2007 revised real GDP growth upwards to 9.4 percent

during 2006-07 from 9.2 per cent in the advance estimates.

The upward revision was mainly due to manufacturing (12.3 per cent from the

earlier estimate of 11.3 per cent) and construction (10.7 per cent from 9.4 per cent),

partly offset by downward revision in financing, insurance, real estate and business

services (10.6 per cent from 11.1 per cent). Real GDP growth averaged 8.6 per cent

per annum during 2003-04 to 2006-07 and 7.6 per cent per annum for the Tenth Plan

period (2002-03 to 2006-07)

Indian economy grew 9.3% in April-June 2007 fuelled by industrial and

services sectors. The real GDP growth during the same quarter of last year was at

9.6%. While the agricultural sector grew at 3.6%, industrial and services grew 10.6%

each on Y-o-Y basis.

Despite the higher than expected growth during the first quarter, economists

expect growth momentum to slow down in the coming quarters due to high level of

interest rates and rupee appreciation.



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The Growth of the GDP:

7.5

99.4

0

2

4

6

8

10

GDP Growth %

2004-05 2005-06 2006-07

Year

GDP Trend

THE TREND OF INFLATION.

Simply put, inflation is a rise in prices items over a period of time. It is

measured through various indices & each provides specific information about the

prices of items that it represents. The index could be the Wholesale Price Index (WPI)

or the Consumer Price Index (CPI) for specified categories of people like agricultural

workers or urban non - manual employees. Each of the indices created in the specific

manner with the certain year as the base year and they consider the price change over

the year. The rate of inflation declared every week has an impression on the stock

market. In the graph you can see the trend followed by the inflation.



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The Trend of Inflation

Inflation Trend

6

4.54.9

5.3

6.46.7

66.5 6.5 6.3

0

1

2

3

4

5

6

7

8

29/04/05 26/10/06 9/6/2006 31/10/06 6/1/2007 31/01/07 17/02/07 3/3/2007 30/03/07 14/04/07

Date

Inflation(%)

INFLATION AND THE MARKETS?

To tame inflation, the government usually hikes interest rates. This tends to

make debt instrument attractive relative to equities as the former carry a lower

risk(small saving instruments are risk free as they are guaranteed by the government).

This result in some amount investment shifting from equity to debt. However, high

inflation is not always bad and low inflation need not always be good for equity

markets, as the impact will differ for companies and sector across different time

horizons. The first thing to consider is the items where prices are rising. For e.g. a rise

in oil prices will impact a wide range of items from food products to those that require

transportation.

BALANCE OF PAYMENTS

Indias balance of payments in 2006-07 reflected a number of positive

features, merchandise trade continue to exhibit robust growth during 2006-07,although there was some loss of pace from a strong growth of 2005-06. The higher

growth of imports vis--vis experts lead to a persistent rise in trade deficit, on the

balance of payments basis. Nonetheless the current account deficits as per cent of

GDP remain unchanged (1.1% of GDP) from the previous year since the widening of



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the merchandise trade deficit was offset to a large extent by the continuing buoyancy

in net invisibles surplus.

Net capital inflows to India remained buoyant (4.9% of GDP), fart exceeding

the current account deficit. Higher capital flows could be attributed to the

strengthening of micro economic fundamentals, greater investor confidence and

ample global liquidity. Net FDI inflows from abroad US$ 19.4 billion exceeded FII

inflows (net) during 2006-07 aggregating US$ 3.2 billion the debt flows (net) at US$

25.0 billion were led by external commercial borrowings reflecting strong investment

demand. Net capital flows, after financing the current account deficit, led to accretion

of US$ 36.6 billion, excluding valuation changes, to foreign exchange reserves during

2006-07.



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THE CURRENT BANKING SCENARIO

Currently (2007), overall, banking in India is considered as fairly mature in

terms of supply, product range and reach-even though reach in rural India stillremains a challenge for the private sector and foreign banks. Even in terms of quality

of assets and capital adequacy, Indian banks are considered to have clean, strong and

transparent balance sheets-as compared to other banks in comparable economies in its

region. The Reserve Bank of India is an autonomous body, with minimal pressure

from the government. The stated policy of the Bank on the Indian Rupee is to manage

volatility-without any stated exchange rate-and this has mostly been true.

With the growth in the Indian economy expected to be strong for quite some

time-especially in its services sector, the demand for banking services-especially retail

banking, mortgages and investment services are expected to be strong. M&As,

takeovers, asset sales and much more action (as it is unravelling in China) will happen

on this front in India.

This is the first time an investor has been allowed to hold more than 5% in a

private sector bank since the RBI announced norms in 2005 that any stake exceeding

5% in the private sector banks would need to be vetted by them.

Currently, India has 88 scheduled commercial banks (SCBs) - 28 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.



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STATE BANK OF INDIA

BSE: 500112 NSE: SBININDUSTRY: Banking PSU.



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BANK PROFILE:

State Bank of India was established on the 1st July, 1955, by acquiring the total

asset and the liabilities of the Imperial Bank of India. The State Bank of India has a

paid up capital of Rs. 526.30 crore.

Reserve Bank of India is the single largest shareholder of the bank. SBIs shares and

bonds are listed for trading on all the major Indian stock exchanges viz., Bombay,

New Delhi, Kolkata, Chennai and Ahemdabad; and at the National Stock exchange.

SBI has one of the largest market capitalization of all the companies traded on the

exchanges. The banks GDRs are listed on the London Stock Exchange.

State Bank of India (SBI), formed in 1955 is the largest public sector bank in India.

The Government of India holds 59.73 percent of the total equity shares of the bank;

institutional investors hold 23.48 percent shares, while the Public holds 6.36 percent.

Mr. T. S. Bhattacharya is the chairman of the bank.

Core sectors to which services of the bank extends are Personal banking, NRI's,

Agricultural and Rural sectors, International banking, Corporate banking, Small and

Medium Sized Enterprises (SME), Government banking, etc. Some of the primary

services provided are working capital finance, project finance, deferred paymentguarantees, capex loans, corporate term loans, structured finance, dealer financing,

channel financing, equipment leasing, loan syndication, financing Indian overseas

firms, packing credit, external commercial borrowings, foreign currency loans, Letter

of Credits, guarantees, etc. Facilities provided by the bank are ATM services, Internet

banking, e-payments, e-rail booking, safe deposit locker, gift cheques, foreign inward

remittance, foreign travel card etc. The bank also provides non-banking services in

areas like capital markets, mutual funds, security trading, insurance, factoring services

and credit card business etc., through its subsidiaries.

The registered office of SBI is in Mumbai. The bank operates through a network of

14 Local Head Offices, 57 Zonal Offices and 5217 ATMs all over India. It also has 52

foreign offices in 34 countries across the globe. It has 3 training institutes located at



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Hyderabad and an academy at Gurgaon. The bank has also acquired two new

branches at Sydney and Muscat.

Shareholding Pattern

Indian Promoters 59.7%

Foreign collaborators 0.01%

Indian inst/Mutual Fund 11.0%

FIIs 11.9%

ADR/GDR 0.0%

Free float 17.3%

Shareholders 526,782

Market related data as on 18/06/07

Market Capital 69387 (Rs Crore)

Face ValueRs. 10

52 Wks High/Low1455/684

Market Price1318



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FINANCIAL ANALYSIS

BALANCE SHEET OF STATE BANK OF INDIA FOR THE LAST THREE

YEARS.

Rs in Crore MARCH 2005 MARCH 2006 MARCH 2007

Capital and

Liabilities

Equity Share Capital 526.30 526.30 526.30

Preference ShareCapital

0.00 0.00 0.00

Reserves 23,545.84 27,117.79 30,772.26

Revaluation Reserves 0.00 0.00 0.00

Deposits 367,047.52 380,046.06 435,521.09

Borrowings 19,184.31 30,641.24 39,703.33

Other Liabilities &Provisions

49,767.97 55,829.23 60,283.15

Total Liabilities 460,071.94 494,160.62 566,806.13

ASSETS

Cash & Balance withRBI

16,810.33 21,652.70 29,076.43

Balance with Banks,Money at Call

22,511.77 22,907.30 22,892.26

Advances 202,374.45 261,800.94 337,336.49

Investments 197,097.91 162,534.24 149,148.88

Net Block 2,576.42 2,673.11 2,676.92

Capital Work inProgress

121.27 79.82 141.95

Other Assets 18,579.79 22,512.51 25,533.20

Total Assets 460,071.94 494,160.62 566,806.13



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PROFIT AND LOSS ACCOUNT OF STATE BANK OF INDIA FOR THE

LAST THREE YEARS.

Rs in Crore MARCH 2005 MARCH 2006 MARCH 2007INCOME

Interest Earned 32,428.00 35,979.57 39,491.03

Other Income 7,121.73 7,528.16 7,498.94

Total Income 39,549.73 43,507.73 46,989.97

EXPENDITURE

Interest expended 18,483.37 20,390.45 23,436.82

Employee Cost 6,907.35 8,123.05 7,932.58

Selling and AdminExpenses

2,414.61 2,872.92 3,288.55

Depreciation 752.21 763.68 631.51

MiscellaneousExpenses 6,687.67 6,950.96 7,159.20

Preoperative ExpCapitalised

0.00 0.00 0.00

Operating Expenses 10,076.00 11,759.65 13,530.15

Provisions &Contingencies

6,685.84 6,950.96 5,481.69

Total Expenditure 35,245.21 39,101.06 42,448.66

Net Profit for the

Year4,304.52 4,406.67 4,541.31

Profit broughtforward

0.34 0.34 0.34

Total Profit 4,304.86 4,407.01 4,541.65Equity Dividend (%) 125.00 140.00 140.00

No of Share 526300000 526300000 526300000



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NET PROFIT GROWTH

4,304.86

4407.01

4541.65

4,150.00

4,200.00

4,250.00

4,300.00

4,350.00

4,400.00

4,450.00

4,500.00

4,550.00

Net Profit (Rs in

Crores)

2005 2006 2007

Year

SBI

STOCK PRICE

SBI

654.8 681.9

938 908.15 968.5

727.75

1028.65

1245.6

994.45

1525

0

200

400600

800

10001200

1400

1600

1800

Date

31/03/05

30/06/05

30/09/05

31/12/05

31/03/06

30/06/06

30/09/06

31/12/06

31/03/07

Date

Price



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MARKET PRICE AS ON BALANCE SHEET DATE:

(in Rs ) MARCH 2005 MARCH 2006 MARCH 2007Market price per

share

654.8 968 994

KEY FINANCIAL RATIOS

Particulars MARCH 2005 MARCH 2006 MARCH 2007

ROE 17.88 16.25 14.51

EPS 81.79 83.73 86.29

Dividend Payout

Ratio

15.28 16.72 16.22

Book Value Per Share 457.38 525.63 594.69

P/E Ratio % 8.05 11.56 11.51

INTERPRATATION:

The profit of the bank is not increasing much, which can be the reason which

has bought the return on equity down. The other reason for ROE decreasing may be

high distribution of dividend. Slow growth of the EPS must not be the reason for the

shareholder to worry because the bank is being giving more than 100% dividend

which brings the profit down and therefore the EPS.

As against this the P/E is on an increase. The increasing book value shows that

the bank has collected a good sum for the shareholders as reserves. The dividend

payout ratio is growing which is good for the holders who like to have some kind of

cash flow from their investments. The market price of the share shows a substantial

capital appreciation in the year 2005-60, but shows volatility.



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BANK OF INDIA

BSE 532149 NSE - BANKINDIAINDUSTRY Banking PSU.



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BANK PROFILE

Bank of India was founded on 7th September, 1906 by a group of eminent

businessmen from Mumbai. The Bank was under private ownership and control till

July 1969 when it was nationalized along with 13 other banks.

Beginning with one office in Mumbai, with a paid-up capital of Rs.50 lakh and 50

employees, the Bank has made a rapid growth over the years and blossomed into a

mighty institution with a strong national presence and sizable international operations.

In business volume, the Bank occupies a premier position among the nationalized

banks.

The Bank has 2644 branches in India spread over all states/ union territories including

93 specialized branches. These branches are controlled through 48 Zonal Offices.

There are 24 branches/ offices (including three representative offices) abroad.

The Bank came out with its maiden public issue in 1997. Total number of

shareholders as on 30/09/2006 is 2, 25,704.

While firmly adhering to a policy of prudence and caution, the Bank has been in the

forefront of introducing various innovative services and systems. Business has been

conducted with the successful blend of traditional values and ethics and the most

modern infrastructure. The Bank has been the first among the nationalized banks to

establish a fully computerized branch and ATM facility at the Mahalaxmi Branch at

Mumbai way back in 1989. The Bank is also a Founder Member of SWIFT in India. It

pioneered the introduction of the Health Code System in 1982, for evaluating/ rating

its credit portfolio.

The Bank's association with the capital market goes back to 1921 when it entered intoan agreement with the Bombay Stock Exchange (BSE) to manage the BSE Clearing

House. It is an association that has blossomed into a joint venture with BSE, called

the BOI Shareholding Ltd. to extend depository services to the stock broking

community. Bank of India was the first Indian Bank to open a branch outside the

country, at London, in 1946, and also the first to open a branch in Europe, Paris in



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1974. The Bank has sizable presence abroad, with a network of 23 branches

(including three representative offices) at key banking and financial centers viz.

London, New York, Paris, Tokyo, Hong-Kong, and Singapore. The international

business accounts for around 20.10% of Bank's total business.





FIIs 16.1%

ADR/GDR 0.0%

Free float 8.8%




Face ValueRs. 10


Market Price 191



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FINANCIAL ANALYSIS

BALANCE SHEET OF BANK OF INDIA FOR THE LAST THREE YEARS.


Capital and

Liabilities

Equity Share Capital 488.14 488.14 488.14


0.00 0.00 0.00

Reserves 3811.12 4338.40 5257.75

Revaluation Reserves 165.61 157.35 149.48

Deposits 78,821.44 93,932.03 119,881.74

Borrowings 5,961.95 5,893.91 6,620.83


5,756.16 7,476.39 9,269.07


ASSETS

Cash & Balance withRBI

3,904.73 5,588.41 7,196.89

Balance with Banks,Money at Call

3,621.52 5,857.57 10,208.65

Advances 55,528.89 65,173.75 84,935.89

Investments 28,686.32 31,781.75 35,492.76Net Block 791.58 799.29 777.89


22.59 10.68 11.41

Other Assets 2,448.79 3,074.77 3,043.52

Total Assets 95,004.42 112,286.22 141,667.01



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PROFIT AND LOSS ACCOUNT OF BANK OF INDIA FOR THE LAST

THREE YEARS.


INCOME

Interest Earned 6,031.53 7,028.70 9,180.33

Other Income 1,155.79 1,184.38 1,562.95

Total Income 7,187.32 8,213.08 10,743.28

EXPENDITURE


Employee Cost 1,263.21 1,328.13 1,614.00

Selling and AdminExpenses 570.27 690.28 897.69

Depreciation 98.84 96.73 96.73

MiscellaneousExpenses

1,120.31 999.78 1,271.83

Preoperative ExpCapitalized

0.00 0.00 0.00

Operating Expenses 1,932.32 2,115.14 2,608.42


1,120.31 999.78 1,271.83


Net Profit for the

Year340.05 701.44 1,123.17


0.00 220.00 541.76

Total Profit 340.05 921.44 1,664.93

Equity Dividend (%) 20.00 30.00 35.00

No of Share 488140000 488140000 488140000



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NET PROFIT GROWTH

340.05

921.44

1664.93

0

500

1000

1500

2000

Net Profit (Rs in

Crores)

2005 2006 2007

Year

BOI

STOCK PRICE

BOI Price

103.65 103.5122.9 126.9

133.45

100.3

162

207.4

168

231.7

0

50

100

150

200

250

31/03/05

30/06/05

30/09/05

31/12/05

31/03/06

30/06/06

30/09/06

31/12/06

31/03/07

31/06/07

Date

Price



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- 46 -

MARKET PRICE OF THE SHARE AS ON 31ST

MARCH:

(in Rs ) MARCH 2005 MARCH 2006 MARCH 2007

Market price pershare

103.65 133.45 167.8

KEY FINANCIAL RATIOS:

Particulars MARCH 2005 MARCH 2006 MARCH 2007

ROE (%) 7.62 18.49 28.24

EPS (Rs) 6.96 18.89 34.10

Dividend Payout Ratio 28.73 15.88 10.26

P/E Ratio 14.89 7.07 4.92

Book Value Per Share(Rs)

91.47 102.09 120.77

INTERPRETATION:

Percentage wise the net profit of the bank is very favorable. The growth in

return on equity is also showing that the bank is earning sufficiently for the

shareholders. The growing profits are leading towards the growth of the EPS. Theprice trend also shows that the share is not much volatile and also shows an upward

trend. Holders for long term are benefited from the capital appreciation.

The P/E ratio showing a down trend may be because of the price not

increasing to the proportion of the profit. A lower P/E ratio is considered one of the

most important criteria for investment purpose. The growing book value indicates that

the bank has huge reserves and can be a potential for bonus.



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PUNJAB NATIONAL BANK

BSE: 532461 NSE: PNB

INDUSTRY: Banking PSU



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BANK PROFILE:

Established in 1895 at Lahore, undivided India, Punjab National Bank (PNB)

has the distinction of being the first Indian bank to have been started solely with

Indian capital.The bank was nationalised in July 1969 along with 13 other banks.

From its modest beginning, the bank has grown in size and stature to become a front-

line banking institution in India at present.

Punjab National Bank is the fourth largest banking entity in the country (in

terms of asset size) with 4.2% share of the total credit disbursals at the end of FY07.

Given its geographic concentration in the northern regions, the bank was a laggard in

terms of credit growth until FY04, which led to it barely sustaining its share of non-

food credit at 4.5%. However, not able to keep up with its private sector peers in

incremental credit disbursements and low retail credit exposure resulted in a loss of

market share (from 4.5% in FY04 to 4% in FY06). Nevertheless, an operating

overhaul in terms of asset quality and retention of high margins has helped the bank

position itself favourably amongst its peers and marginally enhance its share in FY07.

Adequate capital, high NPA coverage and interest rate insulation pegs the bank

amongst the frontrunners in the public sector banking space.

A professionally managed bank with a successful track record of over 110

years. Largest branch network in India 4525 offices including 432 Extension

counters spread throughout the country. Strategic business area covers the large Indo

Gangetic belt and the metropolitan centers. Rupee drawing arrangements with M/s

UAE Exchange Centre, UAE, M/s Al Fardan Exchange Co. Doha, Qatar,M/s

Bahrain Exchange Co, Kuwait, M/s Bahrain Finance Co, Bahrain,M/s Thomas Cook

Al Rostamani Exchange Co. Dubai,UAE, and M/s Musandam Exchange, Ruwi,

Sultanate of Oman.



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Share Holding Pattern



Indian inst/Mut Fund 16.2%

FIIs 20.1%

ADR/GDR 0.0%

Free float 6.0%




Face ValueRs. 10


Market Price490



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FINANCIAL ANALYSIS

BALANCE SHEET OF PUNJAB NATIONAL BANK FOR THE LAST THREE

YEARS.

(Rs in Crore) MARCH 2005 MARCH 2006 MARCH 2007

Capital and

Liabilities

Equity ShareCapital

315.30 315.30 315.30


0.00 0.00 0.00

Reserves 7,533.51 8,758.68 9,826.31

RevaluationReserves

312.49 302.38 293.85

Deposits 103,166.89 119,684.92 139,859.67Borrowings 2,718.29 6,664.87 1,948.86


12,222.24 9,623.64 10,285.14


ASSETS

Cash & Balancewith RBI

9,460.20 23,394.55 12,372.03

Balance withBanks, Money atCall

1,628.83 1,397.14 3,273.49

Advances 60,412.75 74,627.37 96,596.52

Investments 50,672.83 41,055.31 45,189.84Net Block 965.23 1,030.23 1,009.82


0.00 0.00 0.00

Other Assets 3,128.88 3,845.19 4,087.43

Total Assets 126,268.72 145,349.79 162,529.13



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PROFIT AND LOSS ACCOUNT OF PUNJAB NATIONAL BANK FOR THE

LAST THREE YEARS.


INCOMEInterest Earned 8,459.85 9,584.15 11,537.48

Other Income 2,186.36 1,901.00 1,932.71

Total Income 10,646.21 11,485.15 13,470.19

EXPENDITURE


Employee Cost 2,121.23 2,114.98 2,352.45


670.70 721.53 778.97

Depreciation 183.28 186.64 194.80

Miscellaneous

Expenses

1,807.77 2,105.30 2,580.98


0.00 0.00 0.00

OperatingExpenses

3,437.48 3,300.70 4,216.64


1,345.50 1,827.75 1,690.56


Net Profit for the

Year

1,410.12 1,439.31 1,540.08

ExtraordionaryItems

0.00 0.00 -13.27


0.00 0.00 183.49

Total Profit 1,410.12 1,439.31 1,710.30

Equity Dividend(%)

60.00 90.00 100.00

No of Share 315300000 315300000 315300000



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NET PROFIT GROWTH

1410.12 1439.311710.3

0

200

400

600

800

1000

1200

14001600

1800

Net Profit (Rs in

crore)

2005 2006 2007

Year

PNB

STOCK PRICE

PNB Price

393.35 379.5

450.6 466.25470.4

369.5

507474.4

541.25

0

100

200

300

400

500

600

31/03/05 30/06/05 30/09/05 31/12/05 31/03/06 30/06/06 30/09/06 31/12/06 31/03/07

Date

Price



53/70

- 53 -


MARCH:

(in Rs ) MARCH 2005 MARCH 2006 MARCH 2007Market price pershare

393.35 470.4 474.4


MARCH 2005 MARCH 2006 MARCH 2007

ROE (%) 17.28 15.35 16.40

EPS (Rs) 44.72 45.64 54.24


Price Earning Ratio 8.80 10.30 8.30


258.84 297.40 330.97

INTERPRETATION:

The trends of profits are leading the EPS; i. e. the profit has shown a small

growth in the year 2005 06 and shows an increase in the year 2006 07, similarly

the EPS follows the trend. The dividend payout ratio is increasing and the share

holders are enjoying the current inflow of cash.

The P/E ratio is volatile because of the price volatility. The company with thehelp of the growing profit is retaining the profit which in turn is supporting to the

book value of the share.

The investor must look over the return on equity and the deviations of the

share price that is depicted in the price graph. Investor with low risk profile must be

careful if they have this stock in their portfolio.



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BANK OF BARODA

BSE: 532134 NSE: BANKBARODA

INDUSTRY: Banking PSU



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BANK PROFILE:

Bank of Baroda is the fifth largest banking entity in the country (in terms of

asset size) with 4% share of the total credit disbursals at the end of FY06. Given its

geographic concentration in the northern regions, the bank was a laggard in terms of

credit growth in the initial years of this decade, which resulted in a loss of market

share. However, brand and operating overhaul led to accelerated growth in the last

two fiscals, thus helping the bank stabilise its share and position itself favourably

amongst its peers.

Bank of Baroda (BSE: 532134) is a bank in India established on July 20, 1908

by Maharaja of Baroda Sir Sayajirao Gaekwad III in the princely state of Baroda, in

Gujarat. The bank, along with 13 other major commercial banks of India, was

nationalisd on 19th July, 1969, by the Government of India.

Bank of Baroda is the fifth largest bank in India. It has total assets in excess of

Rs. 1.78 lakh crores, or Rs. 1,780 bn., a network of over 2800 branches and offices,

and about 700 ATMs. Bank of Baroda 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 and affiliates in the areas of

investment banking, credit cards and asset management. In its international expansion

Bank of Baroda followed the Indian diaspora, and especially that of the Gujaratis. The

bank has received Reserve Bank of India approval to open offices in Australia, the

Maldives, and New Zealand. It is seeking approval for operatons in Bahrain,

Johannesburg, Kuwait, Mozambique, and Qatar, and is seeking to establish a joint

venture or subsidiary in Ghana and Trinidad and Tobago.



56/70

- 56 -


Indian Promoters 53.8%Foreign collaborators 0.0%


FIIs 20.1%

ADR/GDR 0.0%

Free float 11.4%

Shareholders 224, 161



Face ValueRs. 10


Market Price260



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FINANCIAL ANALYSIS

BALANCE SHEET OF BANK OF BARODA FOR THE LAST THREE

YEARS.

(Rs in Crore) MARCH 2005 MARCH 2006 MARCH 2007

Capital and

Liabilities

Equity ShareCapital

294.53 365.53 365.53


0.00 0.00 0.00

Reserves 5,333.23 7,478.91 8,284.41

RevaluationReserves

0.00 0.00 0.00

Deposits 81,333.46 93,661.99 124,915.98Borrowings 1,640.83 4,802.20 1,142.56


6,062.18 7,083.90 8,437.70


ASSETS

Cash & Balancewith RBI

2,712.32 3,333.43 6,413.52

Balance withBanks, Money atCall

6,541.88 10,121.21 11,866.85

Advances 43,400.38 59,911.78 83,620.87

Investments 37,074.44 35,114.22 34,943.63Net Block 860.80 920.73 1,088.81


0.00 0.00 0.00

Other Assets 4,074.41 3,991.16 5,212.50

Total Assets 94,664.23 113,392.53 143,146.18



58/70

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PROFIT AND LOSS ACCOUNT OF BANK OF BARODA FOR THE LAST

THREE YEARS.


INCOME

Interest Earned 6,431.42 7,049.95 9,212.64

Other Income 1,344.39 1,394.05 1,434.03

Total Income 7,775.81 8,444.00 10,646.67

EXPENDITURE


Employee Cost 1,381.05 1,523.79 1,644.07


516.87 749.83 705.97

Depreciation 81.88 111.13 194.28MiscellaneousExpenses

1,667.02 1,357.20 1,649.33


0.00 0.00 0.00

OperatingExpenses

2,010.81 2,547.14 2,797.04


1,636.01 1,194.81 1,396.61


Net Profit for the

Year676.84 826.96 1,026.46

ExtraordionaryItems

0.00 0.00 0.00


0.00 0.00 0.00

Total Profit 676.84 826.96 1,026.46

Equity Dividend(%)

50.00 50.00 60.00

No of Share 264530000 365530000 365530000



59/70

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NET PROFIT GROWTH

676.84826.96

1026.46

0

200

400

600

800

1000

1200

Net Profit (Rs in

Crores)

2005 2006 2007

Year

BOB

STOCK PRICE

BOB Price

217.75196.65

249 241.05 230.55

196.25

288.45

240215.05

0

50

100

150

200

250

300

350

31/03/05 30/06/05 30/09/05 31/12/05 31/03/06 30/06/06 30/09/06 31/12/06 31/03/07

Date

Price



60/70

- 60 -


MARCH:

(in Rs ) MARCH 2005 MARCH 2006 MARCH 2007Market price per

share

217.75 230.15 215.05


MARCH 2005 MARCH 2006 MARCH 2007

ROE (%) 12.02 10.54 11.87

EPS (Rs) 25.59 22.62 28.03


Price Earning Ratio 8.51 10.17 7.67


212.75 214.60 236.64

INTERPRETATION:

The profit for the bank has increase but the return on equity is showing a

downward trend in the earlier year and then again rising. The issue of additional

equity share may be the reason for such a trend. The bank is also giving good

dividend to the shareholder.

The volatility of the share price can be the reason for displaying such a P/E

trend. The dividend payout ratio shows a minor downtrend. The share is quit volatile.

We can say this because the price has almost not shown any movement over the

period.



61/70

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FINDINGS

COMPERATIVE ANANLYSIS OF THE BANKS

Bank

Name

ROE EPS (Rs.) P/E Price as

on

30/06/07

Mar-05 Mar-07 Change Mar-05 Mar-07 ChangeMar-

07

SBI 17.88 14.51 -3.37 81.79 86.29 4.5 11.51 1525.8

BOI 7.62 28.24 20.62 6.96 34.1 27.14 4.92 231.7

PNB 17.28 16.4 -0.88 44.72 54.24 9.52 8.3 541.25

BOB 12.02 11.87 -0.15 25.59 28.03 2.44 7.67 270.25

INTERPRATION

On comparing the major players of the public sector banking, we can see that

bank of India is being greater increase in the return of equity and EPS than the other

players. The return on equity is the highest for Bank of India. The profit of the bank is

also growing at quicker rate. The P/E is considered one of the important factor that

attract the buyer. The P/E ratio is the lowest indicating that a multiple of 5 of price to

earnings exhibits some potential for capital appreciation in the case of Bank of India.

The price of the share is also low so small investors are also attracted for investment.

The ratios considered above thus show that Bank of India has generated good

profit over the years. The lower P/E multiple shows that the stock is undervalued and

has a great potential to grow.



62/70

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LIMITATIONS



63/70

- 63 -

Fundamental analysis has some limitation involved in it. This limitation can be

explained as under:

Time Constrain:

Fundamental analysis may offer excellent insights, but it can be

extraordinarily time-consuming. Time-consuming models often produce valuations

that are contradictory to the current price prevailing on the exchange. This is not to

say that there are not misunderstood companies out there

Industry/Company Specific:

Valuation techniques vary depending on the industry group and specifics of

each company. For this reason, a different technique and model is required for

different industries and different companies. This can get quite time-consuming,

which can limit the amount of research that can be performed.

The sales and inventory ratio may be very important for the cement sector

company but these ratios are not very useful for the banking sector.

Vastness Of Fundamental Analysis

Fundamental analysis is a very vast concept. It was difficult to analyse each and

every component involved in it. Here an attempt is made to learn the basic of

Fundamental Analysis because it is difficult to carry out the whole process of

fundamental analysis with in two months because of the vastness.



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- 64 -

CONCLUSION



65/70

- 65 -

Fundamental analysis holds that no investment decision should bewithout processing and analyzing all relevant information. It strength lies in the fact

the information analyzed is real as opposed to hunches or assumptions. On the other

hand, while fundamental analysis deals with tangible fact, it does not tend to ignore

the fact that human beings do not always act rationally. Market prices do sometimes

deviate from fundamentals. Prices rise or fall due to insider trading, speculation,

rumour, and a host of other factors.

This is true to an extent but strength of fundamental analysis is that an

investment decision is arrived at after analyzing information and making logical

assumptions and deductions. Furthermore, fundamental analysis ensures that one does

not recklessly buy or sell shares- especially buy.

Fundamental analysis can be valuable, but it should be approached with

caution. If you are reading research written by a sell-side analyst, it is important to be

familiar with the analyst behind the report. We all have personal biases, and everyanalyst has some sort of bias. There is nothing wrong with this, and the research can

still be of great value. Learn what the ratings mean and the track record of an analyst

before jumping off the deep end. Corporate statements and press releases offer good

information, but they should be read with a healthy degree of skepticism to separate

the facts from the spin. Press releases don't happen by accident; they are an important

PR tool for companies. Investors should become skilled readers to weed out the

important information and ignore the hype.



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To conclude we can say that:

Fundamentals of any company are the most important information that any

investor must collect and analyse.

The public sector banks will see an upswing in the near future because there is

a huge requirement of the funds from both the sector goods as well as services.

The banking industry sees a bright future ahead. This industry has huge

growth prospects.

On comparing various Public sector banks with each other on the basis of the

financials Bank of India was found to be the best for a value investment.

Fundamental analysis helps an investor to take rational decisions on buying or

selling of a specific stock especially buying.



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RECOMMANDATION



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The analysis carried out at India Infoline of the public sector banks, their profit

and loss account, balance sheet and ratios I shall suggests the investors to give priority

to BANK OF INDIA than other banks as a value investment. The reason is obvious

that the bank is fundamentally very strong.

The return that the bank has given on the shareholders investment is substantially

good. The profit growth of a company is a true indicator of a companys true

performance and due weight age must be given to it. The price of the stock is low

which attracts small investors. The kind of profit the bank is generating over the

period is quit appreciable. The capital appreciation of the share is also good for the

investor. The fundamental of the economy are also strong and looks that the market

would be touching new highs.



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BIBLIOGRAPHY:

Websites:

www.moneycontrol.com

www.bankofbaroda.com

www.bankofindia.com

www.nseindia.com

www.indiainfoline.com

www.equitymaster.comwww.rbi.org.in

www.wikipedia.com

Magazines:

Dalal Street.

Financial Daily:

Economic Times.

Books:Security Analysis and Portfolio Management Prasana Chandra

Banking Law and Practice. H. C. Agarwal



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ANNEXURE

Formulae for Investment Ratios:

Return on Equity:

Equity Earnings (Profit) / Equity (Net worth) * 100.

Earning Per Share:

Equity Earnings (Profit) / No. of Outstanding Shares.

Dividend Payout Ratio:

Equity Dividends / Equity Earnings (Profit).

Price/Earning Ratio:Market Price Per Share/ Earning Per Share

Book Value Per Share:Paid up Equity Capital + Reserves and Surplus / No. of Outstanding Shares.


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